On 11 August 2021 the Swiss Federal Council approved a new social security agreement between Switzerland and the United Kingdom.
This new agreement is an important step to simplifying the coordination of social security systems of both countries since the UK’s withdrawal from the EU. Once in force, it will supersede the current 1969 UK-Switzerland Social Security agreement.
Whilst the new agreement would resolve any potential apportionment of earnings for employees in a multi-state working scenario between the UK and Switzerland, scenarios involving cross-border activities between the UK, Switzerland and EU countries may still result in a split of social security liabilities and such situations should be carefully analyzed.
The new agreement will not legally enter into force until it is approved by the Swiss and UK Parliaments, which is expected to occur beginning of 2022. However, considering the current situation under the old bilateral social security agreement does lead to many unpractical scenarios, both countries are working on obtaining the necessary approvals in order that the new bilateral social security agreement regulations can already be applied provisionally prior to it legally entering into force. It is anticipated that the provisional application of the new coordination rules shall start before the end of this year.
The new UK-EU Trade and Cooperation Agreement (UK-EU TCA), which came into force from 1 January 2021 does not extend to persons moving between the UK and Switzerland. Where a persons’ social security rights cannot be grandfathered under the UK/Swiss Citizens Rights Agreement (CRA), social security coordination is currently subject to the provisions within the ‘Family Allowances, National Insurance and Industrial Injuries (Switzerland) Order’ of 1969.
This old agreement, whilst containing similar ‘posting’ provisions to the new EU-UK TCA, lacks an equivalent multi-state worker rule and subject to both countries agreement, would have resulted in an apportionment of earnings in each state calculated on a physical workday basis.
The proposed new agreement
- Grants insured individuals largely equal treatment and easier access to social security benefits in the UK and Switzerland;
- Contains tie-breaker rules to determine social security coverage for multi-state workers and, therefore, avoids potential UK and Swiss contribution liabilities;
- Permits a ‘posted worker’ (including third country nationals) moving between the UK and Switzerland for the purpose of work for a period not expected to exceed 24 months to remain subject to only the social security legislation of the sending State (largely corresponding to the rules covered in the UK-EU TCA);
- Contains an exceptional circumstances article that permits both countries by mutual agreement to allow a person to remain subject to only one country’s social security system (akin to Article 16 of EU social security coordination rules EC 883/2004).
Scenarios involving alternating or simultaneous working patterns in the EU/EEA in addition to Switzerland and the UK should be reviewed and considerations to other social security agreements such as between Switzerland and EU member states, UK and EU member states may be relevant.
It is because Switzerland does not apply EU social security coordination rules (EC 883/2004) to third country nationals and as the UK has left the EU, despite establishing the new bilateral agreement between Switzerland and the UK, for these cases the review of the bilateral agreement between Switzerland and the specific EU country/countries remains necessary as UK nationals are now third country nationals.
If the bilateral agreement between Switzerland and the EU country/countries in question does not cover third country nationals, the allocation and splitting of social security contributions might nevertheless be unavoidable irrespective of this new agreement even where the UK-EU TCA applies between the UK and the EU country involved.
The fact that there are new social security coordination rules expected to be approved between the UK and Switzerland following Brexit is to be welcomed.
However, the agreement may lack the fullness of the EU social security coordination rule. Considering there is no umbrella agreement that covers work set-ups between Switzerland, UK and the EU, the respective applicable social security agreements for each country combination must be taken into account. However, both authorities shall look sympathetically at regulating special cases by means of an exceptional agreement if there are substantial reasons for doing so in order that double social security liabilities can be avoided.
Employers who currently have employees seconded between the UK and Switzerland, or who intend to assign employees between these countries should review how this agreement might affect current and future social security liabilities, what certification should be obtained along with costs and impact to employees, in particular for scenarios involving cross border activities between the UK, Switzerland and EU countries, where a split of social security liabilities may arise.