Application of social security legislation when workers are posted abroad
It is well known fact that businesses today operate in an international market in which human and material resources are constantly on the move, requiring employers to maximize their ability to harness synergies from the various transnational economic flows.
In this new environment, business entities from different industries have set up workplaces in territories close to border states, such as, notably, the Spanish-Portuguese border where in recent years it has been common for labor relationships to straddle both countries.
This situation has led to a constant cross-border flow of professionals, as more and more Spanish companies find themselves forced to post workers abroad on a recurring basis to provide their services, whether within the EU or elsewhere.
In this respect, it is necessary to distinguish between two concepts which, while they share some common elements, are clearly different: expatriate workers and cross-border workers.
First of all, expatriate workers can be defined as workers who are temporarily posted by the company to work in a state other than the one where they usually work. In turn, cross-border workers are workers who pursue their professional activity in different EU member state to the one where they usually reside and to which they return at least once a week.
Considering the specific labor law implications of these situations, it should be noted that there is a universal principle which establishes that workers must pay social security contributions in the place where they work. Accordingly, within the EU and as a general rule, workers who are posted from one EU member state to another will generally be subject to the social security legislation of the country where they perform their work, whether as an employee or self-employee.
However, as an exception, EU Regulations permit the social security legislation of the home country (in our case, Spain) to continue to apply in the case of temporary postings. In other words, continuing to make contributions in the home country would be an option granted to companies as an exception to the general rule that requires contributions to be made in the country where the work is performed. This option is only envisaged for temporary situations and, therefore, cannot be prolonged indefinitely. Specifically, Regulation EC 883/2004 offers the possibility of requesting the application of Spanish social security legislation to workers posted to other member states, but subject to a time limit of twenty-four months. In certain cases, the application of several extensions may be requested, up to a maximum of five years, taking into account the periods authorized in the initial posting and any extensions.
Lastly, while we have limited ourselves in this article to a brief and general analysis of worker postings from the standpoint of social security legislation, naturally the situations defined above can also be assessed from other legal angles, such as from a corporate or strictly tax standpoint.
Garrigues Labor & Employment Law Department