Lithuania: Workation within the EU vs. Social Insurance – It gets complex

While the authorities mostly turned a blind eye during the Corona pandemic and did not check whether employers were adhering to all formal criteria for implementation of remote work, employers rightly fear that this reprieve is gradually coming to an end.

After two years of the COVID19 pandemic, everyday work is gradually returning to normal. However, one “achievement” from the pandemic seems to be playing an essential role in the future: Work from anywhere at the initiative of the employee (so-called “workation”).

Aspects of labour law, data protection law and, above all, social security law must be observed, and employers should check whether their internal processes and documents are really up to date.

One topic in particular makes the issue incredibly complex for employers: where and how the employee is covered by social insurance if they work on their own from abroad and how and where this leads to registration and payment obligations for the employer.

Regulation (EC) No 883/2004 on the coordination of social security systems is decisive in cross-border social security cases within the EU. It regulates which social security law applies to an employee who, e.g., works in one EU country but lives in another.

There are two principles:

1. an employee to whom Regulation (EC) No 883/2004 applies is always subject to the legislation of only one member state, and
2. an employee who is employed in one member state is subject to the legislation of that member state

This means that if an employee changes their place of work to another member state, the social insurance will also change immediately. There are several exceptions so that this does not mean that, e.g., business trips abroad do not lead to an employee immediately being subject to a new and, for them, unknown social security law:

1. Posting (i.e. temporary work abroad on the employer’s initiative) under Art. 12 (1) of the Regulation (EC) No 883/2004
2. Carrying out activities in two or more member states under Art. 13 (1) of Regulation (EC) No 883/2004

In both cases, the employee remains insured during a temporary stay abroad in the country where they usually work. However, in order to be able to prove in the destination country that they are insured in their home country, they must obtain a so-called A1 certificate in the home country.

In the case of workation, that is where it gets complex. This becomes apparent when comparing the legal situation in Germany and Lithuania. Regulation (EC) No 883/2004 applies in both countries.
There is no doubt that an A1 certificate must be obtained for work in a member state other than the one where the place of work is located, i.e., also in the case of workation.

First of all, the A1 certificate serves to prove in the destination member state that the employee is insured in their home country and therefore does not have to pay social security contributions in the destination member state. Moreover, without an A1 certificate and the accompanying information from the home social security institution about work abroad, in the worst case the social security of the home country could refuse payment, e.g. in the case of an occupational accident abroad.

However, it is questionable on which of the above-mentioned legal bases the A1 certificate must be obtained and which rules subsequently apply.

Regulation (EC) No 883/2004, which was introduced long before Corona, of course does not yet provide for the relatively new situation of workation. This means that there are different interpretations by the responsible institutions in different countries as to which of the above-mentioned exceptions covers workation. Due to a lack of national legal regulations, a patchwork of different authority/institutional practices could develop in Europe for the time being, although the legal basis is identical.

The German Liaison Office for Health Insurance Abroad (DVKA) pursues a pragmatic approach. According to this, workation is a posting if:

• the employer is aware of the work abroad and consents to it,
• the employer accepts and remunerates work performed, and
• an EU posting is applied for at the competent office.

The Lithuanian Social Security Authority SODRA, on the other hand, takes a completely different view, as a query from bnt attorneys in CEE revealed. According to this, SODRA sees workation not as a posting, but as the exercise of employment for the same employer in two or more member states (Art. 13 (1)(b)(i) of Regulation (EC) No 883/2004). SODRA justifies this by stating that the employer does not send the employee to work in another member state, but performance of the work function in another member state is the employee’s own sole choice.

The consequence of these different views is different framework conditions for workation:

While in the German approach the posting is limited in time (in principle max. 24 months), for the regulations of the Lithuanian approach, i.e. employment for the same employer in different member states, the proportion that the different employments spent in the different member states bear to each other is decisive.

However, since both the German and the Lithuanian approaches are not legal regulations but represent the more or less non-binding view of the responsible authorities/institutions in the different member states, and since they can always refer to the circumstances of the individual case in their assessment, it is recommended to always carry out workation in one’s own company in close consultation with the institution issuing the A1 certificate (in Lithuania SODRA, in Germany the health insurance companies) and to obtain their assessment of the individual case before letting employees go on workation.

Source:

Regulation (EC) No 883/2004 of the European Parliament and of the Council of 29 April 2004 on the coordination of social security systems

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