ECJ confirms 25-percent threshold for regular cross-border work

In its judgement the ECJ has clarified outstanding questions about the 25-percent threshold.

Within the EU/EEA countries, the following rule on determining the social security law to be applied applies to regular cross-border employees: the social insurance of the state of residence applies if the employee carries out a substantial part of his or her work there. This is always the case if at least 25 percent of his or her working time is spent or pay remitted there. In practice, however, this repeatedly leads to uncertainty on how to count the working days. The ECJ now had to clarify the case of a skipper who spent less than 25 percent of his time in the Netherlands.

The Dutch employee working for a company in Liechtenstein sued against the determination by the Dutch authorities to apply Dutch social security, even though he only carried out 22 percent of his working time in the Netherlands. 

The Dutch authorities justified their decision saying that the Dutch version of Art. 14(8) of Regulation 987/2009 used the expressions “also” (“mede”), “indicative criteria” (“indicatieve criteria”) and “indicator” (“indicatie”), meaning that in the case that the working time and/or remuneration in the Member State of residence is less than 25 percent of the employee’s total work in the different Member States, other circumstances could be taken into account in the overall assessment of the employee’s situation. The ECJ clarified that the 25-percent threshold applies strictly to working time and pay.

What factors play a role in the assessment?

The question whether an employee carries out a substantial part of his work in his Member State of residence is primarily determined by two criteria: the share of the work done there and the pay earned in that state. Only if one of these two figures reaches 25 percent in the state of residence does the work count as substantial. The ECJ’s decision expressly does not consider other aspects, such as the employee’s place of residence or the employer’s location, as being determinative. They may have the effect of providing a certain indication within the total picture but are not sufficient to replace the 25-percent threshold. 

Over what period is the work carried out?

Attention should be paid to calculating the 25-percent rule as a reliable forecast for the coming 12 calendar months. The responsible bodies must be able to judge how the employee’s work is expected to be distributed across the next year. Earlier working periods may at most be consulted as a support but do not determine the decision. The ECJ has clarified that a forward-looking consideration is needed to apply the regulation in a uniform and practical way. For employers, this means more certainty in planning, since they will know ahead of time which social security systems apply to their employees.

Consequences for employers and employees

We therefore recommend, in case of doubt, having employees keep a calendar of their travels and draw up a forecast for the coming 12 months, which they regularly review. An A1 certificate to determine the social security law that applies to regular cross-border employees should in any case be applied for from the relevant authority. We’ll be glad to help. Feel free to contact us.