What is social security coordination?
Social security systems typically cover areas such as sickness, maternity/paternity, family, old-age, unemployment and other similar benefits and are the exclusive responsibility of the national authorities. This means that each state is responsible for the design of its own social security system. Therefore the systems are very diverse in terms of both their organisation and the benefits offered.
When a citizen travels or moves to another Member State, however, there is a need to create bridges between national systems, as to guarantee that citizens can enjoy uninterrupted cover. To this end, the European Union has rules to coordinate interaction between national social security systems.
These coordinating rules determine which Member State system a mobile citizen is subject to, and prevent a person from being left without protection, or having double coverage in a cross-border situation. By safeguarding social security entitlements of people on the move, it grants them a real choice to live or work in another country. These rules are about coordination, not harmonisation.
This system has been in place since 1959 and has undergone progressive modernisation throughout the years. It is currently contained in Regulations (EC) No 883/2004 and (EC) No 987/2009.
What do the rules on social security coordination say?
The EU rules on social security coordination do not regulate who is to be insured under national provisions or which benefits are granted – this is the Member States' responsibility. They only provide criteria to determine which system a mobile citizen is subject to.
The EU rules are based on four principles:
- One country only: a person is covered by the social security system of one Member State at a time so that he/she only pays contributions in one country. The person is entitled to benefits, if any, in the country where he/she pays contributions.
- Equal treatment or no discrimination: a person has the same rights and obligations as the nationals of the country where he/she is insured.
- Aggregation: when a person claims a benefit, his/her previous periods of insurance, work or residence in other Member States are taken into account if necessary (for example to demonstrate the person satisfies a minimum period of insurance required under national law to be entitled to benefits).
- Exportability: if a person is entitled to receive a benefit in cash from one Member State, he/she may generally receive it even if he/she is living in a different Member State.
Who is affected?
The provisions cover anyone who moves to another Member State to settle permanently, work temporarily or study, and even those who are travelling to take a holiday.
A few examples of who is covered:
During the summer months, millions of Europeans go to another European country on holiday. The system of coordination protects them if they need healthcare during their stay, in the event of an accident or illness. The European Health Insurance Card provides access to health services in each Member State for anyone requiring care during a temporary stay. Care is provided on the same basis as for residents of the Member State in question.
People who cross the border to work are entitled to medical treatment in both countries (at the expense of the country of work).
Anyone who has worked in several Member States throughout their career is entitled to combine their periods of insurance in order to obtain a full pension.
Jobseekers who decide to look for a job in another Member State can receive unemployment benefits from their Member State and take those during a certain period to another Member State to look for a job there.
How many people are we talking about?
In 2015, around 11.3 million EU-28 citizens of working age (20-64) were residing in another EU Member State than their country of citizenship, of which 8.5 million employed or looking for work. That is 3.7% of the total EU's working age population. In the EU there were 1.3 million cross-border workers (who work in a different EU country than the one in which they live).
In 2014 there were 1.92 million posted workers in the EU. Overall, posted workers represent only 0.7% of total EU employment. The average duration of posting is four months.
What are the advantages of labour mobility?
Free movement of workers brings benefits both to the workers and employers concerned, and the economy at large, contributing to economic growth and competitiveness.
The right to work in another Member State can bring new job opportunities for individuals, help acquire new working experience and improve their skills, including learning languages. With the experience gained, they may not only be able to find a job more easily in their countries of origin later on, they are also on average more likely to be employed than nationals of the host country. In addition, in the host country, they contribute positively to the economy by helping to tackle labour shortages and skills gaps. They help widen the range of services available and boost competitiveness. EU mobile citizens also tend to be net contributors to the costs of public services they use in the host Member State, and are therefore unlikely to represent a burden on their welfare systems. Recent studies conclude that there is no statistical relationship between the generosity of the welfare systems and the inflows of mobile EU citizens.
From a macro-economic point of view, labour mobility helps address unemployment disparities between EU Member States and contributes to a more efficient allocation of human resources. Analysis also suggests that intra-EU labour mobility has played a significant stabilising role during the crisis and may have prevented even stronger spikes in unemployment.
Which benefits are concerned by EU social security coordination?
The EU rules on social security coordination apply in the EU, Iceland, Liechtenstein, Norway and Switzerland to national legislation on:
- sickness, maternity and equivalent paternity benefits
- old-age pensions, pre-retirement and invalidity benefits
- survivors' benefits and death grants
- unemployment benefits
- family benefits
- benefits in respect of accidents at work and occupational diseases
What is the difference between social security and social assistance?
Under EU law, social security benefits are benefits provided according to the social security legislation of the Member States in the branches of sickness, maternity and equivalent paternity benefits; old-age pensions, pre-retirement and invalidity benefits; survivors' benefits and death grants; unemployment benefits; family benefits; benefits in respect of accidents at work and occupational diseases. These benefits are granted because citizens are legally entitled to them, no matter what their material situation is. Social security covers both contribution-based and non-contribution based benefits.
Social assistance refers to benefits intended to combat poverty, and are typically paid to cover minimum living expenses or to address special circumstances in life (for instance where a person does not have resources sufficient to meet his or her own basic needs). Such benefits are normally granted on basis of an individual assessment of the person's needs and circumstances, and will typically be subject to a means-test (examining the financial situation of the person). The benefits are not linked to one of the social security branches mentioned above and are usually closely tailored to the economic and social situation of the Member State concerned.
What is the difference between benefits in cash and in kind?
The rules apply to both benefits in cash and benefits in kind. The distinction between these categories is the nature and purpose of the benefit.
Benefits in kind are all benefits intended to supply, make available, pay for or reimburse the costs of specific goods and services. Example of benefits in kind are healthcare services, vouchers to cover childcare costs at a crèche in the context of family benefits, or reimbursement of the costs of a care-worker to support a disabled person in their home in case of long-term care needs.
Cash benefits are financial payments (of a fixed or differential amount) the level of which is fixed in advance (i.e. the amount paid is not subject to the actual expenditure incurred by the recipient). A monthly unemployment benefit or pension payments that the recipient is free to spend as they choose are examples of cash benefits.
Why change the current system?
The EU's social security coordination rules have existed since 1959. The labour market and society are constantly evolving, as are national social security systems. Therefore these rules have been regularly updated.
While the overall architecture of the rules remains sound, a number of targeted adjustments are needed to ensure that the rules are fair, simpler to apply and easier to enforce.
How does this proposal fit in the broader Commission's agenda?
This proposal is a key element of this Commission's agenda towards social fairness and a deeper and fairer internal market. Clear, fair and enforceable rules are essential to facilitate labour mobility.
Together with the proposal to revise the Posting of Workers Directive, it will help to ensure fair labour mobility. It facilitates the free movement of workers as one of the key pillars of the internal market, while reinforcing the tools for national authorities to fight abuse or fraud.
What are the main changes?
- The period of export of unemployment benefits (when you can take these benefits to another Member State where you are looking for a job) is extended from a minimum period of 3 to 6 months, with the possibility of further extension for the remaining period of entitlement.
- The Member State of former employment will become responsible for paying unemployment benefits to frontier workers, if they have worked there for 12 months. Under the current rules, the Member State of residence is responsible although frontier workers pay contributions and in principle taxes where they work.
- When assessing whether an unemployed mobile worker qualifies for unemployment benefits, a Member State will only have to take into account periods of insurance in other Member States if the person concerned has worked in that Member State for at least 3 months. In other cases the former State of work will be responsible for paying those benefits.
2) Long-term care benefits: the proposal introduces specific coordination rules for long-term care organised on the same logic as the current sickness rules. This means that the Member State of insurance would provide long-term care benefits in cash and reimburse the cost of benefits in kind provided by the Member State of residence. The new rules will provide more legal certainty to the growing group of people who, in our ageing societies, rely on long-term care.
3) Access to welfare benefits for economically inactive persons: the proposal codifies the recent case-law of the Court of Justice of the EU on the conditions for the access to welfare benefits by economically inactive mobile citizens. These are persons who are not working, nor actively looking for work and who do not derive rights as a family member of a worker.
In relation to economically inactive mobile citizens, Member States may make access to both social assistance and social security benefits subject to having a legal right of residence. In order to have a legal right of residence, economically inactive citizens must have sufficient resources to reside without imposing a burden on public finances of the host State, and must have comprehensive sickness insurance.
The situation is different in respect of active jobseekers: their right of residence in another Member States is conferred directly by Article 45 of the Treaty on the Functioning of the European Union. Active job seekers must be registered with the local public employment service and must have a chance to find a job in a reasonable time frame.
The new rules strengthen the administrative tools related to the social security coordination of posted workers, to ensure that national authorities have adequate means to verify the social security status of such workers and to address potentially unfair practices or abuses.
For example, the proposal reinforces the obligations of institutions issuing a Portable Document A1 (a certificate concerning the social security legislation which applies to the posted worker) to assess the relevant facts and guarantee that the information provided in this document is correct. It also introduces clear deadlines for exchanges of information between national authorities.
Furthermore, the proposal seeks to facilitate cross-border exchanges of information between social security institutions and the labour inspectorates, immigration or tax authorities of the Member States to ensure compliance with relevant legal obligations in the fields of labour, health and safety, immigration and taxation law. It produces stronger deterrents against abuse.
5) Family benefits:
The proposal updates the rules on parental leave allowances, which compensate a parent for loss of income or salary during time spent raising a child. Under current rules, parental leave allowances are treated as benefits for the entire family and subject to anti-overlapping rules. This prevents two Member States from paying social security benefits for the same purpose in respect of the same period. With the proposal, parental leave allowances will be treated as the parent's individual right and Member States will have the option to pay them in full to both working parents. In this way, those Member States which are encouraging the sharing of parental responsibilities will be able to remove potential financial disincentives for parents who both take parental leave during the same period.
The proposal does not modify the existing rules on export of child benefits. No indexation of child benefits is foreseen: the country of work of the parent(s) remains responsible for paying the child allowances, and that amount cannot be adjusted if the child resides elsewhere.
Less than 1% of child benefits in the EU are paid to children residing in another Member State than where their parent(s) work. The budgetary impact of indexing family benefits would be minor compared to significant administrative costs that an indexation mechanism would entail.
The Commission will continue to monitor mobility flows and their impact on social security systems.
What is the link between these changes and the Posting of Workers Directive?
While both the proposal on social security coordination and the Posting of Workers Directive relate to labour mobility, the two instruments deal with distinct issues. The Posting of Workers Directive deals with the terms and conditions of employment of posted workers, while the social security coordination rules aim to determine which social security system applies.
The proposal does not change the personal scope of the EU rules on social security coordination, nor of the Posting of Workers Directive. However, it will align the terminology of the two pieces of legislation in order to facilitate their application in practice. The term “posting” will only be used for posting of workers within the meaning of the Posting of Workers Directive (Directive 96/71/EC). Other workers (i.e. self-employed) will be called "sent workers" to make the distinction from posted workers clearer. Posted workers will continue to be covered by the social security system of the home Member State, as long as they are not posted for longer than 24 months or they are not replacing another posted person.
In addition, the revision of the Posting of Workers Directive, the Commission has proposed a new rule on long-term posting: the labour law of the host country will apply if the expected or actual duration of posting exceeds 24 months. The same period of 24 months is applied in the EU rules on social security coordination.
Taken together, this body of EU law provides a framework to guarantee fair competition and respect for posted workers' rights so that both businesses and workers can take full advantage of the internal market's opportunities.
What does not change?
The Commission's assessment of the current rules found that the overall architecture and basic principles of EU social security coordination remain sound. The proposal includes targeted revisions of specific rules in four areas, to make these rules fairer, clearer and easier to apply. But it does not alter the fundamental system of EU social security coordination.
How has the Commission decided on these changes?
The Commission's work has been preceded by ongoing dialogue with the Member States and feedback from citizens, social partners and stakeholders. They have indicated where the rules are effective and where changes were needed.
What will be the impact for citizens?
- For those who choose to move to another country to look for a job, the new rules will support their job search and their return to the labour market.
- In the context of demographic ageing and the promotion of greater independence and mobility for disabled persons, more and more mobile citizens need long-term care benefits. The new rules will make clear under which conditions mobile citizens are entitled to export long-term care benefits when they move abroad. This means that people's rights are better protected in cross border situations.
- In the case of mobile EU citizens who are not working or not actively looking for work, the revision makes clear that the host Member State can make their access to certain social security benefits subject to proof that they have a legal right of residence under EU law. However, Member States must comply with the conditions set out in the Free Movement Directive (Directive 2004/38/EC). This means in the case of social security benefits a difference in treatment compared to nationals of the host country can only be justified by a legitimate objective (such as the need to protect the finances of the host Member State), and must not go beyond what is necessary to attain such objective.
What will be the impact for national authorities?
The new rules establish a stronger link between where contributions are paid and where benefits are granted.
The new rules on export of unemployment benefits provide for stronger cooperation between national employment services. The revision will clarify the obligations of the employment service in the host Member State to support jobseekers with job search activities and to monitor and report on their activities to the Member State responsible for paying the unemployment benefits.
In the context of demographic ageing there are greater demands on Member State budgets to meet the costs of long-term care. Thanks to the new rules, competent institutions identify cases of overlapping benefits more easily so resources can be efficiently allocated according to need, in a way which is fair for mobile citizens and tax-payers.
The revision strengthens the obligations of loyal cooperation between Member States, emphasising the existing obligations of national authorities to verify information supplied by a posted worker or their employer before issuing a portable document A1. It establishes clear procedures for a national authority to challenge the accuracy of documents issued by another Member State in case of doubt.
Thanks to the new rules, the procedure for recovery of unduly paid social security benefits will be aligned to the existing procedure for the recovery of claims relating to taxes and duties. Member States will be able to benefit from a universally recognised uniform instrument for enforcement of claims for unduly paid social security benefits and clearer procedures for mutual cross-border assistance.
What will be the impact for employers?
The new rules give employers more legal clarity. They will be able to request and receive information from national social security institutions on behalf of their employees, to ensure social security contributions are being paid in the correct Member State.
The strengthened procedures to combat fraud and abuse will benefit honest employers who play by the rules.
How will the new rules help tackle abuse and fraud?
The proposal will help identifying and tackling "grey zones", fraud or error in the application of the Regulations, including via the periodic exchange of personal data between Member States to facilitate data-matching, for example in cases of export of pensions and unemployment benefits.
In addition, the reinforced obligations and procedures to verify information exchanged between Member States concerning posted workers will complement the EU rules on posting of workers.
Finally, the proposal revises the procedures for recovery of unduly paid social security benefits to align them with the existing procedures in Directive 2010/24/EU concerning mutual assistance for the recovery of claims relating to taxes and duties. This will also improve legal clarity.
How does this relate to the former UK Settlement Agreement?
The agreement by the Heads of State or Government on a New Settlement for the UK in February 2016 addressed a number of issues covered in this proposal.
As a result of the decision of the British people to leave the European Union, the arrangement agreed by the Heads of State or Government ceased to exist, in line with the terms of that agreement.
What are the next steps?
The Commission's proposals will now be passed on to the European Parliament and EU Member States (meeting in the Council of Ministers) for discussion. Once they reach an agreement, the Regulation will be enforceable in all Member States on the first day following that of its publication in the Official Journal of the European Union.
Transitional protection will be provided to persons already in receipt of unemployment benefits prior to the changes introduced by the new provisions.
Current rules remain in place until entry into force of the new ones.
 See for instance the analysis by ICF GHK in association with Milieu on the impact on the Member States' social security systems of the entitlements of non-active intra-EU migrants to special non-contributory cash benefits and healthcare granted on the basis of residence; and CEPS, Social benefits and migration, A contested relationship and policy challenge in the EU.