Guide for Mobile European Workers

Guide for Mobile European Workers CES CONFEDERATION EUROPEENNE DES SYNDICATS

Guide for Mobile European Workers Bart Vanpoucke FGTB & Ger Essers FNV-Bruxelles CONFEDERATION European Trade EUROPEENNE Union Confederation DES SYNDICATS (ETUC) (CES) With the financial support of the European Commission

Guide for Mobile European Worker Introduction.................................................................... 5 Part I: Legislation and regulations............................................. 6 1. The EEC Treaty.............................................................. 7 2. The free movement of workers: Regulation 1612/68.............................. 9 a. The right of EEA citizens to take up employment.................................. 9 b. The right of non-eea citizens (third country nationals) to take up employment.......... 11 c. The right of residents of the new Member States to take up employment.............. 12 3. The coordination of social security: Regulation 1408/71 & Regulation 883/04........ 15 a. General................................................................. 15 b. Rules for determining the applicable social security legislation....................... 15 c. The right to export benefits.................................................. 17 d. Aggregation of insurance periods............................................. 18 e. Coordination of calculation methods for benefits................................. 19 4. Cross-border employment law................................................ 21 a. General................................................................. 21 b. Convention on Contractual Obligations......................................... 21 c. Directive regarding the posting of workers 96/71/EC.............................. 26 d. Competent labour court: Reg. 44/2001........................................ 27 5. Coordination of taxation: double taxation treaties.............................. 29 a. General................................................................. 29 b. State of employment principle............................................... 30 c. Conditional retention of State of residence principle............................... 31 d. Wage splitting............................................................ 32 e. Taxation of pensions and social benefits........................................ 32 f. Specific rules for frontier workers.............................................. 33 g. Lack of coordination between social security and taxation payments.................. 34 h. Methods of avoiding double taxation.......................................... 34 i. To conclude: the trade union view............................................. 36 6. Supplementary pensions.................................................... 37 7. Right of residence.......................................................... 38 a. General................................................................. 38 b. Right of residence for up to three months....................................... 38 c. Right of residence for more than three months................................... 38 d. Right of permanent residence................................................ 39 e. Right of residence after the end of employment................................. 39 f. Social advantages & social assistance.......................................... 40

PART II : Mobile workers...................................................... 41 8. Posted workers............................................................ 42 a. General................................................................. 42 b. Social security............................................................ 42 c. Taxation................................................................. 48 d. Employment law.......................................................... 49 9. Jobseekers................................................................ 53 a. General................................................................. 53 b. Finding employment across borders: EURES..................................... 53 c. Job-seeking while retaining national unemployment benefit........................ 53 d. Right of residence while seeking work......................................... 55 e. Right of residence during periods of work....................................... 55 f. Guarantees of unemployment benefit after a period of work........................ 55 g. Guaranties to medical insurance.............................................. 61 h. Practical hints............................................................ 61 10. Cross-border workers....................................................... 63 a. General................................................................. 63 b. Employment law and labour legislation........................................ 64 c. Social security............................................................ 65 d. Taxation................................................................. 86 11. Multinational workers....................................................... 89 a. General................................................................. 89 b. Social security............................................................ 89 c. Taxation................................................................. 94 d. Employment legislation..................................................... 96 e. Examples................................................................ 98 12. Migrant workers.......................................................... 104 a. General................................................................ 104 b. Working regulations and right to stay......................................... 104 c. Social security........................................................... 105 d. Tax and contributions due on foreign pensions.................................. 116 PART III Sources of information............................................... 117 5

Introduction The principle of the free movement of persons applies within the European Union and the European Economic Area. For the European worker, this means that he has the right to move to another Member State to work or to look for a job. In doing so, he can expect greater freedom of movement and better protection than other workers who are not European citizens. Nonetheless, mobile workers run into a very complex legal framework. The European legislation and regulations are, despite their size, relatively modest in their intentions. The often very different national laws and regulations in Member States remain to a great extent in place. The aim is to establish a number of basic rights in this varied landscape, and, in a number of areas, to coordinate the differing legislative frameworks. There is no intention to harmonise and/or standardise these laws. The practical effect for the mobile worker is that his rights and obligations are not solely guaranteed by European legislation and regulation. These are also determined by national legislation in his country or countries of residence and/or work. In one area which is important for mobile workers, Europe has little impact: taxation. As yet there is a complete lack of European coordination. So the hundreds of bilateral taxation treaties designed to prevent double taxation and mutually agreed between Member States remain in full force. In Part I, a number of important European treaties, regulations and directives are explained. We also consider the underlying principles of the OECD model treaty to prevent double taxation, on which almost all bilateral double taxation treaties are based. The application of all this in practical cross-border employment situations are further discussed in Part II (chapters 8 to 12). The first edition appeared in 2004. This revised edition is from March 2007. 6

Part I Legislation and regulations Chapter 1. The EEC Treaty Chapter 2. Free movement of workers: Regulation 1612/68 Chapter 3. Coordination of social security: regulation 1408/71 & Regulation 883/04 Chapter 4. applicable employment law: Convention on Contractual Obligations Chapter 5. Coordination of taxation: double taxation treaties Chapter 6. Supplementary pensions Chapter 7. right of residence 7

1. The EEC Treaty The EEC Treaty sets out a number of fundamental basic rights for European citizens. For cross-border or migrant workers the most important articles in the Treaty are: Article 12 Within the scope of this Treaty, and without prejudice to the special provisions it contains, any discrimination on the grounds of nationality is prohibited. Article 17 1. Citizenship of the Union is hereby established. Every person holding the nationality of a Member State shall be a citizen of the Union. Citizenship of the Union shall complement and not replace national citizenship. 2. Citizens of the Union shall enjoy the rights conferred by this Treaty and shall be subject to the duties imposed thereby. Article 18 1. Every citizen of the Union shall have the right to move and reside freely within the territory of the Member States, subject to the limitations and conditions laid down in this Treaty and by the measures adopted to give it effect. Article 39 1. Freedom of movement for workers shall be secured within the Community. 2. Such freedom of movement shall entail the abolition of any discrimination based on nationality between workers of the Member States as regards employment, remuneration and other conditions of work and employment. 3. It shall entail the right, subject to limitations justified on grounds of public policy, public security or public health: a) to accept offers of employment actually made; b) to move freely within the territory of Member States for this purpose; c) to stay in a Member State for the purpose of employment in accordance with the provisions governing the employment of nationals of that State laid down by law, regulation or administrative action; d) to remain in the territory of a Member State after having been employed in that State, subject to conditions which shall be embodied in implementing regulations to be drawn up by the Commission. 4. The provisions of this Article shall not apply to employment in the public service. Article 42 The Council shall, acting in accordance with the procedure referred to in Article 251, adopt such measures in the field of social security as are necessary to provide freedom of movement for workers; to this end, it shall make arrangements to secure for migrant workers and their dependants: a) aggregation, for the purpose of acquiring and retaining the right to benefit and of calculating the amount of benefit, of all periods taken into account under the laws of the several countries; b) payment of benefits to persons resident in the territories of Member States. Article 293 Member States shall, so far as is necessary, enter into negotiations with each other with a view to securing for the benefit of their nationals: the protection of persons and the enjoyment and protection of rights under the same conditions as those accorded by each State to its own nationals,.. the abolition of double taxation within the Community 8

The rights set out in the EEC Treaty are further developed, inter alia, in the EEC Regulation 1612/68 on the free movement of workers within the European Union, Regulation 1408/71 on the coordination of social security, the Regulation on the right of residence, etc. 2. The free movement of workers: Regulation 1612/68 a. The right of EEA citizens to take up employment European Regulation 1612/68, which governs the rights of migrant or cross-border workers and their families, is based on the prohibition of discrimination on the grounds of nationality under Articles 12 and 39, paragraph 2 of the EEC Treaty. As a condition for the application of Regulation 1612/68, the worker must be a citizen of one of the Member States of the European Economic Area (EEA= the Member States of the European Union plus Liechtenstein, Norway and Iceland). An supplementary agreement has been concluded with Switzerland. Article 39 of the EEC Treaty guarantees the free movement of workers, which means that every EEA citizen may work in more or less every sector. An exception is made for the public sector, restricting this right. This only concerns government services, such as the police or the judiciary, whether or not directly participating in the exercise of public authority and those functions extending to the protection of the general interests of the state or public bodies. The European Regulation 1612/68 guarantees the equal treatment of EEA workers in the Member States in relation to: taking up an activity as an employed person (Article 1); negotiating and concluding contracts of employment (Article 2); labour market access (Article 3), including any quantitative restrictions (Article 4); access to the services of employment offices (Article 5); conditions for engagement and recruitment (Article 6). Article 7 of Regulation 1612/68 is of particular importance. This article governs non-discrimination relating to: labour conditions and conditions of engagement; social and tax benefits; the right to training, rehabilitation and retraining; the provisions of collective and individual labour agreements. 9

Article 7 of Regulation 1612/68: 1. A worker who is a national of a Member State may not, in the territory of another Member State, be treated differently from national workers by reason of his nationality in respect of any conditions of employment and work, in particular as regards remuneration, dismissal, and should he become unemployed, reinstatement or re-employment; 2. He shall enjoy the same social and tax advantages as national workers. 3. He shall also, by virtue of the same right and under the same conditions as national workers, have access to training in vocational schools and retraining centres. 4. Any clause of a collective or individual agreement or of any other collective regulation concerning eligibility for employment, employment, remuneration and other conditions of work or dismissal shall be null and void in so far as it lays down or authorises discriminatory conditions in respect of workers who are nationals of the other Member States. This important Article 7 thus ensures that the migrant and frontier worker is entitled to the same social and tax advantages as national workers. Social and tax advantages include: study finance for children, redundancy payments on dismissal, non-contributory continuation of company pensions in the event of unemployment, tax credits, maternity allowances (birth grant), access to collective private health insurance, tax rebates etc. Social benefits must not be confused with statutory social security payments. The coordination of statutory social security is governed by Regulation 1408/71 (see Chapter 3). Examples : A Swedish family moves to Brussels. Both parents take up paid employment in Belgium. On the birth of a child, they claim Belgian maternity allowance (birth grant). This may not be refused on the ground of non-belgian nationality. Maternity allowances are a social advantage (under Article 7, paragraph 2 of Regulation 1612/68). A German family lives in Maastricht; the father is in paid employment in Belgium. On the birth of a child the family is entitled to Belgian maternity allowances. Belgium may not require the family to live in Belgium. If the father is self-employed in Belgium, there is no entitlement to maternity allowances, because Article 7, paragraph 2 of Regulation 1612/68 only applies to employees and not to the self-employed (Leclere judgment C-43/99). A French student lives in the Netherlands to follow higher vocational education. She works two days a week in paid employment. The student is entitled, because she is in employment, to claim a supplementary Dutch student grant (Raulin judgment C-57/89). Another type of example (Article 7, paragraph 4 of Regulation 1612/68): A Greek doctor goes to work in Germany, after working in a comparable post in Greece. Under the German collective labour agreement employees, including doctors, are entitled to promotion to a higher salary scale after a number of years service in German hospitals. The Court of Justice found that the (comparable) years of service in Greece must be counted and treated equally with years of service in Germany (Schöning-Kougebetopoulou judgment C-15/96). 10

Access to trade union organisations and the exercise of trade union rights are governed by Article 8. Article 8 of Regulation 1612/68: 1. A worker who is a national of a Member State and who is employed in the territory of another Member State shall enjoy equality of treatment as regards membership of trade unions and the exercise of rights attaching thereto, including the right to vote; he may be excluded from taking part in the management of bodies governed by public law and from holding an office governed by public law. Furthermore, he shall have the right of eligibility for workers representative bodies in the undertaking. The provisions of this Article shall not affect laws or regulations in certain Member States which grant more extensive rights to workers coming from the other Member States. The provisions of this Article shall not affect laws or regulations in certain Member States which grant more extensive rights to workers coming from the other Member States. 1. As a result of the introduction of the new Residence Directive 2004/38/EC, Articles 10 and 11 of Regulation 1612/68 were removed. b. The right of non-eea citizens (third country nationals) to take up employment Employed persons who are nationals of one of the Member States of the EEA (and Switzerland) have an automatic right to work in another Member State. Employed persons who are not citizens of a Member State (or Switzerland) - third country nationals - do not have this right to go and work in another Member State. They need a work permit. In the event that an EEA worker is married to a non- EEA citizen (third country national) and goes to live and work in another Member, the spouse also has the right to take up paid employment in the host country (State of residence). Until recently, his/her right to take up employment in the State of residence were guaranteed by Article 11 of Regulation 1612/68. Now they are assured by Article 23 of the new Residence Directive 2004/38/EC 1. Article 23 of Directive 2004/38/EC Irrespective of nationality, the family members of a Union citizen who have the right of residence or the right of permanent residence in a Member State shall be entitled to take up employment or be self-employed there. Examples : A Finnish employer recruits an Italian worker. He is married to an Argentinian woman. Both spouses are automatically entitled to reside and take up employment in Finland - under Article 1 of Regulation 1612/68 for the EU citizen, and under Article 23 of Directive 2004/38/EC for his spouse. Therefore no work permit is necessary for the non-eea citizen. A Croatian nurse living in Croatia - a country which has not yet joined the European Union - does not automatically have the right to work in Austria. A work permit is necessary for this. Even if the Croatian nurse is married to a German man, who is working as a cross-border worker in Austria but living in Croatia, she is not allowed to work in Austria. If the couple moves to Austria, there is no need for a work permit any more. A construction company based in Belgium employs Moroccan workers on a permanent basis and temporarily posts them to France. The company is not obliged to apply for a work permit from the French authorities (on the grounds of Articles 49 and 50 (free movement of services) of the EEC Treaty (Vander Elst judgment C-43/93 and judgment in Case C 445/03, Commission v Luxembourg). 11

An Israeli ballerina lives in Amsterdam (NL) and works in Antwerp (B). Because she is not an EEA citizen, she may only work if she has a work permit. She is entitled to Belgian child allowances (social security payments) under Regulation 1408/71 on the coordination of social security. She has no entitlement to Belgian maternity allowances (social advantage) under Article 7, paragraph 2 of Regulation 1612/68. She is entitled to child allowances but not maternity allowances because third country nationals are covered by the scope of the social security coordinating Regulation 1408/71, but not that governing the free movement of workers, Regulation 1612/68. c. The right of residents of the new Member States to take up employment There were two important enlargements to the European Union in recent years. The EU grew from a club of 15 into one of 25 with the accession to the Union on 1 May 2004 of ten new Member States (Cyprus, the Czech Republic, Estonia, Hungary, Latvia, Lithuania, Malta, Poland, Slovakia and Slovenia - in the following called the 2004 accession countries). Then, on 1 January 2007, another two new Member States (Bulgaria and Romania - in the following called the 2007 accession countries) joined us, bringing the total number of members to 27. In the case of each enlargement, the old and new Member States have agreed on transitional arrangements. This allows the right to free movement of workers, a politically sensitive issue, to be introduced gradually. The result of this is essentially that the original system, under which residents of the new Member States needed a work permit to work in an old Member State, may still be retained for a time desired. However, no transitional arrangements were made for Cyprus or Malta. Their residents had the right to work in all the old Member States immediately on their accession in 2004. Residents of the other 2004 accession countries and the 2007 accession countries, however - unless they are nationals of one of the old Member States - will have their right to free access to the labour market in an EU-15 Member State (in the case of the 2004 accession countries apart from Cyprus and Malta) or EU-25 Member State (in the case of the 2007 accession countries) restricted for a time yet. It should be noted that if old Member State A applies restrictive measures to the residents of new Member State B, this State will have the same right in respect of residents of Member State A (= reciprocity). The intention is to give the Member States the chance, over a maximum period of 7 years, to make a gradual transfer from the original nationally controlled permit system to the completely open labour market system under EU Regulation 1612/68. Those Member States that wish to make use of these transitional provisions are obliged to make efforts to extend access policies in respect of their labour markets. Furthermore, they may not diminish existing rights. There is also a rule of precedence that states that persons from a new Member State should be given precedence over persons from non- Member States when applying for vacancies open to foreigners. The transitional arrangements will have three phases, spread over 7 years. In each successive phase, there is less scope for national policy and a greater duty of accountability on those Member States which wish to persist with the permit system. 12

Phase 1 => 01/05/2004-30/04/2006 for the 2004 accession countries, and 01/01/2007-31/12/2008 for the 2007 accession countries: During the first two years after accession, the old Member States may apply national regulations to the access of workers from the new Member States, rather than the EU regulations on free movement. Every old Member State may opt on a voluntary basis, though, to choose to apply the EU regulations at the time of accession. Phase 2 => 01/05/2006-30/04/2009 for the 2004 accession countries, and 01/01/2009-31/12/2011 for the 2007 accession countries: At the end of the first phase, the European Commission will assess the transitional rules. Every Member State that is applying the transitional regulations must then declare whether or not they intend to extend the transitional period for a maximum of three more years. If not, there will be no further need for work permits in that Member State. The Free movement of workers regulation will then apply. In this event the Member State may take further voluntary measures for certain regions or professions, or in the case of unexpected problems in the labour market. Phase 3 => 01/05/2009-30/04/2011 for the 2004 accession countries, and 01/01/2012-31/12/2013 for the 2007 accession countries: After the second phase of three years the Member States which have not yet done so will again be asked to open up their labour markets fully. Only if they can demonstrate serious distortion, or the threat of serious distortion, in the labour market may they extend the work permit system for a maximum of two further years. In the case of the 2004 accession countries, no Member State may continue to operate the work permit system as of 01/05/2011 and Regulation 1612/68 will enter fully into force at that time with no further restrictions throughout the EU-25 countries. The same will apply throughout the EU-27 as of 01/01/2014 in the case of the 2007 accession countries. Only Ireland, Sweden and the United Kingdom opened their labour markets to citizens of the 2004 accession countries from the start. Finland, Greece, Italy, Portugal and Spain joined them as the second phase began. Belgium, Denmark, France, Luxembourg and the Netherlands indicated that they would make use of the possibilities offered to them by the second phase, but at the same time put in place a more flexible permit procedure, covering the whole labour market (in Denmark) or specific industries and professions where there was a need for workers (in Belgium, France, Luxembourg and the Netherlands). Austria and Germany have decided to maintain all the restrictions. In fact, they announced already in 2004 that, depending on their labour market situation, they would make full or partial use of the 7-year transitional period. The 2004 accession countries (including Cyprus and Malta) allowed free movement of workers from other Member States from the start. Only Hungary, Poland and Slovenia decided to apply the reciprocity principle to residents of those EU-15 Member States that were themselves applying restrictions. Since the start of the second phase, only Hungary has continued with this policy. Poland and Slovenia have now completely opened their labour markets. In the case of the 2007 accession countries, we are currently only in the first phase of the transitional period. It was not yet completely clear as the final editorial touches were being made to this guide, what positions the various Member States would take. Nevertheless it can be stated - subject to the appropriate reservations - that the Cypriot, Estonian, Finnish, Latvian, Lithuanian, Polish, Slovakian, Slovenian and Swedish labour markets have been opened to residents of Bulgaria and Romania with immediate effect and without any restrictions being applied. 13

In France, Hungary and Italy, a work permit is still required, but has become easier to acquire. In Austria, Belgium, Denmark, Germany, Greece, Ireland, Luxembourg, Malta, the Netherlands, Portugal, Spain and the United Kingdom, the intention seems to be to keep to the original national work permit policy for the time being. As this guide went to press, it was still unclear whether Bulgaria and Romania would apply the reciprocity principle to the EU-25 Member States that were applying restrictions. Denmark, Germany and Austria will operate a more restrictive access policy. The transitional arrangements only apply to the free movement of workers. The free movement of services - including the posting of workers - will apply from the first day of accession, as will the free movement of self-employed persons, students, pensioners, tourists, etc. Only in Austria and Germany will there be a special protection clause under which secondment from the new Member States can also be restricted. It covers both the 2004 and the 2007 accession countries. This possibility will only apply to a limited number of services, such as construction and industrial cleaning, and may only be used in the event of severe distortions in the sectors concerned. Anyone who is working in an old Member State before 1 May 2004, and who has a work permit for a minimum of twelve months, may automatically continue to work in that Member State. Their family members who had legal access to the labour market in a Member State on the date of accession will also retain this right. If the family reunion takes place after the accession date, the family members will have access to the labour market in that Member State when they have been resident for eighteen months or from the third year after accession, depending on which comes first. In short, anyone who wants to make use of their right to go to work in another Member State during the transitional period must take into account the exact situation in the country where they wish to work. The transitional period is designed to prevent mass migration on a scale that would distort the labour market. It is not intended to prevent all movement. 14

3. The coordination of social security: Regulation 1408/71 & Regulation 883/04 a. General The European Regulation 1408/71 on the application of social security schemes within the Community governs the rights of migrant and cross-border workers and their families. The coordinating regulation 1408/71 prevents workers and their families who make use of the right to free movement from losing their acquired social security rights. The practical implementation of this coordination is set out in the implementing regulation 574/72. 2 These determining rules also apply in Regulation 883/04 (Articles 12 to 16). In the foreseeable future (2008/2009?), coordinating Regulation 1408/71 will be replaced by Regulation 883/04. Regulation 883/04 will come into effect once the relevant implementing regulation has been approved by the European Parliament. A proposal for an implementing regulation has been put forward by the European Commission (COM(2006) 16). Regulation 1408/71 only applies to workers having the nationality of one of the Member States of the European Economic Area (EEA = The European Union, plus Liechtenstein, Norway and Iceland). As of 1 July 2002 the regulation also applies to Switzerland. From 1 June 2003 it was also extended to non-eu citizens ( third country nationals ) legally resident in one of the Member States (except Denmark). Regulation 1408/71 only coordinates social security systems. It does not affect supplementary, extralegal social insurance schemes (company pensions, private health insurance, supplementary sickness and invalidity insurance etc.) The most important coordinating principles of Regulation 1408/71 are: a. the determination of a single applicable social security legislation, to avoid the conflict of laws; b. the obligation to export payments such as family allowance, sickness, invalidity, retirement pensions and death benefits; c. the aggregation of insurance periods in the different Member States; d. the coordination of calculation methods for payments. b. Rules for determining the applicable social security legislation To prevent migrant or cross-border workers being subject to no social security legislation, or being subject to two or more such legislations simultaneously, determining rules were introduced in Regulation 1408/71. These determining rules - in Articles 13 to 17 - establish which social legislation is applicable under given circumstances. These rules are binding in nature, and allow no choice. They are also exclusive, in that a worker can only be subject to the social legislation of a single Member State (Article 13). In general the principle of country of work applies (the lex loci laboris) 2. There are a limited number of exceptions to these basic principles, for example, in the event that his employer posts a worker for a short period to another Member State. In some cases there is also an 15

3 Regulation 883/04 strengthens exclusivity. It will be impossible under any circumstances to be covered by social security in two Member States at the same time. In addition, Regulation 883/04 will extend the posting period from 12 to 24 months. 4 Article 11, paragraph 2 a of Regulation 883/04 5 Article 12, paragraph 1 of Regulation 883/04 6 Article 13, paragraph 1 a of Regulation 883/04 7 Article 13, paragraph 1 b of Regulation 883/04 8 Regulation 883/2004 eliminates the possibility of a person being covered by two social security regimes. In the example above, the person involved is covered by social security in the Netherlands for all his activities - including those in Belgium as a self-employed person. 9 art. 16 du R. 883/2004 10 Articles 11 to 15 of Regulation 883/04 exception to the country of work principle if the worker is employed simultaneously in more than one Member State. Moreover, despite the principle of exclusivity, double social security coverage may still occur in a very specific situation (a person performing work in both paid employment and as a selfemployed person at the same time in States of employment having separate social security regimes for the two professional categories) 3. Examples: A resident of Portugal works in Spain, but returns to Portugal at least once a week. The employee is a frontier worker. He is subject to the social security system of the country in which he works, Spain (Reg. 1408/71, Article 13 paragraph 2 a) 4. A Swedish company posts its personnel manager to Denmark for twelve months. Since he is on secondment, the employee remains subject to Swedish social security (1408/71 Article 14 paragraph 1 b) 5. A resident of Italy works for a French company in both France and Italy. He is subject to the social security of a single Member State, in this case Italy, the country where he both lives and works. The French employer must accordingly make social security contributions in Italy (Reg. 1408/71 Article 14 paragraph 2 b i) 6. A resident of Austria works as a maintenance mechanic for a German company. This maintenance mechanic works in Italy and Switzerland. The employee is subject to the social security legislation of a single Member State, in this case Germany, where his employer is based (Reg. 1408/71, art. 14, paragraph 2 b ii) 7. A resident of Belgium works as a self-employed person in Belgium and in paid employment in the Netherlands. Exceptionally, this person is insured as an employed person in the Netherlands and simultaneously as a self-employed person in Belgium (the split subjection governed by Annex VII of Reg. 1408/71). Such a regulation also applies to a number of other member States 8. In a number of very exceptional cases, there may be exemption from the rules of applicable legislation set out under Reg. 1408/71 Articles 13 to 16. This is governed under Article 17, which states: Article 17 Reg. 1408/71 9 : Two or more Member States or the competent authorities of those States may, by common agreement, provide for exceptions to the provisions of Articles 13 to 16 in the interest of certain workers or categories of workers 10. 16

c. The right to export benefits In many Member States the right to benefits, or their payment, expires when the worker is no longer resident in that Member State. On return to the country of origin, or removal to another Member State, acquired benefit rights are thus lost. This forms a severe hindrance to the free movement of workers. European Regulation 1408/71 establishes a rule which states that benefits for parenthood, sickness, invalidity, old age and death must continue to be paid to entitled persons who live in another Member State or return to their country of origin. This obligation is not absolute. Assistance benefits, for example, cannot be exported. The provisions only apply to unemployment benefits for a limited time (maximum 3 months) (Reg. 1408/71, Article 69) 11. The European Regulation 1408/71 determines how a sick worker who is entitled to sickness benefits or continued wage payments during sickness but domiciled in another Member State shall be regulated. There are also rules which prevent the payment of double child allowance or no child allowance (overlapping entitlement). 11 Article 64 of Regulation 883/04 12 A specific chapter (9) and an annex (X) are incorporated in Regulation 883/04. 13 Article 65 paragraph 2, first sentence of Regulation 883/04 Examples : French statutory retirement, death and invalidity benefits are automatically exportable. This does not apply to assistance benefits from the Fonds National de Solidarité (Law of 30 June 1956) or benefits for disabled adults (French Law of 30 June 1975). Italian pensions (and other payments) for deaf mutes, Irish assistance for the unemployed (Social Welfare Consolidation Act 1993), and, for example, the Danish housing payments to pensioners, are not exportable to another Member States, because these benefits are not based on premiums or contributions (Regulation 1408/71 Article 10 bis and Annex II bis) 12. A Portuguese frontier worker - living in Portugal - who has worked throughout his entire working life in Spain receives Portuguese unemployment benefits if he is completely unemployed (residence principle, Reg. 1408/71 Article 71 paragraph 1 a) ii) 13. This principle also applies to a Spanish worker who moves to Portugal and continues to work in Spain. A single income family living in the Netherlands, the father of which is in paid employment in Germany, has a priority claim on German child allowances. German child benefit is exportable. There is no requirement that the children should grow up in Germany (Reg. 1408/71 Article 74). Because the Dutch child benefit system is based on residence, there is also a right to additional Dutch child allowance payments if these are higher than those paid in Germany. The mother, if she does not work in the Netherlands, may also have a claim (a derived right) to German maternity benefits (Hoever judgment C-245/94 and Zacher judgment C-312/94). If the mother works in the Netherlands, she has the right to German maternity benefits if she satisfies the German requirements. 17

14 All these provisions have been brought together and incorporated in a general article (Article 6) in the new Regulation 883/04. Article 6 of Regulation 883/04: Aggregation of periods Unless otherwise provided for by this regulation, the competent institution of a Member State whose legislation makes: the acquisition, retention, duration or recovery of the right to benefits, the coverage by legislation, or the access to or the exemption from compulsory, optional continued or voluntary insurance, conditional upon the completion of periods of insurance, employment, self-employment or residence shall, to the extent necessary, take into account periods of insurance, employment, self-employment or residence completed under the legislation of any other Member State as though they were periods completed under the legislation which it applies. 15 This principle is thus incorporated in the general Article 6 of Regulation 883/04. 16 Article 61 of Regulation 883/04 17 Article 52 of Regulation 883/04 d. Aggregation of insurance periods In many national legislations the right to a benefit, and its duration and size, are dependent on the condition that the applicant has had social insurance for a certain period and that his social security contributions have been paid. In many systems waiting times are imposed or standard requirements set. Such conditions are very detrimental to migrant and cross-border workers. In transferring from one social security system to another, they can be repeatedly faced afresh with waiting periods and/or standard requirements. The coordinating regulation 1408/71 therefore sets out provisions which state that insurance waiting periods satisfied in another Member State should be accumulated for establishing the right to a benefit ( aggregation rules ) 14. Communications between Member State regarding satisfied insurance periods take place by means of E-forms. Examples : In Belgium six months social insurance are required before sickness benefit can be paid. An Irish worker, who moves to Belgium to work and falls sick after three months, is entitled to Belgian sick benefit if he can show using form E104 (Irl) that he has previously been insured for at least three months in Ireland (Reg. 1408/71 Article 18) 15. A resident of Greece has worked for five years in Greece. He then moves to France. After three months in France he becomes unemployed. To qualify for unemployment benefit in France a worker must have had social insurance for at least 182 days in a 22-month period. Accumulating insurance periods and treating them alike enables the Greek worker to claim French unemployment benefit if he can produce form E301 (Gr) (Regulation 1408/71 Article 67) 16. A Finnish worker has worked in Germany for 4 years. In the German pension system there is a 5-year waiting period. If the Finnish worker has had social insurance for less than 5 years, he has no entitlement to a German pension on the basis of his German contributions. If he was previously insured for a long period in Finland, and can prove it with a form E205, he will be entitled to a German retirement pension based on aggregating and treating equally his Finnish and German insurance periods (Article 44 of Regulation 1408/71) 17. This is known as the statutory pension. e. Coordination of calculation methods for benefits Articles 13 to 17 of the coordinating Regulation 1408/71 18 govern where the cross-border worker has social insurance. This prevents the worker from having double insurance, or none. But this does not solve all the problems. There can, for example, be problems in the payment of child benefits if both parents are subject to the legislation of different Member States, because one works in the state of residence and the other works in another Member State. 18 Articles 12 to 16 of Regulation 883/04 18

Examples : The family lives in Portugal. One of the parents is a frontier worker in Spain, the other works in Portugal. The question is which Member State is liable for child benefit payments: the family s place of domicile, or the country in which one of the parents works. Or should the family s country of residence (Portugal) pay the benefit as a matter of priority, with the country of work supplementing the payment where necessary? The family lives in Maastricht (the Netherlands). The father is in paid employment in Germany and the mother works in Belgium. The question is which of the three Member States should pay child benefit. How much each Member State should pay is also regulated. The Court of Justice reached a binding decision in the Danner case (C-167/88). Situations of this nature are resolved by the coordinating regulation 1408/71 in combination with the implementing order 574/72. 19 Chapter 8 of Regulation 883/04 20 In the new Regulation 883/04, this single pension method only applies if Spain and France are included in Annex VI. As this, however, is not the case, the pro-rata method applies. In coordinating family benefit systems, account is taken of the fact that various types of child benefit systems exist, (employees insurance, residents insurance, and even insurance for the self-employed). The coordinating Regulation 1408/71 determines which Member State must take precedence in paying family benefits and how to avoid an aggregation of child benefit payments (chapter 7 of Reg 1408/71) 19. Aggregation can also occur in the case of invalidity benefit. In a good many Member States invalidity insurance is risk insurance (e.g. the Netherlands, Belgium, Ireland, France, the United Kingdom and Spain). That means that the value of the invalidity benefit is independent of the length of the insurance period. The other Member States have acquired rights systems. Examples : A migrant worker lives and works for one year in Spain (risk system). He previously worked for 15 years in France (risk system). In the event of invalidity this migrant worker, regardless of his insurance history, is only entitled to a full Spanish invalidity pension. Under Regulation 1408/71, he has a claim to a Spanish invalidity benefit exactly as if he had always been insured in Spain 20. A migrant worker lives and works for one year in Spain (risk system). He had previously worked for 15 years in Austria (acquired rights system). In the event of invalidity this migrant worker, regardless of his insurance history, is still entitled to a full Spanish invalidity pension. Because he had previously been insured under an acquired rights system, there will also be a claim to an Austrian invalidity pension. If this is also paid it will be deducted from the Spanish invalidity pension (anti-aggregation). If the worker was not insured against incapacity to work under the Austrian social laws, he is entitled to a full Spanish invalidity pension. Coordination in the event of invalidity is complicated. Account must be taken of the substantial difference between invalidity schemes. A distinction is made between risk systems and acquired rights systems. For the way in which they are coordinated, the insurance situation in which the worker finds himself at the point at which he is incapacitated plays a decisive role. A distinction is made between a worker who was most recently insured in an acquired rights system, and a worker who was most recently insured under a risk system. Coordination is designed so as not to lose acquired rights. It does not really resolve the problem of the often considerable mutual differences between invalidity systems. It can happen that a migrant or 19

frontier worker is declared fully incapacitated in one Member State and simultaneously is regarded as not incapacitated, or only partially so, in the other Member State. This lack of harmonisation cannot be resolved by coordination. Special coordination rules have also been devised for old age and survivors pensions. For a more thorough and detailed description of all the coordination rules, see chapters 10 and 12. 4. Cross-border employment law a. General In the case of cross-border work, the question is which employment law (collective agreement) applies. Before answering this question, it is important to establish what sort of cross-border work is involved. In a number of situations the Rome Convention on the law applicable to contractual obligations (Convention on Contractual Obligations of 19 June 1980) applies. The Convention applies to international labour agreements. This is the case if an employer from a given Member State causes his employee to work in one or more other Member States; for example, if a German company causes an employee living in France to work in Luxembourg, France and Belgium; or if a Greek undertaking seconds an employee to Spain for 2 years. The Convention also applies in principle to an employee who works in another Member State for an employer established there (e.g. frontier worker). There is, however, no question of cross-border domicile. In this event it is almost always agreed to apply the employment law and conditions (collective agreement) of the country of work (lex locis laboris). The Convention has been reworked as a European regulation (Rome I Regulation) on the law applicable to contractual obligations (COM(2005) 650 final). It is not yet certain when this will come into effect (2008?). 20

b. Convention on Contractual Obligations b.1. Applicable law As a general rule the Convention on Contractual Obligations states that a labour agreement is governed by the law selected by the parties (Article 3 of the Convention on Contractual Obligations). No further conditions are imposed on the jurisdiction chosen; any employment law system can in principle be selected. Choice of law by the parties, Article 3, paragraph 1 of the Convention on Contractual Obligations: A contract shall be governed by the law chosen by the parties. The choice must be expressed or demonstrated with reasonable certainty by the terms of the contract or the circumstances of the case. By their choice the parties can select the law applicable to the whole or a part only of the contract 21. Examples : A Swedish firm engages a German-resident maintenance mechanic to work in Germany. The parties may choose which law will govern the contract. In practice the choice will be restricted to the German or Swedish employment law. Since the employee has social insurance and pays tax in Germany, the pragmatic solution is to opt for German employment law. A Swedish undertaking engages an employee domiciled in Luxembourg to carry out paid employment in France and Belgium. In practice there is a choice of the Swedish, French, Luxembourg or Belgian labour laws. Under the social security Regulation 1408/71 Swedish social security legislation is applicable. If the employee works fewer than 183 days in France and Belgium, he will be taxed in his country of domicile (Luxembourg). So there will be no salary split applied. In this event - because of the connection with social security - Swedish employment law can be chosen. If the employee also works in his place of residence (Luxembourg), he is insured under the Luxembourg social insurance scheme and it is more logical to opt for Luxembourg employment law. The Swedish undertaking posts one of its Swedish employees to England for one year. The employee remains covered by Swedish social insurance. He is taxed in England under the Swedish- English double taxation treaty. It is convenient, given the temporary nature of this employment situation, to continue to apply Swedish employment law and/or labour conditions. The employee will afterwards return to Sweden or he may then be posted to another Member State. If no choice of jurisdiction is made, the contract is governed under Article 6, paragraph 2 of the Convention on Contractual Obligations: Notwithstanding the provisions of Article 4, a contract of employment shall, in the absence of choice in accordance with Article 3, be governed: (a) by the law of the country in which the employee habitually carries out his work in performance of the contract, even if he is temporarily employed in another country; or b) if the employee does not habitually carry out his work in any one country, by the law of the country in which the place of business through which he was engaged is situated unless it appears from the circumstances as a whole that the contract is more closely connected with another country, in which case the contract shall be governed by the law of that country. (Note: this applies to both a) and b)) 22. 21 Proposal in Rome I for an Article 3: Freedom of choice (COM(2005) 650 final) 1. Without prejudice to Articles 5, 6 and 7, a contract shall be governed by the law chosen by the parties. The choice must be expressed or demonstrated with reasonable certainty by the terms of the contract behaviour of the parties or the circumstances of the case. If the parties have agreed to confer jurisdiction on one or more courts or tribunals of a Member State to hear and determine disputes that have arisen or may arise out of the contract, they shall also be presumed to have chosen the law of that Member State. By their choice the parties can select the law applicable to the whole or a part only of the contract. 22 Proposal in Rome I for an Article 6: Individual employment contracts (COM(2005) 650 final) 1. 2. A contract of employment shall, in the absence of choice in accordance with Article 3, be governed: (a) by the law of the country in or from which the employee habitually carries out his work in performance of the contract. The place of performance shall not be deemed to have changed if he is temporarily employed in another country. Work carried out in another country shall be regarded as temporary if the employee 21

is expected to resume working in the country of origin after carrying out his tasks abroad. The conclusion of a new contract of employment with the original employer or an employer belonging to the same group of companies as the original employer does not preclude the employee from being regarded as carrying out his work in another country temporarily; (b) if the employee does not habitually carry out his work in or from any one country, or he habitually carries out his work in or from a territory subject to no national sovereignty, by the law of the country in which the place of business through which he was engaged is situated. 3. The law designated by paragraph 2 may be excluded where it appears from the circumstances as a whole that the contract is more closely connected with another country, in which case the contract shall be governed by the law of that country. 23 Proposal in Rome I for an Article 6: Individual employment contracts (COM(2005) 650 final) 1. Notwithstanding the provisions of Article 3, in a contract of employment a choice of law made by the parties shall not have the result of depriving the employee of the protection afforded him by the mandatory rules of the law which would be applicable under this Article in the absence of choice. Examples : A trading company established in Austria takes on a commercial representative living in France to work in France. He also works from time to time in Italy and Spain. As there is no agreement as to which employment law is applicable, French employment law applies (Article 6 paragraph 2 a) of the Convention on Contractual Obligations). This poses no problems for coherence: the employee is already subject to French taxation (in accordance with the double taxation treaty which France has signed with the various countries of work) and this also applies to social security obligations (Article 14 paragraph 2 b) ii of Reg. 1408/71). An undertaking located in Italy takes on a maintenance mechanic to work in Germany, Austria and Switzerland. There is no agreement as to which employment law should apply. In this event Italian labour will apply (Article 6, paragraph 2 b) of the Convention on Contractual Obligations). b.2. Mandatory rules Where a choice of jurisdiction is made, it cannot be absolute: Article 6, paragraph 1 of the Convention on Contractual Obligations states that a choice of law shall not have the result of depriving the employee of the protection afforded to him by the mandatory rules of the law which would be applicable in the absence of choice. The employee can invoke this clause at any time. Article 6, paragraph 1 of the Convention on Contractual Obligations: Notwithstanding the provisions of Article 3, in a contract of employment a choice of law made by the parties shall not have the result of depriving the employee of the protection afforded to him by the mandatory rules of the law which would be applicable under paragraph 2 in the absence of choice 23. This means, by way of example, that, if the Austrian employer and his French commercial representative in the example above have chosen Austrian law, the employee concerned may not lose the protection afforded to him by the mandatory rules of the French law. b.3. Mandatory rules or priority rules Article 7 of the Convention on Contractual Obligations further states that, as well as the law applicable in accordance with a freely chosen jurisdiction and/or Article 6 paragraph 2 of the Convention on Contractual Obligations, effect may be given under certain circumstances to the mandatory rules of the law of another Member State with which the situation has a close connection. However this only applies in the case of mandatory rules described as immediately applicable rules of special mandatory law. These are always applicable, regardless of the jurisdiction chosen. Mandatory rules Article 7, paragraph 1 of the Convention on Contractual Obligations: When applying under this Convention the law of a country, effect may be given to the mandatory rules of the law of another country with which the situation has a close connection, if and in so far as, under the law of the latter country, those rules must be applied whatever the law applicable to the contract. In considering whether to give effect to these mandatory rules, regard shall be had to their nature and purpose and to the consequences of their application or non-application. 22

Article 7, paragraph 2 of the Convention on Contractual Obligations: Nothing in this Convention shall restrict the application of the rules of the law of the forum in a situation where they are mandatory irrespective of the law otherwise applicable to the contract 24. When the mandatory rules of the Member State in which an employee works are applied, the question arises of which mandatory rules are concerned. One often-used definition of the term mandatory rules is that given by the Court of Justice in the Arblade case (C-396/96 and C 376/96). The Court ruled that this meant national provisions compliance with which has been deemed to be so crucial for the protection of the political, social or economic order in the Member State concerned as to require compliance therewith by all persons present on the national territory of that Member State and all legal relationships within that State. This contrasts with the definition under Article 6, paragraph 1 of the Convention on Contractual Obligations, which is restricted to specific rules affording protection to an employee. Mandatory rules are therefore those in public law, which can apply in the general interest to a private legal relationship (e.g. an employment contract). A legal rule may become mandatory if it impacts on public order (police and safety laws). Mandatory rules override the choice of jurisdiction. However, this principle only applies if the international employment relationship falls within the scope of the mandatory rule. Scope rules may be written in legislation or unwritten in case law. Which laws are regarded as mandatory varies according to the Member State. There is no uniformity. Thus the German Bundesarbeitsgericht has determined that maternity leave and paid sick leave are in the general social interest (mandatory rules under Article 7 paragraphs 1 and 2 of the Convention on Contractual Obligations) and must be regarded as priority regulations. Another example is the French redundancy law. This states that any contract between an employer and an employee, under the terms of which the employee renounces his right to redundancy payments or agrees that his notice period can be shortened without compensation, is null and void. French case law has however ruled that this is not a mandatory rule (Article 7 paragraphs 1 and 2 of the Convention on Contractual Obligations) that is applicable regardless of the law governing the contract. A French employee whose employment contract is legitimately subject to foreign law may not therefore assume that French legislation will apply as of right to dismissal. Under the Directive 96/71/EEC regarding the posting of workers (see point c. below) a number of mandatory rules are uniformly imposed upon Member States. Examples : 24 Proposition dans Rome I pproposal in Rome I for an Article 8: Mandatory rules (COM(2005) 650 final) 1. Mandatory rules are rules the respect for which is regarded as crucial by a country for safeguarding its political, social or economic organisation to such an extent that they are applicable to any situation falling within their scope, irrespective of the law otherwise applicable to the contract under this Regulation. 2. Nothing in this Regulation shall restrict the application of the rules of the law of the forum in a situation where they are mandatory. 3. Effect may be given to the mandatory rules of the law of another country with which the situation has a close connection. In considering whether to give effect to these mandatory rules, courts shall have regard to their nature and purpose in accordance with the definition in paragraph 1 and to the consequences of their application or non-application for the objective pursued by the relevant mandatory rules and for the parties. A Portuguese undertaking engages a Portuguese worker living in Belgium to employ him in Belgium. It is agreed that Portuguese employment law is applicable. In accordance with Article 6 paragraph 1 of the Convention on Contractual Obligations the mandatory rules of Belgian employment law still apply. In Belgium this includes all generally binding collective employment agreements. In the event of dismissal, it must be established whether Belgian law - e.g. the statutory notice period - offers more protection than Portuguese law on dismissal. In Portugal there is a notice period of 60 days. If, for example, in Belgium the statutory notice period is 28 days, Portuguese employment law may be applied on the basis of the principle of favourable treatment. If however the generally binding Belgian collective agreement imposes a notice period of 3 months, this notice period must be applied. 23

A German horticultural business engages Portuguese employees for a project in Maastricht (the Netherlands). It is agreed to apply German employment law. In Germany - in contrast to the Netherlands - there is no statutory minimum wage. The German employer is obliged to apply the Dutch statutory minimum wage (Directive on the posting of workers). In the event of dismissal, the question arises of whether German or Dutch statutory notice periods are applicable. The employee may invoke the dismissal regulations that afford him most protection (Article 6 paragraph 1 of the Convention on Contractual Obligations). Whether the Dutch generally binding collective agreement for the horticultural sector is applicable is unclear since generally binding collective agreements in the Netherlands are not mandatory rules. c. Directive regarding the posting of workers 96/71/EC In the event of a traditional posting - when an employer established in a Member State (originating State) temporarily posts an employee to another Member State (host Member State) - the question is which employment law and labour conditions apply. Directive 96/71/EC governs the posting of workers. In contrast to the Convention on Contractual Obligations, this Directive aims at harmonising the mandatory rules in the sense that it determines which areas of employment law in each Member State qualify as a minimum as mandatory rules, even where legislation or case law in a Member State has taken no initiatives in the matter. There is however no question of harmonisation as to content. In other words, the principle of subsidiarity applies to the practical, national interpretation of these regulations. It applies to those areas of employment law, as set out in the statutory and administrative provisions of each Member State and, where they exist, in the generally binding collective employment agreements for the construction and related sectors, relating to: a) maximum work periods and minimum rest periods; b) minimum paid annual holidays; c) the minimum rates of pay, including overtime rates; this point does not apply to supplementary occupational retirement pension schemes; d) the conditions of hiring-out of workers, in particular the supply of workers by temporary employment undertakings; e) health, safety and hygiene at work; f) protective measures with regard to the terms and conditions of employment of pregnant women or women who have recently given birth, of children and of young people; g) equality of treatment between men and women and other provisions on non-discrimination. The mandatory rules under the Directive on the posting of workers, (a to g above) of the host Member State (State of employment) must be observed by the foreign employer throughout the period of the posting. This applies whatever the law applicable to the employment relationship. In this way social dumping is prevented in the territory of the host Member State. In accordance with article 3, paragraph 7 of this Directive, where regulations on working conditions and protection (a to g) in the host State are less favourable than those in the originating State, the working conditions and protection of the latter must be applied (principle of favourable treatment). As has already been said, this rule applies not only to statutory provisions, but also to provisions such as those set out in collective agreements for the construction and allied sectors. Each Member State, 24

however, is entitled under Article 3, paragraph 10 of 96/71/EC, to extend the scope and content of the Directive. Some Member States have made use of this right. A number of Member States have even brought all generally binding collective agreements from every sector into the scope of the Directive on the posting of workers. These States are Belgium, France, Finland, Greece, Italy, Luxembourg, Austria, Portugal and Spain. Examples: In the case of a French employer posting an employee to the German construction sector, the German minimum wage must be paid where this is higher than the French wage. If a Spanish employer posts a Spanish employee to the Dutch horticultural sector, the statutory Dutch minimum wage must be paid. The horticultural collective agreement - although declared to be general and binding - does not apply, since the Directive does not apply to the Dutch horticultural sector. If the Spanish employee is posted to the Belgian horticultural sector, however, the Belgian collective agreement for the sector does apply, since the Belgian government has brought these collective agreements within the scope of the Directive. d. Competent labour court: Reg. 44/2001 Regulation (EC) no 44/2001 on jurisdiction and the recognition and enforcement of judgments in civil and commercial matters establishes community regulations for the jurisdiction and recognition of decisions in civil and commercial matters. This regulation also applies to frontier employees. In relation to individual contracts of employment Article 19 of Reg. 44/2001 states that an employer domiciled in a Member State may be sued in the courts of the Member State where he is domiciled; or in the courts for the place where the employee habitually carries out his work; or in the courts for the last place where he did so. This clause thus establishes, in the employee s favour, an exemption to the general principle that persons (in this case the employer) domiciled within a Member State shall be sued before the courts of that Member State. Article 19 Reg. 44/2001: Jurisdiction over individual contracts of employment An employer domiciled in a Member State may be sued: 1. in the courts of the Member State where he is domiciled; or 2. in another Member State: a) in the courts for the place where the employee habitually carries out his work or in the courts for the last place where he did so, or b) if the employee does not or did not habitually carry out his work in any one country, in the courts for the place where the business which engaged the employee is or was situated. If the employer wishes to take proceedings (e.g. to dissolve an employment contract), he may do so only in the courts of the Member State in which the employee is resident. In consultation with the employee after the dispute has arisen - an agreement may be reached to take proceedings before the courts of another Member State. 25

Article 20 du Reg. 44/2001 : 1. An employer may bring proceedings only in the courts of the Member State in which the employee is domiciled. 2. The provisions of this Section shall not affect the right to bring a counter-claim in the court in which, in accordance with this Section, the original claim is pending Article 21 Reg. 44/2001: The provisions of this Section may be departed from only by an agreement on jurisdiction: 1. which is entered into after the dispute has arisen; or 2. which allows the employee to bring proceedings in courts other than those indicated in this Section. Examples : An employee domiciled in Italy is engaged by a French employer to carry out maintenance work in Italy. It is agreed to apply French employment law. There is a conflict over wages payments. The employer can only take proceedings before the Italian court, which must then apply the French employment laws. There can, however, be an agreement to declare the French courts competent. A German employer wishes to rescind the employment contract of his employee who is domiciled in Austria and works across the border in Germany. The employer must have this contract - to which German employment law is applicable - rescinded by an Austrian court, which must deliver a judgment based on German employment law. The German employer and his Austrian frontier worker may decide to bring the dispute before a German court. 26

5. Coordination of taxation: double taxation treaties a. General The EEC Treaty (Article 293) requires Member States to conclude bilateral treaties to prevent double taxation. In contrast to the European Regulation 1408/71, which coordinates statutory social security, there is no multilateral European treaty on taxation. The coordination of taxation is governed by many hundreds of bilateral taxation treaties between Member States. These double taxation treaties follow the model convention drafted by the OECD (Organisation for Economic Cooperation and Development). Under Article 39, paragraph 2 (non-discrimination) of the EC Treaty and Article 7 paragraph 2 of Reg. 1612/68, migrant and frontier workers enjoy the same tax advantages as national employees. This often means that the wages of a frontier or posted employee are taxed in the place of work. The question is which Member State - the place of residence or that of employment - should confer the tax deductions (rebates) and/or exemptions in connection with the employee s family situation. This problem is particularly thorny in a family where one parent works in the State of residence and the other in another State. In the case of a frontier employee the question is thus: when must the country of employment treat this employee - who is liable for tax abroad (non-resident) - as resident for tax purposes with the related tax advantages (tax rebates etc.). In the Schumacker case (C-279/93) the Court of Justice ruled that a frontier employee (not domiciled in the State in which he works) the greater part of whose (family) income derives from the State in which he works, is entitled in that State to all tax advantages/deductions in connection with his personal and family situation. The Court took the greater part to mean more than about 90%. A striking aspect of jurisprudence in relation to tax benefits is that the Court of Justice leaves Member States considerable freedom to conclude treaties to prevent double taxation. Even provisions in such treaties which make a direct distinction on nationality grounds may, under given circumstances, be legitimate (Gilly judgment, C-336/96 ). The large degree of autonomy enjoyed by Member States in taxation leads in practice to situations where apparent rules in the social security regulation ( where the employee has social insurance ) often conflict with the rules in the bilateral tax treaties ( where taxes are paid ). Thus employees in the international road transport and haulage sector have social insurance in the Member State where the employer is established (registered place of business, Article 14, paragraph 2 a) of Reg. 1408/71) and must frequently pay taxes in their country of residence on the income earned outside the Member State where the employer is established. There is a lack of coordination between taxation and the collection of social security contributions, with all its advantages and disadvantages. The big difference between taxation and social security contributions is that the exclusivity principle applies to the contributions, meaning that only one Member State is empowered to collect them. In the case of taxation, however, it is possible for an employee who works in two or more Member States 27

to be taxed in those States on the income earned for work carried out within their territory. There is no double taxation, but rather the liability is shared ( salary-splitting, see chapter 11). Double taxation treaties create no taxation obligation for the signatory States. They simply indicate which income is assigned to which treaty State. Whether or not this leads to actual taxation depends on national legislation. b. State of employment principle In accordance with the OECD model convention the state of employment principle is applied to income tax. For an employee who lives in one Member State and works in another, the country of residence must in principle relinquish its taxation powers to the country of employment. Article 15 paragraph 1 OECD model convention (2005): Subject to the provisions of Articles 16, 18 and 19, salaries, wages and other similar remuneration derived by a resident of a Contracting State in respect of an employment shall be taxable only in that State unless the employment is exercised in the other Contracting State. If the employment is so exercised, such remuneration as is derived therefrom may be taxed in that other State. Example : An employee resident in France who works for a Spanish employer in Spain is taxed in Spain (state of employment principle). In double taxation treaties concluded between neighbouring States, however, an exception may be made to this principle for frontier workers. In this event the State of residence retains the right to impose taxes (Frontier workers, see f.). There are also exceptions for transport employees in shipping and air transport. Their remuneration is not taxed in the State of employment, but rather in the Member State where the undertaking s effective management is situated (registered place of business, see chapter 11). Article 15 paragraph 3 OECD model convention (2005): Notwithstanding the preceding provisions of this Article, remuneration derived in respect of an employment exercised aboard a ship or aircraft operated in international traffic, or aboard a boat engaged in inland waterways transport, may be taxed in the Contracting State in which the place of effective management of the enterprise is situated. Another principle often applies to artists, sportsmen, teachers in higher education and students. The salaries and pensions of public servants are generally taxed in the State of the administration (State of employment). Under strict conditions the OECD model convention states that the State of residence may retain its powers of taxation even if the employee carries out his activities in another Member State. 28

Example : An employee domiciled in France who works for a French registered employer in Spain may be taxed in Spain (State of employment principle) or in France (State of residence principle). Which of these two Member States is entitled to levy taxes is determined under Article 15 paragraph 2 of the OECD model convention. c. Conditional retention of State of residence principle If an employee works in a Member State other than his State of residence and there is a slight relationship with this State of employment, the State of residence retains its powers of taxation. This is the case if the employee is working there temporarily and his employer has no connection with the State of employment. For situations of this kind the OECD model convention sets out objective criteria. The State of residence shall not cede its taxation powers to the State of employment where the following conditions are simultaneously fulfilled: Article 15 paragraph 2 OECD model convention (2005): Notwithstanding the provisions of paragraph 1, The remuneration derived by a resident of a Contracting State in respect of an employment exercised in the other Contracting State shall be taxable only in the first-mentioned State if: a) the recipient is present in the other State for a period or periods not exceeding in the aggregate 183 days in any twelve month period commencing or ending in the fiscal year concerned, and b) the remuneration is paid by, or on behalf or, an employer who is not a resident or the other State, and c) the remuneration is not borne by a permanent establishment which the employer has in the other State. If any one of these conditions is not satisfied, there is deemed to be a sufficient relationship with the State of employment and the employee is taxed there from his first physical presence day (for further consideration of crucial concepts such as 183 physical presence days, fixed establishment, etc. see chapter 8: The posted employee). In the taxation treaties, cross-border employment agency workers are often taxed in the State of employment because condition b is not satisfied. An employment agency that supplies a worker - with whom it has a contract of employment - to an employer in another country is often considered in the taxation treaties to be the formal employer. The company to which the worker is supplied is considered to be the material employer, as this company is the one that actually exercises supervision over the worker and that also indirectly pays the worker s wage. Example : An employee lives and works in Italy. From 1 February to until 31 May he is posted by his employer to Spain for a temporary contract with a customer. There is no fixed establishment. This employee continues to be taxed in his state of residence, Italy. An employee lives and works in Italy. From 1 February to until 31 May he is posted by his employer to a construction site in Spain. Under the tax treaty, the construction site must be regarded as a fixed establishment. The remuneration for February, March, April and May are taxed in the state of employment, Spain. 29

25 Article 13, paragraph 1 a of Regulation 883/04 A Polish employment agency worker is supplied by a Polish employment agency to a Dutch company. This Polish worker is taxed from the outset in the Netherlands because the Dutch borrowing company is considered to be the material employer and pays the wages to the Polish employment agency. d. Wage splitting If an employee works in two or more Member States, there may be a shared right to tax his remuneration under the above-mentioned regulation (Article 15 paragraph 2 of the OECD model convention). Both the State(s) of employment and the State of residence may exercise the right to tax part of the remuneration. Each State of employment may tax that part of the remuneration earned from activities carried out within its territory. The State of residence levies tax on the total (global) income of the employee progressively, but must exempt the remuneration already taxed in other States. Social security contributions may not be split (see chapter 3), under the exclusivity principle of Reg. 1408/71. Example : An English employee works for an employer established in France. He works 2 days per week in his State of residence (the United Kingdom) and 3 days in France. The employee is taxed in France on the income from activities carried out in France. He is taxed on the income from activities carried out in the United Kingdom in that country. The employee has social insurance in his State of residence (Article 14, paragraph 2 b) i) of Reg. 1408/71) 25. The French employer must transfer social security contributions to the United Kingdom. For a number of other standard instances of multinational work, see chapter 11 (the multinational employee). 30

e. Taxation of pensions and social benefits The question is one of where non-statutory company pensions, private pensions, social payments etc. are subject to taxation. In accordance with Article 18 of the model OECD convention, this is the beneficiary s State of residence. Government pensions (public service pensions) are, however, taxed in the source country (the former State of employment). Statutory social payments such as sickness and invalidity benefits, statutory old age and survivors benefits are taxed in the beneficiary s State of residence under Article 21 ( Other income ) of the OECD model convention. Sometimes, however, separate and/or divergent social security articles are included in double taxation treaties. Article 18 Pensions Pensions and other similar remuneration paid to a resident or a Contracting State in consideration or past employment shall be taxable only in that State. Article 21 Paragraph 1 Other income Items of income of a resident or a Contracting State, wherever arising, not dealt with in the foregoing Articles or this Convention shall be taxable only in that State. Examples : A resident of Italy receives a statutory German retirement pension. The German retirement pension is taxed in Italy (the country of residence) under Article 22 of the double taxation treaty between Germany and Italy. A resident of Germany receives a statutory Dutch retirement benefit. Under the double taxation treaty between Germany and the Netherlands, this benefit is taxed in the Netherlands (the State paying the benefit). A Dutch company pension, on the other hand, is taxed in Germany (State of residence). Dutch public service pensions paid to a retired public employee living in Germany are taxed in the Netherlands (the State of public employment). f. Specific rules for frontier workers In taxation treaties between neighbouring states, there are often exceptions to the State of employment principle. Notwithstanding a strong connection with the State of employment, the State of residence retains the powers of taxation. Supplementary protocols will define the limited frontier region in which an employee must live and work in order to qualify as a frontier worker (see chapter 10). As has been said, this regulation forms an exception to the general rule set out in both the OECD model convention (taxation), and Reg. 1408/71 (social security). 31

Example : Under the frontier workers protocol between France and Germany, an employee is deemed to be a frontier worker if he lives in the French departments of Moselle, Bas-Rhin or Haut Rhin, and works in Germany, either in the Saarland or within 30 km of the border. He is then subject to taxation in France (the State of residence). If the employee lives in Germany either in Saarland or within a 20 km of the French border and works in France, he is subject to taxation in Germany (State of residence). For both groups, an employee who does not satisfy these geographical requirements for 45 days per year is subject to taxation in the State of employment. g. Lack of coordination between social security and taxation payments In various kinds of cross-border work frontier work, posting etc. it may therefore come about that social security contributions and taxation are subject to conflicting principles (the lex locis laboris or State of employment principle versus the lex locis domicilii or State of residence principle). This leads to a lack of coordination. Depending on the situation, this may work to the benefit or the disadvantage of the cross-border employee. In the budgetary logic of a Member State there is usually a connection between tax levies and social security contributions. Thus there are Member States which are characterised by a social security system with low contributions which compensate for this through higher taxes (e.g. the public funding of social security). The reverse is also true. Example : A frontier worker lives in France and works in Belgium. He pays relatively low social security contributions in Belgium and relatively low income tax in France. This is advantageous. On the other hand, the frontier worker who lives in Belgium and works in France pays relatively high French social security contributions and relatively high Belgian income tax. That is disadvantageous. It may also come about that a budgetary measure leading to increased social security contributions, for internal political reasons, is compensated by adjustments to taxation. If, however, a frontier worker pays tax in another Member State he does not benefit from this compensatory measure. In order to establish taxation and social security contributions according to the same principle (State of employment principle or equality in the work place ), a number of double taxation treaties have recently been amended (the Netherlands-Belgium 2003, Belgium-Germany 2004). Where this was coupled with disadvantages to Dutch frontier workers ample compensatory rules have been agreed. The Dutch government itself compensates those frontier workers who go to work in Belgium after the introduction of the new double taxation treaty. This has created equality with the neighbours. 32

h. Methods of avoiding double taxation One of the most commonly used methods of preventing double taxation in the State of residence is the exemption with progression following the proportional method. This means that in the State of residence, a tax assessment is firstly calculated on the basis of the whole global income (the total of domestic and foreign income). This is done exactly as if the whole income were taxable in the State of residence. All the national taxation legislation is applied in the calculation, including progressive tax scales, deductions etc. Only after the theoretical tax due has been established is the tax deduction system for preventing double taxation applied. This is done by calculating the proportion of total global income already taxed abroad. Finally, by taking the same percentage (proportion) of the theoretically calculated tax figure, the actual figure for the tax deduction is obtained. The final tax due in the State of residence is established by reducing the sum equal to the theoretical tax assessment (on global income) by the actual tax deduction (for the proportion of income which has already been taxed abroad). An example will make all this somewhat clearer: Say that the employee lives in Member State A. He works for 7 months in Member State B. The income from Member State B amounts to 18,000. On this income, he pays tax in 5,600 to Member State B. In Member State A (the state of residence) the employee earns 12,000 in the remaining 5 months. The global income of the employee therefore comes to 30,000. The State of residence will make a shadow calculation, i.e. it will calculate how much tax the employee would theoretically pay if he had earned this 30,000 in his state of residence (Member State A). Let s assume that the theoretical income tax payable is 10,000. The exemption with progression following the proportional method works in this case as follows: The tax deduction = Member State B income x Member State A + B income theoretically calculated tax The tax deduction = 18.000 x 18.000 + 12.000 10.000 = 6.000 33

The employee will pay tax of 10,000 minus 6,000 = 4,000 in his State of residence. In total the employee will have paid taxes of: 4,000 (Member State A) plus 5,600 (Member State B) = 9,600. In this instance there is an advantage of 400. The employee gets an exemption in his State of residence of 6,000 on the theoretical sum due of 10,000. Abroad, however, he only pays 5,600 in tax. In this form of tax reduction to avoid double taxation, the State of residence plays no part in determining how much tax the employee pays in the other Member State (the State of employment). If the employee works in a Member State with higher tax rates than those of the State of residence, this exemption method will work to his disadvantage. Let s assume that the employee in the example above had paid tax of 7,500 in Member State B. In calculating the tax reduction in the state of residence, no account is taken of the tax actually paid abroad. It does take account of the income taxed abroad, but that remains unreduced at 18,000. The tax deduction allowed is therefore also unchanged at 6,000. In that case the employee will have paid 7,500 in the State of employment (Member State B) and 4,000 in the State of employment (Member State A): giving a total of 11,500, which is higher than the theoretical tax of 10,000 in the State of residence. The Court of Justice delivered a judgment in a similar case (Gilly case, C-336/96). If the (exempt) sum of the tax deduction to prevent double taxation allowed by the State of residence is lower than the tax paid in the State of employment, this does not contravene Community law (Article 39 of the EEC Treaty). To have an accurate picture of the frontier worker s net income position we have to take account of the social security contributions due in both Member States, as well as the income tax to be paid. It may be the case that social security contributions in one Member State are (partially) publicly funded. i. To conclude: the trade union view Because taxation and social security are coordinated by different methods, problems may arise. This lack of coordination, i.e. paying tax in Member State A and social security contributions in Member State B, may lead to financial advantages or disadvantages. Such situations are always very involved - particularly when there is salary-splitting for taxation purposes - and administratively quite complex. The frontier employee needs to be very well informed as to his actual rights and obligations. There is a role here for taxation and social security institutions, but also for the European employer. The latter are morally obliged to give their employees as much advice and support as possible. Where financial losses occur as a result of their international position, they ought - in our opinion - to make compensation. That also applies to the Member States. They should compensate their frontier workers where losses arise as a result of changes to national legislation and regulations and/or the amendment of double taxation treaties. 34

6. Supplementary pensions Statutory pensions are coordinated by the EEC Regulation 1408/71. Directive 98/49/EC on safeguarding the supplementary pension rights of employed and self-employed persons moving within the Community was introduced in 1998. This Pensions Directive has the aim of safeguarding employees (scheme members) in supplementary pension schemes, who move from one Member State to another. The protection applies to both voluntary and compulsory supplementary pension schemes. Directive 98/49/EC obliges Member States to take measures to ensure that employees (scheme members) who make use of their right to free movement, and for or on behalf of whom no further contributions or premiums are made, retain their acquired pension rights. In the case of an employee posted by his employer to another Member State the Pensions Directive has made it possible to continue the supplementary pension scheme. Posted is here understood in the sense of Article 14 of Reg. 1408/71. Article 6 98/49/EC: Contributions to supplementary pension schemes by and on behalf of posted workers Paragraph 1: Member States shall adopt such measures as are necessary to enable contributions to continue to be made to a supplementary pension scheme established in a Member State by or on behalf of a posted worker who is a member of such a scheme during the period of his or her posting in another Member State. Paragraph 2: Where, pursuant to paragraph 1, contributions continue to be made to a supplementary pension scheme in one Member State, the posted worker and, where applicable, his employer shall be exempted from any obligation to make contributions to a supplementary pension scheme in another Member State. To counter the lack of cross-border information, the Directive also includes a duty of information. Article 7 Directive 98/49/EC: Information to scheme members Member States shall take measures to ensure that employers, trustees or others responsible for the management of supplementary pension schemes provide adequate information to scheme members, when they move to another Member State, as to their pension rights and the choices which are available to them under the scheme. Such information shall at least correspond to information given to scheme members in respect of whom contributions cease to be made but who remain within the same Member State. The European Commission s proposals on the portability of supplementary company pensions are currently under discussion (COM(2003)916). The European Trade Union Confederation (ETUC) is arguing for statutory measures or a European framework agreement between the social partners, which would make it more possible for supplementary pensions to be transferred across frontiers. 35

7. Right of residence a. General Since 29 April 2004, the right of residence for all citizens of the European Union has been governed by a single directive: Residence Directive 2004/38/EC. This directive also applies to non-eu citizens (third country nationals) if they are family members of an EU citizen. Their right of residence is derived from the corresponding right of the EU citizen. As for other cases, a separate Residence Directive (2003/109/EC) applies to third country nationals - i.e. non-eu citizens - who are long-term residents. The right of residence is divided into three categories: the right of residence for up to three months (see b), the right of residence for more than three months (see c), and the right of permanent residence (see d). The right also of the family members to take up employment - regardless of their nationality - are set down in Directive 2004/38/EC. Article 23 stipulates that the family members of an EU citizen having the right of residence or right of permanent residence in a Member State have the right to be employed or self-employed in that Member State. b. Right of residence for up to three months On production of a valid passport or identity card, an EU citizen and his family members have the right of residence in a Member State for a period of up to three months without any conditions or any formalities (Article 6 of Directive 2004/38/EC). This also applies to dependent family members, even if they are not themselves Community citizens (third country nationals). There are no administrative requirements (Article 6 of Directive 2004/38/EC). The residence of the Community citizen is authorised on the basis of a valid passport. No contract of employment is required. May an unmarried partner stay in another Member State if he or she is dependent on the worker who goes to live and work in another Member State? This is only the case in those Member States that allow their own citizens to live with an unmarried partner from another Member State. Cohabitation is regarded as a social advantage under Article 7, paragraph 2 of Reg. 1612/68 (Reed decision C-59/85). Moreover, the term family member is defined as follows in Article 2, paragraph 2 b of Directive 2004/38/EC: the partner with whom the Union citizen has contracted a registered partnership, on the basis of the legislation of a Member State, if the legislation of the host Member State treats registered partnerships as equivalent to marriage and in accordance with the conditions laid down in the relevant legislation of the host Member State ; 36

c. Right of residence for more than three months Article 7, paragraph 1 of Directive 2004/38/EC stipulates that all Union citizens shall have the right of residence on the territory of another Member State for a period of longer than three months if they: are workers or self-employed persons in the host Member State; or have sufficient resources for themselves and their family members not to become a burden on the social assistance system of the host Member State during their period of residence and have comprehensive sickness insurance cover in the host Member State. In the event that an EU citizen wishes to reside in a Member State for longer than three months, he must report to the local authorities (population administration). Proof of registration in the population register is then issued to the Community citizen. No residence permit is required. A residence card is issued to family members who are not Community citizens (third country nationals; Article 9 of Directive 2004/38/EC). The proof of registration must be provided free of charge or at a price that does not exceed the price charged to the country s own citizens for the issue of similar documents. The residence card for family members who are not Community citizens is not a conventional residence permit, but a special Residence card of a family member of a Union citizen. The card has a purely declaratory value - in other words, it provides written confirmation of the right of residence granted under Directive 2004/38/EC. The residence card must be provided free of charge or at a price that does not exceed the price charged to the country s own citizens for the issue of similar documents. d. Right of permanent residence Le The right of permanent residence is acquired after residing for a period of 5 years in a Member State. Article 16, paragraph 1 of Directive 2004/38/EC stipulates that all Union citizens who have resided legally for a continuous period of five years in the host Member State shall have the right of permanent residence there. Article 16 also applies to family members who do not hold the nationality of a Member State and who have resided legally for a continuous period of five years in the host Member State with the Union citizen. Upon application, Member States will issue Union citizens, after having verified duration of residence (at least 5 years), with a document certifying their right to permanent residence (Article 19 of Directive 2004/38/EC). Member States shall issue family members who are not nationals of a Member State with a permanent residence card within six months of the submission of the application; the permanent residence card is renewable automatically every ten years (Article 20 of Directive 2004/38/EC). These documents must be provided free of charge or at a price that does not exceed the price charged to the country s own citizens for the issue of similar documents. 37

26 Article 65 of Regulation 883/04 27 As above e. Right of residence after the end of employment The EU citizen maintains his right of residence in the event of sickness, an accident at work or involuntary unemployment (after one year s work). Where he is unemployed following a temporary contract of employment with a duration of shorter than one year or he has become involuntarily unemployed within the first twelve months of residence, he maintains his right of residence for 6 months. In this case, the employee must, though, register as a jobseeker at an employment office. Claims to unemployment benefits are regulated by Article 71 of Regulation 1408/71 26. f. Social advantages & social assistance Under Article 24 of Directive 2004/38/EC, EU citizens have the right to identical ( equal ) treatment to the citizens of the host Member State. This right also applies to family members who do not hold the nationality of a Member State but do have the right of residence or the right of permanent residence in a Member State. There is an exception here for social assistance. The Residence Directive states that the State of residence is not obliged to pay a social assistance allowance for the first three months of residence. This also applies if a jobseeker from another Member State is involved. The right to study grants and maintenance grants for training programmes and so on are only provided to the person concerned once he has the right of permanent residence (after 5 years). If, though, the EU citizen is working in the State of residence, he can claim all fiscal and social advantages from the outset (Article 7 of Regulation 1612/68). In the case of involuntary unemployment, the person concerned may have the right to statutory unemployment benefit, paid by the State of residence. The right to statutory unemployment benefit is based on Article 71 of Regulation 1408/71 27. Social assistance allowances do not fall within the scope of this regulation. 38

PART II : Mobile workers Chapter 8. Posted workers Chapter 9. Jobseekers Chapter 10. Cross-border workers Chapter 11. Multinational workers Chapter 12. Migrant workers 39

8. Posted workers a. General 28 In Regulation 883/04, posting is regulated by Articles 12 and 16. A posted worker is an employee who normally works in the territory of one Member State (the originating State), and who is sent by his employer - in the framework of the provision of services - to work in another Member State. Posting is thus not covered by the regulations on the free movement of persons. During this period the posted employee works exclusively in this Member State. It includes, for example, a resident of Spain, who is sent by his Spanish employer to work in Germany for 20 months to undertake work for a German customer. In the course of his normal working activities the employee in question is subject to the employment laws, social security and income tax of a given Member State. However, posting to another Member State, even if this is only temporary, can interrupt this normal and familiar framework. The practical impact of posting on an employment situation thus merits attention. Not only in relation to the applicable social security legislation (Reg. 1408/71), but also in terms of income tax (bilateral double taxation treaties) and employment law (Convention on contractual obligations and the posted workers Directive 96/71/EC). For each of these areas different rules and/or provisions apply. b. Social security b.1 General In principle an employee must have social insurance in the country where he actually carries out his working activities (Article 13, paragraph 2, a) of Reg. 1408/71). However, in the event of a posting the provisions of the European coordinating regulation 1408/71 which allow for a temporary exception to the State of work principle may be invoked. The articles concerned are Article 14, paragraph 1 and Article 17 28. Article 14, paragraph 1 of Reg. 1408/71 governs the conditions under which an employee, when sent to another Member State, may work in this Member State without the legislation of the Member State where he is usually socially insured ceasing to apply. Article 17 opens up additional possibilities in this respect. 40

Article 14, paragraph 1 Reg. 1408/71: a) A worker employed in the territory of a Member State by an undertaking to which he is normally attached who is posted by that undertaking to the territory of another Member State to perform work there for that undertaking shall continue to be subject to the legislation of the first Member State, provided that the anticipated duration of that work does not exceed twelve months and that he is not sent to replace another worker who has completed his term of posting. 29 b) if the duration of the work to be done extends beyond the duration originally anticipated, owing to unforeseeable circumstances, and exceeds twelve months, the legislation of the first State shall continue to apply until the completion of such work, provided that the competent authority of the State in whose territory the worker is posted or the body designated by that authority gives its consent; such consent must be requested before the end of the initial twelve month period. Such consent cannot, however, be given for a period exceeding twelve months. Article 17 Reg. 1408/71 30 Two or more Member States or the competent authorities of those States may, by common agreement, provide for exceptions to the provisions of Articles 13 to 16 in the interest of certain workers or categories of workers. As far as the application of these articles to posting is concerned, Member States have a mutual, fundamental agreement, the State of work principle can be suspended for a maximum period of five years. 29 In the new coordinating Regulation 883/04, the period of 12 months is extended to 24 months. However, there is no possibility any more of an extension of 12 months. 30 Article 16 of Regulation 883/04 31 24 months in Regulation 883/04 32 This possibility of an extension no longer applies in Regulation 883/04. 33 24 months in Regulation 883/04 The question is how Article 14, paragraph 1 and/or Article 17 of Reg. 1408/71 are applied in practice. Depending on the estimated length of the posting at the outset, there are three possible scenarios. b.2 Posting for less than 12 months Article 14, paragraph 1 a) of Reg. 1408/71 states that initial consent for exemption from the State of work principle in respect of social security can be granted for a maximum of 12 months 31. Consent is given by the competent body of the Member State where the employee was originally insured. This body issues an E101 certificate (declaration of the legislation applicable). If the posting, due to unforeseen circumstances, lasts longer than originally estimated, then under Article 14, paragraph 1 b) of Reg. 1408/71 the certificate can be extended for a maximum of 12 months 32. This consent must however be given by the institution (the competent body ) in the host Member State. This body issues an E102 certificate (Extension of posting). If there are further unforeseen circumstances after this second period, an extension of a maximum of 3 years can be requested, this time on the basis of Article 17. Mutual agreement is required between the competent body of the originating Member State and that of the host Member State. b.3 Posting of more than 12 months but less than 5 years When it is clear from the outset that the posting will last longer than 12 months 33 (e.g. 3 years), approval for remaining socially insured in the Member State where the employee was insured preceding the posting is requested immediately under Article 17. There is a maximum period of 5 years. 41

34 Article 11, paragraph 3 a of Regulation 883/04 b.4 Posting of more than 5 years Through a combination of Article 14, paragraph 1 and Article 17 of Reg. 1408/71 a posted employee can thus continue to be socially insured for a maximum of 5 years in the originating Member State. If, however, it is clear from the outset that the posting will last more than 5 years, or if it continues after exhausting all the allowed period(s), the host Member State will be regarded as the usual and only country of work. The usual State of work principle must then be applied (Article 13, paragraph 2, a) of Reg. 1408/71) 34. The employee in question will then automatically be subject to the social security system of the host Member State (lex locis laboris). In consequence his employer will be obliged to satisfy all the requirements of the social security legislation in question. In the example of the Spanish employee posted to Germany by his Spanish employer we can distinguish between two different scenarios. In the first scenario, the duration of the posting is expected to be 12 months (or less). In that case the Spanish employee, for the first 12 months of activities for his Spanish employer in Germany, continues to be socially insured in Spain. Spanish social security legislation continues to be applicable, certified by the issue of an E101 certificate. This certificate is issued by the competent Spanish body on the basis of Article 14, paragraph 1 a) of Reg. 1408/71. However, if due to unforeseen circumstances the work continues for 8 months longer than was originally estimated, the competent German body can issue an E102 declaration (Article 14 paragraph 1 b) of Reg. 1408/71). This states that the employee can continue to be socially insured in Spain for an additional period of 8 months (up to a maximum of 12 months). In the second situation it is clear at the outset that the posting will last for 20 months. In that event there can be no exemption from the State of work principle under article 14, paragraph 1 a) and Article 17 must be applied at once. By prior mutual agreement with the competent German body, an E101 certificate is issued by the competent Spanish body under Article 17. b.5 Sickness insurance The posted employee - and any accompanying family members - must also be able claim reimbursement of the costs of medical treatment in the Member State to which he has been posted. While the State of work principle is not applied, he needs to request a European Health Insurance Card (EHIC) or - in the event of a more permanent stay in the employing state - a form E106 (Declaration of entitlement to health and maternity benefits in a country other than that in which the person concerned is normally or was previously insured) from the health fund in the originating State. The European Health Insurance Card (EHIC) must be kept until medical care is needed. Form E106, issued in the event of permanent establishment, must, on the other hand, be submitted as quickly as possible to the health service in the host Member State. Costs will be reimbursed in accordance with the legislation of the country where the medical treatment is carried out. b.6 Practical questions and comments regarding posting arrangements Questions relating to posting may arise to which the regulation 1408/71 provides no immediate answer. Supplementary rules are set out in Decision no 181 of the Administrative Commission (AC). The Court of Justice, too, has reached a number of striking decisions that may be regarded as guidelines. 42

b.6.1 Posted employee: direct relationship Posting is only possible if a direct relationship continues to exist between the employer and the seconded employee. The employer who seconds a worker must retain authority over the posted employee under employment law (payment and responsibility for wages, determining working activities, powers of dismissal etc.). There is thus no question of lending the employee (Fitzwilliam decision, C-202/97) or the conclusion of an employment contract with the borrowing firm. b.6.2 Temporary interruption of activities A temporary interruption of the posting due to sickness, holiday or because the employee is recalled to carry out other activities in the original State of employment does not necessarily mean that the posting period allowed is suspended or extended. b.6.3 Unlimited posting It is possible to post an employee more than once to the same Member State. If under Article 14, paragraph 1 of Reg. 1408/71 the permitted duration of posting in a given Member State has expired, a waiting period may be imposed. The length of this waiting period varies from one Member State to another (the Netherlands, for instance, applies a waiting time of 3 months, Belgium a waiting time of 2 months and so forth). b.6.4 Posting to two or more undertakings In the event that the employer caused the employee to carry out his activities with two or more undertakings in the same Member State, the posting rules continue to apply automatically. This is, however, only on the condition that the activities are carried out on behalf of the original employer (direct relationship, see b.6.1). b.6.5 Posting to State of residence The starting point for posting is that an employee, as a consequence of his habitual activities, is and remains socially insured in a given Member State. In the most cases this is the State of employment. If an employee works simultaneously in the territory of two or more Member States this may also be the State of residence (Article 14, paragraph 2 b) i) of Reg. 1408/71). A posted employee is removed from his habitual employment context. He is sent for a given time to a Member State which is generally not part of his normal work area. However it is even more important that he works for the whole period exclusively in this Member State. To avoid a sudden break the employee s social insurance the posting arrangements in Reg. 1408/71 are applied. Posting to one s own State of residence is therefore not excluded. The posting arrangements in no way prevent an employee from being posted from the Member State where he is socially insured under normal circumstances to his own State of residence. 43

35 Article 12 of Regulation 883/04 36 Article 11, paragraph 3 a of Regulation 883/04 37 Article 16 of Regulation 883/04 38 In the new coordinating Regulation 883/04, a self-employed person can only post himself if he is going to be carrying out activities of the same nature during the posting. Examples : A Swedish employer engages a Finnish employee. After working for some time on Swedish territory the employee in question is posted for a certain long-term assignment to his State of residence, Finland. It is, however, the intention that after completing this posting that he will resume his normal activities in Sweden. Under Article 14, paragraph 1 a) of Reg. 1408/71 35 the employee may continue to have social insurance in Sweden. On basis of this Article an E101 certificate is issued by the competent Swedish body. If the Swedish employer only engages this Finnish to work in his State of residence, Finland, he cannot be treated as a posted worker for social security purposes. In such a case the fundamental rule regarding social security must be applied. In accordance with Article 13, paragraph 2 a) of Reg. 1408/71 36 the employee is socially insured in Finland, the territory where the activities in paid employment are carried out. A Swedish employer engages a Finnish employee for an indeterminate period. The employee starts his activities in his State of residence (Finland) but is subsequently employed in Sweden. To prevent this employee from being (or continuing to be) insured for a brief period in Finland, under Article 17 of Reg. 1408/71 37 and in the interests of this migrant employee and his employer, Swedish social security legislation is declared applicable from the first day. On basis of such an exceptional agreement, the Finnish resident may be covered by Swedish social insurance during a given assignment on the Finnish territory. In such a case an E101 certificate is issued. Conclusions: if the non-habitual nature of a long-term assignment in the State of residence can be satisfactorily demonstrated, posting from the social security system of another Member State to one s own State of residence is entirely within the scope of Reg. 1408/71. b.6.6 Posting by employment agencies and companies operating from a PO box address Cross-border postings by employment agencies are possible under strict conditions. For example, employment agencies established in a given Member State may only post employees who are socially insured within that Member State. There must also be a direct relationship which continues to exist between the employment agency and the posted employee. Finally, the employment agency must, like any other company which wants to post workers (decision Plum C-404/98), carry out significant economic activity in the Member State from which it wants to post employees. Postings from companies operating from a PO box address and suchlike are thus never allowed. b.6.7 Posting of (false) self-employed persons The coordinating regulation 1408/71 makes provision for the posting of self-employed workers as well as employees (Article 14 bis Reg. 1408/71). A self-employed worker can therefore post himself from Member State A to Member State B. A situation can arise in which the self-employed activities, as pursued in Member State A, are treated as employed activities by the legislation of Member State B (e.g. under protective legislation designed to fight false self-employment ). The free movement of services, however, obliges Member State B to accept these self-posted self-employed persons from Member State A as self-employed insofar as the legislation of Member State A accepts them as such (Banks decision C-178/97) 38. 44

b.6.8 Validity of the E101 declaration ( posting certificate ) The declaration of applicable legislation (E101 certificate) is issued by the competent body of the Member State where the employee is covered by social insurance. This E101 declaration is automatically binding on the social security bodies and inspectorates of the Member State in which the posted workers pursues his work activities. If there is any doubt as to validity, the bodies in the state of employment must communicate with the body that issued the E101 declaration. b.6.9 Lack of coordination between social security and taxation It can occur that applicable social security legislation (liability for contributions) is that of the employee s State of residence and that under the applicable double taxation treaty the posted employee is liable for taxation in the Member State in which he pursues his work activities. In this way there arises a lack of coordination between the payment of tax (State of employment) and of contributions (State of residence). This situation is administratively complex and may work to the disadvantage as well as they advantage of the employee concerned. c. Taxation The payment of taxes during a posting is governed in the applicable bilateral double taxation treaties concluded by the posted worker s State of residence with the State of employment to which he is posted. This treaty prevents the posted employee from being taxed twice, or in the wrong treaty state. A good understanding of the the 183 days rule and the fixed establishment issue is essential. Most double taxation treaties follow the OECD model convention. There are successive versions of the OECD model convention on which the bilateral treaties may be based. The most up-to-date version dates from 2005. Posting is governed by Article 15. Article 15 OECD Model Convention: Income from employment 1. Subject to the provisions of Articles 16, 18 and 19, salaries, wages and other similar remuneration derived by a resident of a Contracting State in respect of an employment shall be taxable only in that State unless the employment is exercised in the other Contracting State. If the employment is so exercised, such remuneration as is derived therefrom may be taxed in that other State. 2. Notwithstanding the provisions of paragraph 1, remuneration derived by a resident of a Contracting State in respect of an employment exercised in the other Contracting State shall be taxable only in the first-mentioned State if: a. the recipient is present in the other State for a period or periods not exceeding in the aggregate 183 days in any twelve month period commencing or ending in the fiscal year concerned, and b. the remuneration is paid by, or on behalf of, an employer who is not a resident of the other State, and c. the remuneration is not borne by a permanent establishment which the employer has in the other State. This article comes from the new OECD model convention. Previous models, and the bilateral double taxation treaties based on them, differ at some points: for example, at Article 15, paragraph 2, a). The OECD-model convention states that the taxation of income from work (wages) in first instance is allotted to the State of residence. However the State of employment will tax wages earned for work carried out on its territory (the State of employment principle). 45

The State of residence nevertheless retains its right to levy taxes on this income if the following conditions are satisfied: a. the posted worked is not present in the State of employment for more than 183 days per calendar year (previous OECD model convention) or a period of 12 consecutive months (new OECD model convention), and b. wages are paid by or on behalf of an employer who does not live in the State of employment, and c. the wages are not paid on behalf of a fixed establishment or representation which the employer has in the State of employment. If any one of these three conditions is not satisfied, the posted employee will be taxed in the State of employment in accordance with the legislation of this Member State. This takes retrospective effect and thus applies from the first day of his presence in the state of State of employment. In practice an attentive reading of the bilateral taxation treaty - and in some cases even that of the related case law - is necessary. This will make it clear: if the 183 physical presence days must be calculated over a twelve month period or over a calendar year; what exactly should be understood by the term presence in the State of employment (under the new OECD-model convention presence in the state of employment must be understood as every day, even if only for a part of that day, that the employee is in the territory of the State of employment.. It thus includes days of interruption of work for sickness, holidays, weekends and/or public holidays spent in the State of employment); how the wage payment criterion must be interpreted (who is responsible for the wages, and under what accounting system this takes place). This is judged on the actual existing situation. In the case of an agency which operates as the material employer, this leads to taxation in the State of employment); in the event that an employment agency worker is supplied to a company in another country, the borrowing company is considered to be the material employer, which means that the worker is taxed in the State of employment from the outset; what exactly should be understood by a fixed establishment (e.g.. when does a construction site become a fixed establishment?). A fixed establishment is a physically fixed - not mobile - establishment (offices, works, work place, site, etc.). 46

d. Employment law d.1 Convention on Contractual Obligations The employee is generally already in employment with the employer before posting. The employment law of the Member State where the employee normally pursues his activities is therefore applicable. In principle the employer and employee may opt to change this temporarily during the posting. They may thus agree to apply temporarily - for the duration of the posting - the employment legislation of the Member State to which the employee is sent. Otherwise, in principle, the employment legislation of the Member State in which the employee normally carries out his activities remains applicable. The employer and employee thus have a free choice of jurisdiction under Article 3 of the Convention on Contractual Obligations (European Treaty on the jurisdiction applicable to contractual obligations). This choice of jurisdiction, however, may not cause the employee to lose the protection which he enjoys under the mandatory rules of the law which would apply if not choice were made. In the absence of a choice of jurisdiction, Article 6, paragraph 2 of Convention on Contractual Obligations determines the applicable law. Article 6, paragraph 2 of the Convention on Contractual Obligations: [...] a contract of employment shall, in the absence of choice [...] be governed: a) by the law of the country in which the employee habitually carries out his work in performance of the contract, even if he is temporarily employed in another country; or b) if the employee does not habitually carry out his work in any one country, by the law of the country in which the place of business through which he was engaged is situated; unless it appears from the circumstances as a whole that the contract is more closely connected with another country, in which case the contract shall be governed by the law of that country. This provision applies to both a) and b). Account must also be taken of the mandatory rules (Article 7 of the Convention on Contractual Obligations). These are rules which extend further than the protection of individual employees. They are in the general interest ( police and public order laws ). They include measures to protect the labour market or safety regulations. If the conditions of Article 7 are met these rules can be applied to international labour relations. Article 7 of the Convention on Contractual Obligations: 1. When applying under this Convention the law of a country, effect may be given to the mandatory rules of the law of another country with which the situation has a close connection, if and in so far as, under the law of the latter country, those rules must be applied whatever the law applicable to the contract. In considering whether to give effect to these mandatory rules, regard shall be had to their nature and purpose and to the consequences of their application or non-application. 2. Nothing in this Convention shall restrict the application of the rules of the law of the forum in a situation where they are mandatory irrespective of the law otherwise applicable to the contract. In the example of the employee living in Spain who is posted by his Spanish employer to Germany and where Spanish employment legislation remains applicable, the employment relationship may also be governed by mandatory German employment law. It is important to know which areas of the German employment legislation are regarded as mandatory rules. The posted Spanish employee can obtain this information from the German trade union confederation. (DGB). 47

d.2 Directive on posting 96/71/EEC The European posting Directive (96/71/EEC), which supplements the Convention on Contractual Obligations, aims to prevent social dumping and unfair competition via posting. This directive is transposed by Member States into national employment legislation. The Directive aims at harmonising the mandatory rules by establishing which areas of employment law are included. There is however no question of harmonisation as to content. Article 3, paragraph 1 of Directive 96/71/EEC prevents social dumping or unfair competition in the following areas: 1. The maximum work periods and minimum rest periods; 2. The minimum paid annual holidays; 3. The minimum rates of pay (defined by national legislation), including overtime rates; 4. The conditions of hiring-out of workers, in particular the supply of workers by temporary employment undertakings; 5. Health, safety and hygiene at work; 6. Protective measures with regard to terms and conditions of employment of pregnant women or women who have recently given birth, of children and of young people; 7. Equality of treatment between men and women and other provisions on non-discrimination. Where these matters are subject to legislation within a Member State, the Directive stipulates that this should also apply to the employees of foreign employers. In other words, they are mandatory rules. Example : A Spanish employer posts an employee to a German abattoir to work as a butcher. In Germany there is no statutory minimum wage. There is therefore nothing to prevent the Spanish employer from continuing to pay the Spanish rate. However, if the same employee is sent to the Netherlands, where there is a statutory minimum wage in force, he must receive at least that wage. In addition the Directive states that, where these matters are more thoroughly covered by collective agreements in the construction and allied industries, the sector-specific rules must also be regarded as mandatory. Example : A Spanish employer posts an employee to a Dutch construction site as a building worker. In the Netherlands a generally binding collective agreement applies to the construction industry. The Spanish employer must therefore guarantee his employee, as a minimum, the conditions for work and rest time, holidays, wage rates etc. set out in the Dutch collective agreement. This applies to all the aspects identified under Article 3, paragraph 1 of the Directive 96/71/EEC. Another Spanish employer sends an employee to a Dutch abattoir to work as a butcher. This employer must pay at least the Dutch statutory minimum wage, but he is not obliged to respect the wage scales in the Dutch collective agreement for abattoirs. The posting Directive establishes the absolute minimum. However it also offers Member States the option to declare other collective agreements to be mandatory rules applicable to workers posted in their territory (Article 3, paragraph 10 96/71/EC). A number of Member States have made use of this option. The following Member States have applied it to all collective agreements in every sector: Belgium, France, Finland, Greece, Italy, Luxembourg, Austria, Portugal and Spain. 48

Example : A Spanish employer sends an employee to a Belgian abattoir to work as a butcher. He must pay the employee at least the wage scales in the Belgian collective agreement for abattoirs. The posting Directive clearly establishes the principle of favourable treatment (Article 3, paragraph 7 of 96/71/EC): Article 3, paragraph 7 96/71/EC: Paragraphs 1 to 6 shall not prevent application of terms and conditions of employment which are more favourable to workers. The enforced application of the legislation of the host Member State does not therefore mean that the posted worker should lose the more favourable working, wages and employment conditions of the originating State. For an employee posted by his Spanish employer to Germany, mandatory German employment legislation will apply. Under the European Directive on posting, this automatically includes the aspects listed under Article 3, paragraph 1 of 96/71/EEC, as they appear in German employment law and the German collective agreement for the construction industry. Attention should also be given to whether the German government has brought other collective agreements into the scope of the posting Directive, or has declared other aspects of its employment legislation to be mandatory. The employee can obtain such information from the German trade union confederation, the DGB, and/or from the liaison offices established by the Directive. For employees posted from Spain to Germany, the liaison office is the Baden-Württemberg Landesarbeitsamt in Stuttgart. 49

9. Jobseekers a. General Every citizen of a Member State in the European Economic Area (EEA) has the right to work and stay in another Member State. For an unemployed worker - who is a national of one of the Member States - there are special rules and facilities. For example these apply to an Austrian unemployed worker who goes to seek work in the Netherlands. However, they also apply to a Czech jobseeker who wants to seek work in Ireland or a Danish jobseeker who wants to work in Spain. This chapter also describes the rules that apply to jobseekers who find a temporary job and then become unemployed again. Someone who wants to seek work in another Member State is faced with a number of questions such as How can I look for work whilst maintaining my unemployment benefit? What formalities must I comply with? (registration with employment offices, etc.); What is the position regarding my right of residence while I am looking for work and working? What is my right to unemployment benefit I become unemployed again? b. Finding employment across borders: EURES The European Commission set up the EURES project to meet the needs of jobseekers, workers and employers. The aims of EURES - European Employment Services - are: the development of open and generally accessible European labour markets; the transnational, inter-regional and cross-border exchange of job offers and applications; transparency and the exchange of information about European labour markets, including information on living conditions and opportunities for obtaining skills. A European network of about 700 EURES counsellors is available to support workers and jobseekers. EURES counsellors in employment offices have the task of providing cross-border mediation and information. In border regions (Euro-regions) jobseekers and employees can call upon trade union EURES counsellors from ETUC trade unions. These EURES counsellors protect the collective interests of frontier workers and give advice to individual frontier workers. 50

c. Job-seeking while retaining national unemployment benefit Article 69 of the European coordinating Regulation 1408/71 39 guarantees that a jobseeker - under certain conditions - may export his unemployment benefit for 3 months to another Member State. This rule offers jobseekers a unique opportunity - while keeping their unemployment benefit - to explore the labour market in another Member State and find work there. A work permit is not required by EEA nationals. EEA nationals can thus make use of Article 69 of Reg. 1408/71 without problems 40. For non-eea nationals ( third country nationals ) legally resident in the territory of a Member State, this right is more complicated. Although Reg. 859/2003 recently extended the scope of application of Reg. 1408/71 to include this group of employees, an exception was made in the case of Article 69. The right to retain national unemployment benefit plus the conditions are set out in Article 69 of Reg. 1408/71 41 : 1. A worker or self-employed person who is wholly unemployed and who satisfies the conditions of the legislation of a Member State for entitlement to benefits and who goes to one or more other Member States in order to seek employment there shall retain his entitlement to such benefits under the conditions and within the limits hereinafter indicated: a) before his departure, he must have been registered with the employment services of the competent State as a person seeking work and must have remained available for at least four weeks after becoming unemployed. However, the competent services or institutions may authorise his departure before such time has expired; 39 Article 64 of Regulation 883/04 40 Article 64 of Regulation 883/04 41 In Article 64 of Regulation 883/04 the same conditions apply. In addition, the Member States may extend the period from 3 months to a maximum of 6 months. Payment is made by the unemployment benefit office in the former State of employment (the competent institution) and no longer by the corresponding office in the country where the unemployed person is seeking work. b) he must register as a person seeking work with the employment services of each of the Member States to which he goes and be subject to the control procedure organised therein. This condition shall be considered satisfied for the period before registration if the person concerned registered within seven days of the date when he ceased to be available to the employment services of the State he left. In exceptional cases, this period may be extended by the competent services or institutions; c) entitlement to benefits shall continue for a maximum period of three months from the date when the person concerned ceased to be available to the employment services of the State which he left, provided that the total duration of the benefits does not exceed the duration of the period of benefits he was entitled to under the legislation of the State. In the case of a seasonal worker such duration shall, moreover, be limited to the period remaining until the end of the season for which he was engaged. 2. If the person concerned returns to the competent State before the expiry of the period during which he is entitled to benefits under paragraph 1 (c), he shall continue to be entitled to benefits under the legislation of that State; he shall lose all entitlement to benefits under the legislation of the competent State if he does not return there before the expiry of that period. In exceptional cases, this time limit may be extended by the competent services or institutions. 3. The provisions of paragraph 1 may be invoked only once between two periods of employment. To make use of this rule, an unemployed person must request a form E303 from the unemployment benefit office in his State of residence. This form (Declaration on retention of the right to unemployment benefits) must be handed to the unemployment benefit office of the Member State where he goes to seek work, after registering as a jobseeker with the public employment service. 51

42 Also Regulation 883/04 43 A similar passage is incorporated in Article 61 of Regulation 883/04. d. Right of residence while seeking work There is (as yet) no specific European rule governing the right of residence for jobseekers. In the Antonissen case (C-292/89), the European Court of Justice ruled that a jobseeker has an automatic right to remain in another Member State for 6 months whilst seeking work. If at the end of these 6 months the jobseeker can show that he is still looking for work and that there is a real chance that he will find it, he cannot be forced to leave the Member State. e. Right of residence during periods of work The right of residence - in the case of both temporary and permanent residence - is regulated by Directive 2004/38/EC (see chapter 6). The EU citizen maintains his right of residence in the event of involuntary unemployment (following one year s work). Where he is unemployed following a temporary contract of employment with a duration of shorter than one year or he has become involuntarily unemployed within the first twelve months of residence, he maintains his right of residence for 6 months. In this case, the employee must, though, register as a jobseeker at an employment office. f. Guarantees of unemployment benefit after a period of work If the jobseeker finds work in the Member State, it may happen that he subsequently becomes unemployed again. How does this affect his entitlement to unemployment benefit, and in which Member State should he apply? Reg. 1408/71 42 offers a number of guarantees. f.1 Mutual recognition of periods of work and employment In many Member States entitlement to unemployment benefit is dependent on the condition that the unemployed person has worked during a certain set period preceding the application for benefit (waiting time). Employees who make use of the right to the free movement of workers would be at a disadvantage in the acquisition of their benefit rights if insurance periods completed in other Member States were not recognised. To prevent such interruptions in social insurance, Member States are obliged to recognise insurance periods completed in other Member States and to take them into account when determining access to and the amount and duration of unemployment benefit. This essential and fundamental coordinating principle is included in the EEC Treaty itself. Article 42 of the EEC Treaty: The Council shall [...] adopt such measures in the field of social security as are necessary to provide freedom of movement for workers; to this end, it shall make arrangements to secure for migrant workers and their dependants: a) for the purpose of acquiring and retaining the right to benefit and of calculating the amount of benefit, of all periods taken into account under the laws of the several countries; The aggregation rules for the coordination of unemployment benefit are set out in Article 67 of Reg. 1408/71 43. 52

Article 67 Reg.1408/71 : The competent institution of a Member State whose legislation makes the acquisition, retention or recovery of the right to benefits subject to the completion of insurance periods shall take into account, to the extent necessary, periods of insurance or employment completed under the legislation of any other Member State, as though they were periods completed under the legislation with it administers, provided, however, that the periods of employment would have been counted as insurance periods had they been completed under that legislation. 44 The period of 4 weeks has been removed in Article 62 of Regulation 883/04. To demonstrate that the worker was formerly covered against unemployment by the social insurance of another Member State, the unemployed worker must hand in a form E301 to the unemployment benefit office where he is applying for benefit. Form E301 is issued on request by the unemployment benefit service of the Member State in which the employee formerly worked. Form E301 is a declaration on the periods to be taken into account for granting unemployment benefit. The form also states what the employee s occupation was, how much he earned and why his employment contract was terminated. f.2 Calculation of amount and duration of unemployment benefit In most Member States unemployment benefit is calculated on the wages that the employee has earned over a given period preceding unemployment. Article 68 of Reg. 1408/68 states that where the employee has worked for longer than four weeks in the Member State, and previously worked in another Member State, exclusive account must be taken of the wages that the employee earned in the Member State where he was last unemployed and applied for unemployment benefit. Article 68 Reg. 1408/71 : 1. The competent institution of a Member State whose legislation provides that the calculation of benefits should be based on the amount of the previous wage or salary shall take into account exclusively the wage or salary received by the person concerned in respect of his last employment in the territory of that State. However, if the person concerned had been in his last employment in that territory for less than four weeks, the benefits shall be calculated on the basis of the normal wage or salary corresponding, in the place where the unemployment person is residing or staying, to an equivalent or similar employment to his last employment in the territory of another Member State. 2. The competent institution of a Member State whose legislation provides that the amount of benefits varies with the number of members of the family, shall take into account also members of the family of the person concerned who are residing in the territory of another Member State, as though they were residing in the territory of the competent State. This provision shall not apply if, in the country of residence of the members of the family, another person is entitled to unemployment benefits for the calculation of which the members of the family are taken into consideration. Where an Austrian employee has worked for longer than 4 weeks in the Netherlands the amount of the Dutch unemployment benefit is calculated on the basis of the wages actually earned in the Netherlands. To establish entitlement to Dutch unemployment benefit and its duration, both Dutch and Austrian insurance periods must be taken into account. If the Austria employee worked for less than 4 weeks in the Netherlands, the Dutch wage is notionally set at the normal remuneration in the Netherlands in the sector in which the employee worked in Austria 44. 53

45 Article 64, paragraph c of Regulation 883/04 46 Article 65 of Regulation 883/04 regulates which Member State is responsible for paying the unemployment benefit. f.3 Possible scenarios A number of situations may arise: 1. The jobseeker finds no work and returns to his State of residence within 3 months (f.3.1); 2. The employee works temporarily and subsequently returns immediately to his State of residence (f.3.2); 3. The employee works temporarily and subsequently seeks new work in the State of employment (f.3.3); 4. The employee works temporarily and subsequently seeks work for a short time in the State of employment, but finally returns to his State of residence (f.3.4); 5. The jobseeker finds permanent work and remains living in his State of residence (f.3.5) 6. The jobseeker finds permanent work and comes (possibly with his family members) to live in the State of employment (f.3.6) f.3.1 The jobseeker finds no work and returns to his State of residence If the jobseeker fails to find work and returns to his state of residence within 3 months, he is entitled to continue to claim his national unemployment benefit. If he exceeds this period, unemployment benefit does not continue (Article 69, paragraph 2 of Reg. 1408/71) 45. The time within which the jobseeker must return is very strictly applied in practice. In very exceptional cases extension is possible, in consultation with the unemployment benefit service (Coccioli decision, C-139/78 and the Testa decisions, C-41/79, C-21/79 and C-796/79). If the jobseeker fails to return within three months, he must work again in the State of residence before he can be entitled to unemployment benefit there again. In practice the Austria jobseeker, on returning within the period of 3 months, has a claim in principle to the continued payment of Austria unemployment benefit. f.3.2 The employee works temporarily and subsequently returns immediately to his State of residence In this case the employee is unemployed after working temporarily. He did not live in the Member State where he worked, but stayed there temporarily. After the termination of his temporary activities he returns immediately to his State of residence. Because he officially lived in the other Member State during his temporary employment, he is has a claim under Article 71, paragraph 1 b) ii) of Reg. 1408/71, to unemployment benefit which is paid by the unemployment benefit services of his State of residence 46. Article 71, paragraph 1 b) ii) Reg. 1408/71: A worker, other than a frontier worker, who is wholly unemployed and who makes himself available for work to the employment services in the territory of the Member State in which he resides, or who returns to that territory, shall receive benefits in accordance with the legislation of that State as if he had last been employed there. the institution of the place of residence shall provide such benefits at its own expense. Of course the employee must show that he was covered by social insurance in the Member State in which he was temporarily employed. For this he must produce form E301 (declaration on the periods to be taken into account for granting unemployment benefit). He must apply for this form from the unemployment benefit service of the Member State where he last worked. The unemployment benefit office in his State of residence will recognise the foreign insurance periods recorded on form E301 (see f.1 & f.2). 54

In the case of the Austrian employee temporarily employed in the Netherlands, he will in principle be entitled to claim Austrian unemployment benefit when he returns to his State of residence on production of form E301 (NL), exactly as if he had been working in Austria. 47 Article 65, paragraph 5 b of Regulation 883/04 f.3.3 Employee remains in the State of employment after temporarily working The employee has the right to unemployment benefit in accordance with the legislation of the State of employment where he is temporarily living, under Article 71, paragraph 1 b) i) of Reg. 1408/71. Article 71,, paragraph 1 b) i) Reg. 1408/71: A worker, other than a frontier worker, who is partially, intermittently or wholly unemployed and who remains available to his employer or to the employment services in the territory of the competent State shall receive benefits in accordance with the legislation of that State as though he were residing in its territory; these benefits shall be provided by the competent institution; < > In establishing the right to unemployment benefit, and its amount and duration, the unemployment benefit service in the State of employment - where the employee remains to seek work - must take account of the insurance periods completed in the former State of employment (State of residence) of the worker (see f.1 & f.2). The latter must request a form E301 in his former State of employment (State of residence) and hand it to the employment benefit service in the State of employment where he remains to actively seek work and is registered as a jobseeker. If the Austrian employee, after his temporary work activities in the Netherlands, becomes unemployed and remains in the Netherlands in order to seek work, he can in principle make a claim for Dutch unemployment benefit. To show that he was previously covered by social insurance in Austria, he must provide form E301 (Austria) to the Dutch unemployment benefit service (UWV). Form E301 (Austria) is issued by the Austrian unemployment benefit service. f.3.4 Employee remains in the State of employment for some time after temporary work ceases and then returns to his State of residence The employee has a claim to unemployment benefit under the legislation of the State of employment where is temporarily living, under Article 71, paragraph 1, b) i) of Reg. 1408/71 (see f.3.3 above). However suppose that the employee, after receiving unemployment benefit for 2 months from the unemployment benefit service of the State of employment, decides to return to his State of residence since he cannot find work in the State of employment. The right to unemployment benefit is governed by Article 71, paragraph 1, b) i) of Reg. 1408/71. 47 Article 71, paragraph 1 b) i) of Reg. 1408/71: [ ] if such worker has become entitled to benefits at the expense of the competent institution of the Member State to whose legislation he was last subject, he shall receive benefits under the provisions of Article 69. Receipt of benefits under the legislation of the State in which he resides shall be suspended for any period during which the unemployed person may, under Article 69, make a claim for benefits under the legislation to which he was last subject. In that event the employee can thus seek work for 3 months in his State of residence while retaining this unemployment benefit. After these 3 months he is in principle entitled to unemployment benefit from the unemployment benefit service in his State of residence. The duration of this unemployment benefit is, however, reduced in this instance by the duration of the foreign benefit payment. 55

To establish the right to, and the duration of, unemployment benefit in his State of residence the employee who returns home must submit form E301, which is issued by the unemployment benefit services of the Member State in which he previously worked (see f.1 & f.2). It is of essential importance that the employee, before he returns home, obtains forms E301 and E303. This will enable a seamless transfer of his benefit rights. This rule is based on Article 71, paragraph 1 b) i), Article 69 of Reg. 1408/71 and the Knoch decision (C-101/91). In the event that the Austrian employee, after his temporary job lasting 4 months in the Netherlands, becomes involuntarily unemployed, he has in principle a claim to Dutch unemployment benefit. Naturally, he must also register with the Dutch employment service. To show that he was previously covered by social insurance in Austria, he must submit form E301 (Austria) to the unemployment benefit service in the Netherlands (UWV). Form E301 is issued by the Austrian unemployment benefit service. If he does not succeed in finding new work in the Netherlands, then under Article 71, paragraph 1 b) i) of Reg. 1408/71 he can return to his State of residence, Austria, to actively seek work for a further three months whilst retaining his Dutch unemployment benefit. The Dutch unemployment benefit is paid by the Austrian unemployment benefit service for 3 months if the Austrian jobseeker can produce form E303 (NL). In the event that the employee has still found no work after 3 months in Austria, he can still claim Austrian unemployment benefit. The duration of the Austrian benefit, however, will be reduced by the period for which he received the Dutch benefit. To show that he was covered by social insurance in the Netherlands he must produce form E301 to the Austrian unemployment benefit service. The period for which the Austrian unemployment benefit is paid will be reduced by 5 months, i.e., the 2 months Dutch unemployment benefit received whilst living and seeking work in the Netherlands, and the 3 months Dutch benefit paid whilst he was living and seeking work in Austria. f.3.5 The jobseeker finds permanent work in the State of employment but does not move his residence In this event is there is a cross-border employee, who lives in a different Member State from that in which he works. If the employee returns to his place of residence each day, or at least once a week, he is a frontier worker. The unemployment rules for both types of cross-border employees are described in chapter 10. f.3.6 The jobseeker finds a permanent job and moves to the State of employment In this event the worker is said to have emigrated. The employee and his family move to another Member State, where he will live and work from now on. He thus becomes a migrant worker. The unemployment benefit rules for migrant workers are described in chapter 12. 56

g. Guaranties to medical insurance g.1 During the job-seeking period The jobseeker who retains his unemployment benefit (E303) whilst going to seek work in another Member State must, if he has statutory medical insurance, ask for the European Health Insurance Card (EHIC) from his insurers. The European Health Insurance Card guarantees that the unemployed person and his family members are entitled to medical care and sickness benefits in the State where they are staying. 48 Article 11, paragraph 3 of Regulation 883/04 In the event of sickness, it may happen that the worker is unable to return within the period of 3 months, as a result of which the entitlement to continuation of unemployment benefit is lost. In the event of circumstances beyond the worker s control, and under very exceptional circumstances, this rule may be waived. It is of the very greatest importance in such a situation to contact the unemployment benefit service that issued form E303. g.2 During periods of employment If the employee finds work in the Member State where he went to seek employment, he will then be covered by social insurance there too (Article 13, paragraph 2 Reg. 1408/71) 48. If he becomes sick during this period, he is entitled in principle to benefits and payments under his local medical insurance. In a number of Member States, however, sickness payments or benefits are only made after the employee has been covered by social insurance or employed for a given time (the waiting period ). To prevent an interruption in insurance cover, the coordinating regulation states that corresponding periods in other Member States must be recognised and taken into account for satisfying waiting time requirements. By producing form E104 (Statement of periods of insurance, employment and residence in a particular Member State), issued by the medical insurance service in the Member State where the jobseeker was most recently insured, he can demonstrate in the Member State where he works that he was previously covered by social insurance in another Member State. h. Practical hints In the event that a jobseeker wishes to go to another Member State to seek work, he needs the following E-forms: Form E303: Declaration of unemployment benefit entitlement. This form must be requested from the unemployment benefit service in the State of residence and delivered to the unemployment benefit service in the Member State where he seeks work. Form E301: Declaration of the periods to be taken into account in calculating unemployment benefits. This form must be requested from the unemployment benefit service in the State where the insurance periods were completed and delivered to the unemployment benefit service in the Member State where he is seeking work and claiming benefit. Forms E110, E111, E128 and E119 have been replaced by the European Health Insurance Card (EHIC). The EHIC must be requested from the medical service in the State of residence and delivered to the medical insurance service in the Member State where he is seeking work. 57

Form E104: Statement of periods of insurance, employment and residence. This form prevents the employee from encountering waiting periods under medical insurance schemes in the Member State where he goes to work. Form E104 is issued by the medical insurance service in the Member State where the jobseeker or employee was most recently covered by social insurance. If the employee becomes unemployed in the other Member State (State of employment) and wishes to return to his State of residence it is important to obtain form E301 in the State of employment. This will ensure his entitlement to unemployment benefits in his State of residence. 10. Cross-border workers a. General a.1 Cross-border workers A cross-border worker is an employee who works in one Member State (State of employment) and lives in another (State of residence). It is essential that he retains his normal place of residence outside the State of employment. If the cross-border employee moves to the State of employment, he becomes a migrant worker (see chapter 13). A resident who moves to a neighbouring State but continues to work in his original State of employment (migrant resident), is also a cross-border or a frontier worker. The term normal place of residence does not exclude the possibility that the cross-border employee, for practical reasons, also has temporary accommodation in the State of employment. As long as there is a certain amount of home - work travel (commuting) between two Member States, the worker is regarded as a cross-border employee. An example is the resident of Salzburg in Austria, who works as a laboratory technician in a pharmaceuticals company in Germany and who, despite the fact that he has rooms there where he stays during the working week, does not move to Germany. European legislation guarantees him free access to the German labour market and also ensures that he does not thereby lose the social rights he previously acquired in Austria. a.2 Frontier worker status Under the legislation applicable a cross-border employee may also be given frontier worker status. In this case there will also be a definition of a cross-border worker in this legislation. There are usually objective criteria which the commuting or cross-border employee must satisfy as a minimum. This specific frontier worker status gives him rights and/or obligations which differ from the generally applied principles. 58

The definition of a frontier worker in the social security regulation 1408/71 is broader than the one used in the double taxation treaties. This often causes confusion and erroneous conclusions. It is therefore of great importance to make this distinction consistent. a.2.1 Social security The coordinating Regulation 1408/71 49 sets out specific rules for frontier workers. Among other things, it establishes different benefit rights in the event that he becomes wholly unemployed. 49 Also the new coordinating Regulation 883/04 50 Article 1, paragraph f of Regulation 883/04 51 Article 1, paragraph f of Regulation 883/04 Article 1, paragraph b of Reg. 1408/71 50 establishes who should be regarded as frontier workers. These are cross-border workers who in principle return to the State of residence every day, or at least once a week. Article 1, paragraph b) Reg. 1408/71: frontier worker means any worker employed in the territory of a Member State and residing in the territory of another Member State to which he returns as a rule daily or at least once a week a.2.2 Tax Although the OECD model convention has no specific provisions for frontier workers, bilateral double taxation treaties concluded by neighbouring States may well include mention of frontier workers. If a double taxation treaty does make such special rules for frontier workers, a stricter definition usually applies than that used for the purposes of social security (Article 1, paragraph b Reg. 1408/71) 51. As well as the required criteria these definitions generally also include geographical conditions: commuting must take place within a clear and objectively delineated frontier area. This specific frontier worker status gives rights and/or obligations which differ from the generally applied State of employment principle. Workers treated as frontier workers for the purposes of taxation are taxed in their State of residence on income earned in the neighbouring State. a.2.3 Lack of coordination The application of different definitions of the term frontier worker can lead to a lack of coordination. A situation can arise where the employee is covered by social insurance in the State of employment and remains liable to tax in his State of residence. This can be both advantageous and disadvantageous. b. Employment law and labour legislation b.1 Employment law The employment and labour laws applicable in the European Economic Area (EEA) makes no specific provisions which affect the rights and/or obligations for cross-border employees or frontier workers. Reg. 1612/68 states that EEA citizens working within the territory of another Member State, regardless of their nationality (provided they are EEA nationals) or State of residence shall enjoy the same rights as national employees. Articles 1 to 6 of Reg. 1612/68 guarantee the free movement of EEA nationals (this also applies to Swiss nationals under a separate agreement) in the single labour market. These employees can therefore take up employment without a work permit in any other Member State. Non-EEA nationals, third 59

country nationals, do not enjoy this freedom of movement. The Free movement of employees regulation 1612/68 also applies to frontier workers. Example : An employee living in France with French nationality may work in Belgium without a work permit, even if he is not resident in Belgium. However, this right does not apply to his Algerian spouse, if she has not taken French nationality and/or the family does not move to Belgium. In this last case employees are known as migrant workers (see chapter 12). If the family moves, the right of the spouse to take up employment can be invoked under Article 23 of the Residence Directive 2004/38/EC. b.2 Applicable employment legislation The employment contract between the cross-border or frontier worker and his employer is generally governed by the employment legislation (labour law or collective labour agreement) of the State of employment. This is not only for practical reasons. Various international and national legal principles and provisions (see also chapter 4) often make this mandatory: In many Member States a large proportion of employment laws are also special mandatory provisions (sometimes also known as police and safety laws or mandatory rules ). These must accordingly be respected in any form of employment on their territory. Article 7, paragraph 2 of Reg. 1612/68 instructs that the cross-border employee must automatically be entitled to the same tax and social advantages as national employees; In the absence of a choice of jurisdiction an employment contract will be governed by the law of the State where the employee normally carries out his work, under Article 6, paragraph 2 Convention on Contractual Obligations. 60

c. Social security c.1 Applicable social security law The coordinating Regulation 1408/71 sets out the principles concerning the social security legislation applicable when employees take up their right of free movement within the European Economic Area. These provisions establish in which Member State the cross-border worker is covered by social insurance. No distinction is made between cross-border and frontier workers. Article 13, paragraph 1 of Reg. 1408/71 52 states that an employee may only be covered by social insurance in one Member State at a time, even if he works on the territory of two or more Member States via one or more employment contracts. This is the exclusivity principle. The question is which Member State this should be. To determine this Reg. 1408/71 applies the State of employment principle (the lex locis laboris). Only in the event of simultaneous employment in the territory of two or more Member States, can the State of residence play a determining role (Article 14, paragraph 2 b) i) Reg. 1407/81) 53. See chapter 11, Multinational workers. The cross-border or frontier worker is, in accordance with Article 13, paragraph 2 of Reg. 1408/71 54, covered by social insurance in his State of employment. If he was previously covered by social insurance in another Member State - for example in the Member State where he lives because he previously worked there - he then moves from the one social security system to the other, notwithstanding the fact that he retains his normal place of residence in the original Member State (State of residence). By moving from one social security system to another the employee may be faced with an interruption in his social insurance cover. 52 Article 11, paragraph 1 of Regulation 883/04 53 Article 1, paragraph 1a of Regulation 883/04 54 Article 11, paragraph 3a of Regulation 883/04 55 All these provisions have been brought together and incorporated in a general article, Article 6, in the new Regulation 883/04. 56 Also Regulation 883/04 European legislation regards this as an obstruction to the free movement of workers. The coordinating Regulation 1408/71 therefore sets out special coordinating rules for each branch of social security 55. These should neutralise, as far as possible, the risk of interrupted social insurance in the event of crossborder working. The coordinating rules are based on a principle established under Article 42 of the EEC Treaty which requires Member States to take account of all insurance periods completed by EEA nationals, including those completed in another Member State, in determining entitlement to benefit and/or calculating its rate and duration. The exchange of information between the Member States regarding social insurance periods takes place by means of E-forms. The cross-border worker lives in one Member State and works in another. Under the guidelines of Reg. 1408/71 he is subject to the social security system in his State of employment. He may reasonably claim that he retains close personal links with his State of residence. He is also present there on a regular basis. Generally his family is also there. He can therefore also opt to pass difficult periods, for example sickness, invalidity and/or unemployment in his State of residence. This is not only the case for cross-border employees. If European legislation offered no guarantees of this, this could constitute an obstacle to the free movement of workers. Reg. 1408/71 56 therefore contains a number of practical provisions to make this possible. It should also be noted that these practical provisions in the coordinating regulation give much less choice to frontier workers (e.g. during unemployment). 61

57 Article 6 of Regulation 883/04 58 Article 17 of Regulation 883/04 59 Article 18, paragraph 2 of Regulation 883/04 stipulates that the family members also have a right to benefits in kind in the Member State where the frontier worker is covered by social security if this Member State is not given in Annex III of Regulation 883/04. This applies only to those family members given on form E106 and not insured in their State of residence. c.2 Sickness and maternity c.2.1 Medical benefits In principle cross-border or frontier workers have a claim on the medical services of the Member State where they pay their contributions, i.e. the State of employment. In a number of Member States waiting times apply to medical benefits. Under Article 18, paragraph 1 of Reg. 1408/71 57 the employee who transfers from one social security system to another is protected against interruptions in his entitlement to medical benefits. This applies only in the event that he was previously covered against sickness by statutory social insurance in another Member State. He must demonstrate this on form E104 (Statement of periods of insurance, employment and residence), to the health insurance service in the State where he now has social security cover (i.e. the new State of employment). It is therefore important that the cross-border employee requests this form E104 from the medical insurance service of the Member State where he was formerly insured when he starts to work in the new State of employment. The cross-border or frontier worker - and any family members also covered by his insurance - is then registered by the medical insurance institution in the State of employment (competent Member State). The employee (like his family) has, however, close personal links with his State of residence. They must have the opportunity to receive medical treatment in their State of residence. Article 19, paragraph 1 a) of Reg. 1408/71 makes this possible. Article 19, paragraph 1 Reg. 1408/71: A worker residing in the territory of a Member State other than the competent State, who satisfies the conditions of the legislation of the competent State for entitlement to benefits, taking account where appropriate of the provisions of Article 18, shall receive in the State in which he is resident: a) benefits in kind provided on behalf of the competent institution by the institution of the place of residence in accordance with the legislation administered by that institution as though he were insured with it; 58 The institution in the State of employment (competent Member State) will annually issue the employee form E106 (Declaration of entitlement to health and maternity benefits in a State other than the competent Member State) which he must give to the institution in his State of residence. After handing in form E106 the cross-border or frontier worker has the right to use the medical services of both his State of employment (competent Member State) and his State of residence. This right of choice does not apply automatically in the case of the family members of frontier workers who are covered by insurance in the State of employment. There must either be an agreement between the State of residence and the State of employment, or the State of employment must give its explicit consent. Otherwise such family members may only receive medical benefits on the territory of the State of residence (on behalf of the State of employment, in accordance with Article 19, paragraph 1 a) ). Article 20 Reg.1408/71 : A frontier worker may also obtain benefits in the territory of the competent State. Such benefits shall be provided by the competent institution in accordance with the legislation of that State, as though the worker were resident there. Members of his family may receive benefits in kind under the same conditions; however, receipt of such benefits shall, except in urgent cases, be conditional upon an agreement between the States concerned or between the competent authorities of those States or, in its absence, on prior authorisation by the competent institution 59. 62

The right of choice ends immediately at the moment that the employee ceases to work in the State of employment. This is the case for invalidity and retirement benefits. Even if the employee receives an invalidity or old age pension from the former State of employment - and remains liable to contributions there - the right of choice expires. In the event of unemployment the right of choice only expires if the unemployed worker receives unemployment benefit from his State of residence 60. c.2.2 Sickness benefit In principle the cross-border or frontier worker is entitled to sickness benefit from the Member State where he is liable for social security contributions, i.e. the State of employment. In a number of Member States waiting periods are applied to the right to continued wages payments during incapacity and/or sickness benefit. This is the case in Belgium, Denmark, Finland, France, Ireland, Norway, Austria, etc. Article 18, paragraph 1 of Reg. 1408/71 61 protects the cross-border employee against interruptions in his right to continued wage payments during incapacity and/or sickness benefits. Submitting form E104 in time (see c.2.1) is therefore also of the utmost importance. The coordinating Regulation 1408/71 provides for right of choice between State of residence and State of employment in respect of sickness benefit. Under Article 19, paragraph b) of Reg. 1408/71 62 sickness benefit and the continued payment of wages are exportable to another Member State (State of residence). This means that the employee may, without problems, remain in the territory of his State of residence while receiving sickness benefit from the State of employment. Depending on any mutual agreements which may have been reached between the State of residence and the State of employment, this sickness benefit may be either directly paid by the institution in the State of employment or indirectly through the agency of the institution in the State of residence. Article 19, paragraph 1 Reg. 1408/71: A worker residing in the territory of a Member State other than the competent State, who satisfies the conditions of the legislation of the competent State for entitlement to benefits, taking account where appropriate of the provisions of Article 18, shall receive in the State in which he is resident: a) b) cash benefits provided by the competent institution in accordance with the legislation which it administers. However, by agreement between the competent institution and the institution of the place of residence, such benefits may be provided by the latter institution on behalf of the former, in accordance with the legislation of the competent State. The practical details for the implementation of this Article including arrangements for medical examination are governed under Article 18 of the implementing order Reg. 574/72. In the event of sickness the employee must report to the institution in State of residence (e.g. the sickness benefit institution). This body will determine whether or not the employee is incapacitated. It is also responsible for communication with the competent body in the State of employment. Communication between the Member States takes place by means of the following E-forms: E115 (Request for benefit in the event of incapacity for work), E116 (Medical report in the event of incapacity for work) and E118 (Declaration of end of incapacity for work). The employee can thus not be summoned to the State of employment to establish his incapacity. This also applies to the period for which the employer is obliged to pay guaranteed wages during sickness (Rindone decision C-2/86, Paletta I decision, C-45/90 and Paletta II, C-206/94). 60 The new Regulation 883/04 stipulates that the right of choice remains intact for the frontier workers in a number of situations. Article 28 of Regulation 883/04: Special rules for retired frontier workers 1. A frontier worker who retires is entitled in case of sickness to continue to receive benefits in kind in the Member State where he last pursued his activity as an employed or self-employed person, insofar as this is a continuation of treatment which began in that Member State. The term continuation of treatment means the continued investigation, diagnosis and treatment of an illness. 2. A pensioner who, in the five years preceding the effective date of an old-age or invalidity pension has been pursuing an activity as an employed or selfemployed person for at least two years as a frontier worker shall be entitled to benefits in kind in the Member State in which he pursued such an activity as a frontier worker, if this Member State and the Member State in which the competent institution responsible for the costs of the benefits in kind provided to the pensioner in his Member State of residence is situated have opted for this and are both listed in Annex V. 61 Article 6 of Regulation 883/04 62 Article 21, paragraph 1 of Regulation 883/04 63

c.3 Unemployment 63 This also applies to Regulation 883/04, in which the aggregation provision for the payment of unemployment benefits is regulated by Article 61. 64 Article 61, paragraph 1 of Regulation 883/04 65 Regulation 883/04 does away with the difference in regulations for calculating benefits when the worker has had employment for less than 4 weeks. Article 62, paragraph 1 of Regulation 883/04 is clear about this: 1. The competent institution of a Member State whose legislation provides for the calculation of benefits on the basis of the amount of the previous salary or professional income shall take into account exclusively the salary or professional income received by the person concerned in respect of his last activity as an employed or self-employed person under the said legislation. In the event of unemployment a distinction must be made between cross-border workers who are frontier workers and those who are not. In principle a cross-border employee should be able to make a claim for unemployment benefit from the Member State where is liable for contributions, i.e. the State of employment. However, this is not the case for wholly unemployed frontier workers. The State of residence must take responsibility for him, and immediately reintegrate him completely in the social security system there. The remaining cross-border employees - employees who do not return every day or at least once a week to the State of residence - have the right of choice. On transfer from one social security system to another there is the danger of an interruption in social security cover. This is partly because of waiting periods, but also because of the fact that the employee may well have paid no social contributions for a long time, or may even have never paid them, in the State of residence. Article 67 of Reg. 1408/71 therefore includes a provision for taking account of contributions paid in another Member State 63. Article 67 Reg.1408/71 : The competent institution of a Member State whose legislation makes the acquisition, retention or recovery of the right to benefits subject to the completion of insurance periods shall take into account, to the extent necessary, periods of insurance or employment completed under the legislation of any other Member States, as though they were periods completed under the legislation which it administers, provided, however, that the periods of employment would have been counted as insurance periods had they been completed under that legislation. In establishing entitlement to unemployment benefit and its rate and duration, the competent Member State must always take account of insurance periods completed in other Member States. This prevents a worker from losing rights to unemployment benefit acquired elsewhere. To demonstrate that he was previously covered by social insurance as an employed person in another Member State the worker needs form E301. Form E301 is a declaration on the periods to be taken into account for granting unemployment benefit. This form must be delivered, at the time of application for unemployment benefit, to the unemployment benefit service of the Member State where entitlement to the benefit can be established. Form E301 is requested from the unemployment benefit institution of the Member State where the cross-border employee was previously covered by social insurance. Most Member States also give income-related unemployment benefits. For a cross-border employee this is calculated in accordance with article 68, paragraph 1 of Reg. 1408/71 64. If the cross-border employee, immediately preceding his benefit application, worked for longer than 4 weeks in the Member State which is competent to pay his unemployment benefit (for partial or temporary unemployment, the State of employment; for full employment, the State of residence for frontier workers and the State of employment or the State of residence in the case of other cross-border workers) then account shall only be taken of the wages which is has earned there. If, however, he has worked for less than 4 weeks - or even not at all (which is the case when an application for unemployment benefit is made in the State of residence) - the amount of unemployment benefit will be fixed on the basis of notional wages. This notional figure is determined in turn on the basis of the wages habitually paid in the competent Member State for the occupation that the crossborder worker formerly pursued in his previous State of employment 65. 64

Form E301 therefore also contains information on the occupation of the cross-border worker, what he was paid and the reason for the termination of his contract. In applying the provision concerning temporary/partial and full unemployment in Article 71 of Reg. 1408/71, a distinction must be made between a cross-border employee who is frontier worker (see c.3.1. and c.3.2) and one who is not (see c.3.3 and c.3.4) 66. c.3.1 The frontier worker who becomes partially or intermittently unemployed The frontier worker has a claim to unemployment paid by the Member State where he is liable for contributions, i.e. the State of employment (State of work principle), under Article 71, paragraph 1 a) i) of Reg. 1408/71: A frontier worker who is partially or intermittently unemployed in the undertaking which employs him, shall receive benefits in accordance with the legislation of the competent State as if he were residing in the territory of that State; these benefits shall be provided by the competent institution; this benefit will be paid by the competent body 67 ; 66 Article 65 of Regulation 883/04 regulates the right to unemployment benefit in the case of a person being intermittently/partially or wholly employed: Article 65 of Regulation 883/04: Unemployed persons who resided in a Member State other than the competent State 1. A person who is partially or intermittently unemployed and who, during his last activity as an employed or self-employed person, resided in a Member State other than the competent Member State shall make himself available to his employer or to the employment services in the competent Member State. He shall receive benefits in accordance with the legislation of the competent Member State as if he were residing in that Member State. These benefits shall be provided by the institution of the competent Member State. 2. A wholly unemployed person who, during his last activity as an employed or self-employed person, resided in a Member State other than the competent Member State and who continues to reside in that Member State or returns to that Member State shall make himself available to the employment services in the Member State of residence. Without prejudice to Article 64, a wholly unemployed person may, as a supplementary step, make himself available to the employment services of the Member State in which he pursued his last activity as an employed or self-employed person. An unemployed person, other than a frontier worker, who does not return to his Member State of residence, shall make himself available to the employment services in the Member State to whose legislation he was last subject. 3. The unemployed person referred to in the first sentence of paragraph 2 shall register as a person seeking work with the competent employment services of the Member State in which he resides, shall be subject to the control procedure organised there and shall adhere to the conditions laid down under the legislation of that Member State. If he chooses also to register as a person seeking work in the Member State in which he pursued his last activity as an employed or self-employed person, he shall comply with the obligations applicable in that State. 4. 5. (a) The unemployed person referred to in the first and second sentences of paragraph 2 shall receive benefits in accordance with the legislation of the Member State of residence as if he had been subject to that legislation during his last activity as an employed or self-employed person. Those benefits shall be provided by the institution of the place of residence. (b) However, a worker other than a frontier worker who has been provided benefits at the expense of the competent institution of the Member State to whose legislation he was last subject shall firstly receive, on his return to the Member State of residence, benefits in accordance with Article 64, receipt of the benefits in accordance with (a) being suspended for the period during which he receives benefits under the legislation to which he was last subject. 67 Article 65, paragraph 1 of Regulation 883/04 65

68 Article 65, paragraph 2 of Regulation 883/04 69 With the coming into force of Regulation 883/04, it is not clear whether the Miethe judgment is still applicable. Article 65, paragraph 3 of Regulation 883/04, which takes its inspiration from Miethe, is unclear about the specific right to unemployment benefits. Example : A frontier worker, who lives in Portugal and works in Spain, has a claim on Spanish unemployment benefit in the event of temporary unemployment. The Spanish unemployment benefit service must take account of the insurance periods satisfied in other Member States (e.g. Portugal). c.3.2 The frontier worker who is wholly and definitively unemployed The frontier worker has a claim for unemployment benefit paid by the Member State where he lives (State of residence principle), under Article 71, paragraph 1 a) ii) of Reg. 1408/71: A frontier worker who is wholly unemployed shall receive benefits in accordance with the legislation of the Member State in whose territory he resides as though he had been subject to that legislation while last employed the institution of the place of residence shall provide such benefits at its own expense; the institution of the place of residence shall provide such benefits at its own expense 68 ; Example : A frontier worker who lives in France and works in Luxembourg is entitled to French unemployment benefit in the event of his becoming wholly and definitively unemployed. This is the case even if he has never been covered by social insurance in France and he has Luxembourg nationality. Exception : In exceptional cases a wholly unemployed frontier worker may be entitled to unemployment benefits from the State of employment. This is the case if the frontier worker has no personal or social relations in the State of residence so that his chances of finding employment there are minimal. For example, this may be the case if a non-french speaking Dutch family moves to the Francophone part of Belgium and the frontier worker becomes unemployed after 6 months. Under the Miethe judgment (judgment C-1/85, the atypical frontier worker) the frontier worker may then claim Dutch unemployment benefit (right of choice) 69. If a frontier worker moves to the State of employment (competent Member State) after he has become unemployed he is then entitled to claim unemployment benefit in accordance with the unemployment rules of the State of employment. The duration of the unemployment benefit, however, will then be reduced by the time that unemployment benefit has been paid by the State of residence (Huijbrechts decision, C 131/95). In a small number of Euro-regional situations the frontier worker has a right of choice. This is the case, for example, in the German-Austrian frontier zone. There a frontier worker who, during the six years preceding the first day of unemployment, has been covered by German social insurance for at least five years, may choose whether to apply for Austrian or German unemployment benefits. As an additional condition, the frontier worker must have been wholly insured in Germany during the last of these five years. The same right of choice exists in the opposite case, where the worker has lived in Germany and worked in Austria. 66

c.3.3 The cross-border worker, other than frontier worker, who becomes partially or intermittently unemployed. 70 Article 65, paragraph 1 of Regulation 883/04 The cross-border employee who is not a frontier worker is entitled to unemployment benefit paid by the Member State where he is liable to pay contributions, i.e., the State of employment (State of work principle), under Article 71, paragraph 1 b) i) of Reg. 1408/71: A worker, other than a frontier worker, who is partially, intermittently or wholly unemployed and who remains available to his employer or to the employment services in the territory of the competent State shall receive benefits in accordance with the legislation of that State as though he were residing in its territory; these benefits shall be provided by the competent institution 70. 71 In the new regulation, the same rights apply if Article 65, paragraph 2 and Article 65, paragraph 5 of Regulation 883/04 are taken together. c.3.4 The cross-border employee other than a frontier worker who becomes wholly and definitively unemployed A cross-border employee other than a frontier worker is entitle to make a choice. He has three options: a. Like the frontier worker, he has an immediately claim to unemployment benefit paid by the State in which he lives (State of residence principle). b. He is entitled to unemployment benefit paid by the Member State where he is or was liable for contributions, the State of employment, if he temporarily remains in that State to seek work. c. If after a certain time he decides that he would have a better chance of employment in his State of residence and returns home, he can export his unemployment benefit for three months to the State of residence. After this 3-month period he is entitled to unemployment benefit in accordance with the legislation of his State of residence. The duration of this benefit will however, be reduced by the period for which he received unemployment benefit in the State of employment. This is all in accordance with Article 71 paragraph 1 b) ii) of Reg. 1408/71: A worker, other than a frontier worker, who is wholly unemployed and who makes himself available for work to the employment services in the territory of the Member State in which he resides, or who returns to that territory, shall receive benefits in accordance with the legislation of that State as if he had last been employed there; the institution of the place of residence shall provide such benefits at its own expense However, if such worker has become entitled to benefits at the expense of the competent institution of the Member State to whose legislation he was last subject, he shall receive benefits under the provisions of Article 69. Receipt of benefits under the legislation of the State in which he resides shall be suspended for any period during which the unemployed person may, under Article 69, make a claim for benefits under the legislation to which he was last subject 71. 67

72 In Regulation 883/04, the coordination of family benefits is regulated by Articles 67 to 69. 73 Chapter 8 of Regulation 883/04 74 The big difference between Regulation 1408/71 and Regulation 883/04 is that in Regulation 883/04 there is no distinction is made any more between child benefits and family benefits. The new regulation stipulates the priority rules in the unitary system if both parents have a claim to child benefits. A distinction is made in this respect between parents who have a right to child benefits for the same reasons and parents who have a right to child benefits for different reasons. If they have a right to child benefits for different reasons, the right obtained on the basis of working has priority over the right on the basis of a pension or on the basis of place of residence (Article 68, paragraph 1 a of Regulation 883/04). Additions to the right which is established to have priority are regulated by Article 68, paragraph 2 of Regulation 883/04. If both parents have a right to child benefits for the same reason - for example on the basis of work - a priority right based on the place of residence of the children applies, and so on. c.4 Family benefits In principle the cross-border or frontier worker is entitled to family benefits in the Member State where he is subject, i.e. the State of employment (the competent State). The State of employment principle thus applies. Family benefits here does not simply mean traditional child benefit. Family benefits are all benefits in kind and payments cash intended to meet family expenses. It thus includes: benefits for raising children (e.g. the German parental benefit), family credits (UK), childcare at home (Finland) etc. Family social assistance payments and any birth or adoption grants are not included. The coordination of child benefits is governed by Articles 72 to 80 of Reg. 1408/71 72. A large number of Member States make the payment of child benefits conditional on the children residing in their territory. Under Article 73 of Reg. 1408/71 the coordinating regulation prevents residence conditions being applied to the children of EEA workers who live in another Member State than the competent Member State where the worker is employed and subject to social security. Article 73 Reg.1408/71 : Subject to the provisions of Annex VI, a worker subject to the legislation of a Member State shall be entitled to the family benefits provided for by the legislation of the first Member State for members of his family residing in the territory of another Member State, as though they were residing in the residing in the territory of the first State. Despite the principles set out above, the coordination of family benefits (chapter 7 Reg. 1408/71) 73 must be read carefully. If an employee is covered by social insurance in a Member State other than the Member State where he lives with his family, two family allowance systems may simultaneously apply. Often a family may also acquire benefit rights under the legislation of the State of residence since the other parent - although not in employment - is entitled to child benefits as a resident ( resident s insurance ). To avoid the payment of overlapping benefit or none, there are a number of priority and anti-accumulation provisions. To make it possible to coordinate the very different statutory rules, a distinction is made between child benefit systems under which payments are dependent on work (type A) and those systems where entitlement depends on residence (type B). Type A systems include those in Belgium, Spain, Italy, Luxembourg, Greece, Portugal etc. Type B systems are found in the Netherlands, Germany, France, the United Kingdom, Denmark, Poland, the Czech Republic, Estonia, Latvia, Slovenia, etc. Because the principle of the State of employment forms the basic rule, type A systems take precedence over type B systems 74. 68

c.4.1 Coordination of child benefits in Regulation 1408/71 There are two possible family scenarios. In the first one parent works (1) in the second, both parents work (2). 1. Family with one working parent Coordination is simple if only one parent is in paid employment in the family. The Member State where this parent is in paid employment takes precedence and must pay the family benefits (Article 73 Reg. 1408/71). The State of employment principle takes priority. If the family lives in a Member State with work-related family benefits (type A system), no additional benefit will be paid by the State of residence. However, if the family lives in a Member State with residence-based system (Type B), additional child benefit is paid by the State of residence if it is paid at a higher rate than the benefit paid by the State of employment. The amount of the additional benefit is calculated per child. Examples: The father works in Spain (type A system) and the family lives in Portugal (type A system). The mother is not in paid employment. The family is only entitled to Spanish family benefits. The father works in Belgium (type A system) and the family lives in Poland (type B system). The mother is not in paid employment. The family has entitled to Belgian child benefits plus additional Polish benefits if these are paid at a higher rate than in Belgium. 2. Both parents in the family work In the event that one of the parents is in paid employment in the State of residence, any claim in the State of residence takes precedence (the State of employment of one of the parents). If however child benefits in the State of employment of the other, cross-border parent are paid at a higher rate, the difference is paid by that State. Example : The family lives in the Czech Republic (type B system). The father works in the Netherlands (type B system), the mother is also in paid employment in the Czech Republic. There is a prior right to Czech family allowances. If the Dutch benefit is higher, the Netherlands must make good the difference. Sometimes both parents work as cross-border employees in the same Member State. In that event there is only entitlement under the legislation of the State of employment. Example : The family lives in Slovenia (type B system). Both parents work as frontier workers in Italy (Type A system). There is only entitlement to Italian child allowances. There can be no claim on additional Slovene benefits. If one of the parents goes to work in Slovenia or is in receipt of Slovene unemployment benefit, there will be a prior right to Slovene child benefits. If the Italian child benefit is paid at a higher rate than the Slovene benefit, additional benefit is paid by Italy. 69

75 Article 7 of Regulation 883/04 c.4.2 Coordination of other family benefits in Regulation 1408/71 Benefits for raising children, parental allowances and childcare payments all fall into the scope of the coordinating Regulation 1408/71 (Hoever decision, C-245/94, Zachow decision, C-312/94 and Eila Päivikki Maaheimo decision, C-330/00). Examples: A frontier worker living in Poland and working in Germany is entitled to the German parental allowance. A Greek employee works as cross-border employee in Germany. His spouse has a claim on German parental allowances is she is not working (a derived right). If she works in Greece, she has no entitlement to the German benefit. A Finnish employee is posted to Germany. He continues to be covered by Finnish social insurance under Article 14, paragraph 1, a) of Reg. 1408/71. The family lives in Germany. The mother has Finnish maternity leave. Under Finnish law she is entitled to payment for childcare at home or for private childcare. Despite the fact that the family does not live in Finland, the family is entitled to Finnish payments for childcare in the home or private childcare. A number of family allowances are outside the scope of the coordinating Regulation 1408/71. Belgium, Luxembourg and France have excluded childbirth grants (annex II Reg. 1408/71). These payments, however, do fall within the scope of the regulation on the Free movement of workers (Article 7, paragraph 2 of Reg. 1612/68, social advantages ). This applies, for example, to Dutch study grants. Examples: An Irish employee works in Luxembourg. On the birth of a child the spouse - if she is not herself covered by social insurance in Ireland - is entitled to the Luxembourg childbirth allowance. The children of Belgian or German frontier workers employed in the Netherlands are entitled to a Dutch student grant, if the children are attending colleges of higher education or universities for which the children of Dutch employees also receive a study grant. This applies to colleges of higher education and universities in the Netherlands, Flanders and the German Länder of Nordrhein Westfalen, Niedersachsen and Bremen. c.5 Invalidity In principle cross-border or frontier workers are entitled to invalidity benefits from the Member State where they are insured, i.e. the State of employment. Under Article 10, paragraph 1 of Reg. 1408/71 invalidity pensions are automatically exportable to another Member State. This means that the cross-border employee may reside, without problems, in the territory of his State of residence or elsewhere while receiving an invalidity pension from a former State of employment. Article 10, paragraph 1 Reg. 1408/71: A Save as otherwise provided in this Regulation, invalidity, old-age or survivors cash benefits, pensions for accidents at work or occupational diseases and death grants acquired under the legislation of one or more Member States shall not be subject to any reduction, modification, suspension, withdrawal or confiscation by reason of the fact that the recipient resides in the territory of a Member State other than that in which the institution responsible for payment is situated 75. 70

The medical examination for the initial determination of invalidity must take place in the cross-border worker s State of residence (article 51, paragraph 1 Reg. 574/72). If a frontier worker is only subject to risk systems (see below) the medical examination on initial determination of invalidity may take place in the State of employment. (Vidal decision, C-344/89 and Voeten and Beckers decision, C-279/97). 76 Article 44 of Regulation 883/04 In a number of Member States waiting periods apply to the right to an invalidity pension. The transfer from one social security system to another, which often occurs in the case of cross-border workers, can thus lead to an interruption in social insurance. Article 38 of Reg. 1408/71 protects the cross-border employee against interruptions in his right to an invalidity pension by means of the recognition and aggregation of insurance periods. Article 38 Reg.1408/71. Aggregation of insurance periods : 1. The competent institution of a Member State whose legislation makes the acquisition, retention or recovery of the right to benefit conditional upon the completion of insurance periods shall take account to the extent necessary of insurance periods completed under the legislation of any other Member States, as though they had been completed under its own legislation 76. Within the European Union very large differences exist between invalidity insurance systems. There is no question of harmonisation. The basis of the coordination of these systems rests on the distinction between the two fundamentally different types of invalidity insurance: risk systems (a) and acquired rights systems (b). a. Risk systems In risk systems the rate at which the invalidity pension is paid is independent of duration of the invalidity insurance. These invalidity pensions may be compared with statutory sickness benefit insurance: they may well be income-related, but the length of the insurance period has no influence on the amount of the payment. If the employee is not (or is no longer) covered by social insurance at the start of the permanent incapacity for work, there is no entitlement to benefit. Risk systems exist in Belgium, Spain, France (with exception of the mine workers scheme), Greece (only the insurance scheme for agricultural workers), Ireland, the Netherlands, Finland (for those born with a disability or whose incapacity develops at an early age) and the United Kingdom. b. Acquired rights systems Under acquired rights systems the rate at which invalidity pension is paid will depend on the duration of the invalidity insurance. These invalidity pensions may be compared with retirement pensions: the longer the claimant has been insured, the higher the invalidity pension will be. The acquired benefit rights are in addition earned. If the employee is no longer covered by social insurance at the start of permanent incapacity for work, his right to an acquired - previously earned - invalidity pension revives. Acquired rights systems exist in Germany, Austria, Finland (except for those born with a disability or whose incapacity develops at an early age), Italy, Luxembourg, Denmark, Portugal, Greece (except the insurance scheme for agricultural workers), France (the special mineworkers scheme), Sweden and the new Member States (Poland, the Czech Republic, Lithuania etc). A cross-border or frontier worker has generally been subject to two or more social security systems. Invalidity insurance may be of either the risk or acquired rights type. Since previously acquired rights may not be lost, coordination under Reg. 1408/71 must take account of the existence of these two fundamentally differing types of invalidity scheme. 71

77 Regulation 883/04 will in practice bring about a major change in the coordination of invalidity allowances for employees who have only worked in Member States with a risk system. Article 44, paragraph 1 of Regulation 883/04 does not put an end to the single pension method as such, but it does make it subject to an extra condition: the Member States with risk systems who are prepared for coordination to continue using this method must make that choice clear by explicitly ensuring that they are included in Annex VI of Regulation 883/04. If they do not do this, they are implicitly choosing coordination using the pro-rata system (part pension method; see c.5.2.), which in Regulation 1408/71 is actually rather characteristic of the coordination between/with acquired rights systems. Article 44, paragraph 1 of Regulation 883/04 therefore ensures that the single pension method can only continue to be applied if the worker suffering from an illness has only worked in Member States given in Annex VI. Four different scenarios may front the cross-border worker who is declared incapacitated, each of which gives rise to a different method of coordination. The employee has only worked in Member States with a risk system (c.5.1); The employee has only worked in Member States with acquired rights systems (c.5.2); The employee has most recently worked in a Member State with an acquired rights system and previously worked in a Member State with a risk system (c.5.3.); The employee has most recently worked in a Member State with a risk system and formerly worked in a Member State with an acquired rights system (c.5.4). c.5.1 The employee has been exclusively insured in a risk system: single pension method In the existing regulation, Reg. 1408/71, the coordination between risk systems is governed by Article 39, paragraphs 1 and 2. The cross-border employee who has only been insured in Member States with risk systems is entitled to a single invalidity pension paid by the Member State where he was most recently insured. In calculating the rate of this pension no account is taken of the legislation of the Member States in which he was previously insured. This coordination method, which results in one invalidity pension, is known as the single pension method 77. Example : A cross-border worker who most recently worked for 8 months in the United Kingdom (risk system) and previously worked for 10 years in Ireland and 10 years in France (both States with risk systems), is entitled to an invalidity pension from the Member State where he most recently had social insurance - in this case, the United Kingdom. 78 78 Ireland and the United Kingdom appear in Annex VI of Regulation 883/04. However, this is not the case for France. This means that method c.5.4. will be applied when Regulation 883/04 comes into effect. If the employee 72

c.5.2 The employee has exclusively been insured under acquired rights systems: pro-rata system Coordination between acquired rights systems is governed by Article 40, paragraph 1 of Reg. 1408/71 79. By analogy with a retirement pension, invalidity pension rights have been acquired in all Member States. Since acquired rights cannot be lost, Article 40 paragraph 1 is therefore based word for word on the pro-rata system established for the coordination of retirement pensions under Article 46 of Reg. 1408/71 80. In applying the pro-rata system each Member State, on the basis of its own national legislation, must establish whether, and to what extent, the claimant is incapacitated. After this an invalidity pension is calculated as if the worker had completed all his insurance periods in the EEA in this Member State (the theoretical sum ). Finally, the actual invalidity pension is calculated, on a pro-rata basis. were to have worked in Sweden instead of France, the single pension method will continue to apply, because Sweden, like the United Kingdom and Ireland, appears in Annex VI of Regulation 883/04. 79 Article 46, paragraph 1 of Regulation 883/04 80 Article 52 of Regulation 883/04 The pro-rata invalidity pension is the sum of: 81 Article 46, paragraph 1 of Regulation 883/04 = length of insurance period in the Member State x total length of insurance periods in all Member States theoretical invalidity pension in this one Member State Example : If the cross-border worker has worked consecutively for 10 years in Austria, 10 years in Italy and 10 years in Germany - all States with acquired rights systems - there will in principle be a claim for 10/30 of the Austrian invalidity pension, 10/30 of the Italian invalidity pension and 10/30 of the German invalidity pension. In the case of the pro-rata coordination method, establishing benefit rights entails a long-drawn out and administratively complicated process. The calculation can only take place if each Member State knows for how long the employee was insured in the other Member States. The medical examination - on behalf of the other Member States - takes place in the sick worker s State of residence. Both the insurance institutions and the worker may have problems of interpretation and translation. In practice it frequently happens that an employee is declared wholly incapacitated in one Member State and only partially or not at all incapacitated in another. In the application of the pro-rata system, the lack of harmonisation of the criteria for incapacity often has a distressing impact on the worker. c.5.3 The employee was most recently insured under an acquired rights system and was formerly insured under a risk system: pro-rata system The employee was most recently insured under an acquired rights system, but was previously insured under a risk system. In such cases the pro-rata method for acquired rights systems is applied, once again in accordance with article 40, paragraph 1 of Reg. 1408/71 81. However, this calculation requires recourse to an artificial device. Although the risk system does not conform to the logic of earned or acquired rights, in this instance it is treated as though it did. In the interests of the employee, the risk system is treated as a notional acquired rights system. In this way the right to benefit previously acquired or earned under the risk system is not lost. Each Member State, including those operating a risk system, makes a pro-rata calculation as described in under c.5.2: establishing the degree of incapacity, followed by calculating the theoretical invalidity pension and the proportion of benefit corresponding the period of insurance. 73

82 Article 54, paragraph 2 of Regulation 883/04 Example : A cross-border worker has spent five years working in Spain (risk system) and then goes to work in Luxembourg (acquired rights system). Suppose that after working for 10 years in Luxembourg he becomes permanently incapacitated. In principle he is entitled to 5/15 of the Spanish invalidity pension and 10/15 of the Luxembourg benefit. It goes without saying that the criticisms of the pro-rata system which were made in paragraph c.5.2 apply here too. c.5.4 The employee was most recently insured under a risk system and was previously insured under an acquired rights system: prevention of overlapping benefits This situation will arise, for example, in the case of a German worker employed in Belgium or France, both States operating risk systems, who was previously insured under the German acquired rights system. Or in the case of a cross-border worker who was most recently insured under the Spanish risk system but who was previously insured under acquired rights systems in Sweden or Luxembourg. If the cross-border worker was most recently insured under a risk system, he is in principle entitled to a full invalidity pension in that Member State. However the employee may also have a claim, under his previously acquired rights, to invalidity benefit from a Member State with an acquired rights system. In that event the Member State with the risk system will or should deduct this sum from the full pension that would normally be paid (anti-accumulation method under Article 46 b, paragraph 2 Reg. 1408/71) 82. If on the other hand no right exists to an invalidity pension from the Member State with an acquired rights system - for example, if the criteria for invalidity are not the same - then the Member State with the risk system, where the employee was most recently insured, remains liable to pay the full invalidity pension. In that event benefit is paid under the single pension system. The obvious lack of harmonisation in this case does not result in a reduced invalidity pension. Example : A cross-border worker, who has most recently worked in the Netherlands for 10 years (risk system) and previously worked for 2 years in the Czech Republic (acquired rights system) is entitled in principle to a full Dutch invalidity benefit. However this will be reduced by the amount of any Czech invalidity benefit due. 74

c.6 Retirement In principle a cross-border or frontier worker may claim an old age pension from all those Member States in which he has ever been covered by social insurance. The pensions paid will be in proportion to the periods in which has actually been insured in each State (pro-rata). Under Article 10, paragraph 1 of Reg. 1408/71 old age pensions are automatically exportable to another Member State. This means that the cross-border worker may live in the territory of his State of residence or elsewhere while receiving an old age pension from a former State of employment. Article 10, paragraph 1 Reg.1408/71 : A Save as otherwise provided in this Regulation, invalidity, old-age or survivors cash benefits, pensions for accidents at work or occupational diseases and death grants acquired under the legislation of one or more Member States shall not be subject to any reduction, modification, suspension, withdrawal or confiscation by reason of the fact that the recipient resides in the territory of a Member State other than that in which the institution responsible for payment is situated. 83 In the absence of European harmonisation national pension systems differ greatly. Some systems are workers insurance schemes (Spain, Ireland, Belgium, Portugal etc.); others are residents schemes (the Netherlands, Sweden, Denmark.) Pensionable age also varies from one Member State to another (65 in the Netherlands, 67 in Norway, 60 in France, and so on). In some countries it is possible to retire at a younger age with anticipatory benefits (Germany, Belgium, Luxembourg etc.), in others not. The structure of pensions also differs considerably. There are pensions based on average earnings (Belgium, France, Germany etc.) whilst in other States retirement pensions are independent of income (the Netherlands, Denmark etc.) Some Member States (e.g. Germany) also have waiting periods. 83 Article 7 of Regulation 883/04 84 Chapter 5, Articles 50 to 60 of Regulation 883/04: Old-age and survivors pensions 85 The coordination of old age pensions does not change substantially in Regulation 883/04. 86 Article 51 of Regulation 883/04 87 Article 57 of Regulation 883/04 88 Article 52 of Regulation 883/04 Old age benefits can also divided into statutory insurance benefits and supplementary pension schemes. The statutory old age benefits of Member States are coordinated by Reg. 1408/71 (Articles 44 to 53 of chapter 3: (Old age and death) 84. This does not apply to supplementary pensions, which are governed under the pensions Directive 98/49/EC. c.6.1 Coordination of statutory old age pensions The following principles apply to the coordination of old age pensions 85 : a. Pensions rights acquired in a Member State are guaranteed. The redemption of statutory old age pensions, refund of contributions or transfer to another Member State is not possible. b. An old age pension acquired in a Member State will be paid at the age applicable in that State. Old age pensions are automatically exportable to other Member States (article 10 Reg. 1408/71). This does not apply to supplementary benefits which do not depend on contributions (non-contributory benefits) and those which are means-tested. c. If a cross-border worker is not insured for long enough in a Member State to claim an old age pension (including anticipated pensions), insurance periods completed in other Member States must be taken into account in establishing the right to such a pension (Article 45, Reg. 1408/71) 86. d. If a cross-border worker has been insured for less than one year in a Member State this old age pensions is paid not by that State but by the member state in which he was most recently insured (Article 48, Reg. 1408/71) 87. e. The rules for calculating pensions are established in Article 46 Reg. 1408/71 88 (see c.6.1). 75

Examples : 89 Article 52 of Regulation 883/04 An employee works in Italy. Previously he lived for 5 years in the Netherlands (not necessarily in work) and worked for 10 years in Belgium. He applies for his on old age pension at the age of 60. Whether or not he is entitled to an anticipated Italian, or Belgian, old age pension is dependent on the number of periods for which he was covered by social insurance. He becomes entitled to an Italian or Belgian old age pension at the age of 60 by accumulating the insurance periods completed in the Netherlands, Belgium and Italy. If he is entitled to a Belgian and Italian old age pension from the age of 60, that does not mean that he is also entitled to a Dutch pension at the same age. The Dutch statutory old age pension is not paid before the age of 65, regardless of whether the claimant has worked or simply lived in the Netherlands. A French employee once worked for 10 months in Germany and 6 months in Luxembourg as a frontier worker. Since he was covered by social insurance for less than a year in both Member States he has no claim to a German or Luxembourg old age pension (Article 48 Reg. 1408/71). However, for these periods the worker is entitled to an old age pension paid by the Member State where he most recently worked. (France). A Swedish employee worked for 4 years in Germany in paid employment. Under German law there is no entitlement to a German old age pension since the employee was not covered by social insurance for at least 5 years there (Wartezeit). However if the worker was also insured in another Member State he can still become entitled to a German pension by the recognition and aggregation of all insurance periods (a regulation pension). c.6.2 Calculation of statutory old age pensions Article 46 of Reg. 1408/71 89 sets out the method of calculating pensions. Each Member State must carry out three calculations: the national pension (1), the theoretical sum (2) and the pro-rata pension (3). 1. National pension calculation: The national pension is the old age pension to which a cross-border worker is entitled for the insured years in a Member State. This is determined in accordance with the national legislation of this Member State. No account is taken of insurance periods completed in other Member States. 2. Theoretical pension calculation: The theoretical pension is the sum to which a cross-border worker would be entitled if all the insurance periods completed in other Member States had been completed in this one Member State (notional figure). The employee is not entitled to this theoretical sum. The calculation is just a stage in calculating the pro-rata pension. 3? Pro-rata pension calculation ( regulation pension ): The pro-rata pension is obtained by multiplying the theoretical pension sum (2) by a fraction. This numerator of this fraction is the length of the insurance period completed in the Member State; the denominator is the total duration of all insurance periods competed in all Member States used in calculating the theoretical sum. 76

The pro-rata old age pension totals: = length of insurance period in the Member State x total length of insurance periods in all Member States theoretical old age pension in this one Member State Finally the national pension amount (1) is compared with the pro-rata pension (3). Each Member State then pays the higher pension sum. Example : Take the example of an Austrian lab technician who, after working for 5 years in Austria and 20 years in Germany, then works for 15 years in Italy. He is insured for a total of 40 years. The Italian pension service calculates as follows. First the Italian old age pension under Italian law is worked out. Then the theoretical pension (the regulation pension ) which he could have acquired if he had been insured for 40 years in Italy is calculated. Then the pro-rata pension is calculated. This is 15/40 of the theoretical pension. The Italian national old age pension is compared with the pro-rata pension. The higher sum is paid. A similar calculation must also be carried out in Austria and Germany. c.6.3 Applying for statutory old age pensions Cross-border or frontier workers must apply for their old age pensions in the Member State where they live. The institution in the State of residence, generally the national pension service, is responsible for requesting pensions in the other Member States. For this reason it is also known as the managing body. In calculating the pension each Member State must take account of the insurance periods completed in the other Member States. The foreign pensions services must, as quickly as possible, send a summary of insurance periods to the managing body. The managing body must then ensure that the pension institution in each Member State is also informed of the overall insurance period position. These exchanges of information take place using form E205. It can take a considerable time to process pension applications. It is therefore of great importance that cross-border workers about to take their pension allow enough time (at least a year) when applying to the institution in their State of residence. Many Member States offer the chance to have a pension calculation carried out beforehand. It is advisable for cross-border workers to take up this opportunity and request such pension calculations (prognoses) in advance from each Member State in which they have previously been insured. c.6.4 Supplementary pensions The rules in the coordinating Regulation 1408/71 in respect of applying for and calculating statutory pensions do not apply not to supplementary (company) pensions. Cross-border workers must therefore apply for any supplementary pensions themselves. It is also of the greatest importance to keep any information about such pensions carefully, and to maintain regular contact with the pension insurers and/or pension fund in question. This will help to avoid gaps in cross-border pensions at a later date. 77

c.6.5 Tax and contributions due on foreign pensions A cross-border or frontier worker receiving a foreign invalidity or old age pension must pay tax on this pension in his State of residence. A number of double taxation treaties contain exceptions to this general rule. In these cases, pensions are taxed in the source country. This also applies to public service pensions. If under the applicable double taxation treaty statutory and/or supplementary pensions are taxable in the paying Member State, such pensions are tax-exempt in the Member State where the pensioner lives. The exclusivity principle applies to social security contributions. That means that the pensioned worker can only be subject to the legislation of a single Member State. If the cross-border employee has a pension from his State of residence as well as from a foreign country, he will be covered by social insurance in the State of residence. Whether or not the State of residence levies social security contributions from the foreign pension depends on the national legislation of the state of residence. d. Taxation The rules on taxation can be found in the applicable Bilateral treaty to prevent double taxation that the State in which the cross-border or frontier worker lives has concluded with his State of employment. The OECD model convention adopts the State of employment principle as the general rule (article. 15, paragraph 1 OECD) If the cross-border or frontier worker also carries out activities in the State of employment for an employer from this State, there is no exemption to this principle under the 183-day rule (Article 15, paragraph 2 OECD) and his income is taxed in the state of employment. For a number of cross-border employees the OECD model convention sets out specific rules. This applies inter alia to teachers, public employees, sea-going or flying personnel in the international transport sector etc. Although no provision is made in the OECD model convention, neighbouring States sometimes, but not always, decide to introduce special rules for frontier workers in their double taxation treaties. In this event frontier workers income is not taxed in the State of employment, but in the State of residence. Not every cross-border worker, however, is regarded as a frontier worker. Double taxation treaties often contain strict criteria, stricter than those applying to social security legislation (Article 1, paragraph b Reg. 1408/71). As well as regularly returning to his State of residence, the worker must also live and work within a well-defined border area. The double taxation treaty makes it clear what should be understood by the fiscal border area. It will also govern where an employee is taxed if he lives and works within the border area but also carries out activities outside the zone for his employer (e.g. when posted elsewhere). Such tax rules for frontier workers can be found in the double taxation treaties concluded between neighbouring States such as France-Spain (10 km border zone), Belgium-France (20 km border zone), Norway-Sweden (border areas in accordance with the Scandinavian double taxation treaty), Germany- Austria (30 km border zone), etc. 78

Where bilateral double taxation treaties have clauses applying to frontier workers, four scenarios may arise for cross-border workers: The employee lives and works within the border zone (1); The employee lives within the border zone but works outside it (2). The employee lives outside the border zone but works within it (3); The employee lives and works outside the border zone (4). Only in the first case is he classed as a frontier worker for tax purposes, and pays income taxes in his State of residence. In all other cases the State of work principle applies (with respect for the 183-day rule and fixed establishment rule), and he is taxed in the State of employment as a non-resident. Examples: 1. Under the French-Belgian treaty a resident of Lille (F) who works in Kortrijk (B) - both places situated within the fiscal border zone - is regarded as a frontier worker for the purposes of taxation and he is therefore subject to taxation in France (State of residence). 2. Under the French-Belgian treaty a resident of Lille (F) - within the fiscal border zone who works in Brussels (B) - situated outside the fiscal border zone - is not regarded as a frontier worker for the purposes of taxation and is accordingly subject to taxation in Belgium (State of employment). 3. Under the French-Belgian treaty a resident of Paris (F) outside the fiscal border zone - who works in Kortrijk (B) is not regarded as a frontier worker for the purposes of taxation because he lives outside the fiscal border zone and is therefore subject to taxation in Belgium (State of employment). 4. Under the French-Belgian treaty a resident of Paris (F) who works in Brussels (B) is not regarded as a frontier worker for the purposes of taxation because he lives and works outside the fiscal border zone and is therefore subject to taxation in Belgium (State of employment). If a cross-border worker is taxed as a non-resident in the State of employment, the question is whether the State of employment should give him the same tax advantages (tax free allowances, deductions for dependent partner and children, professional expenses etc) as those given to a national employee. The Court of Justice delivered a pertinent judgment in the Schumacker case (C-279/93). The State of employment must only do so if the cross-border worker has insufficient (residual) income in his State of residence. Schumacker Decision (C-279/93): Article 48 (old) of the Treaty must be interpreted as precluding the application of rules of a Member State under which a worker who is a national of, and resides in, another Member State and is employed in the first State is taxed more heavily than a worker who resides in the first State and performs the same work there when, as in the main action, the national of the second State obtains his income entirely or almost exclusively from the work performed in the first State and does not receive in the second State sufficient income to be subject to taxation there in a manner enabling his personal and family circumstances to be taken into account. For the coordination of social security (Reg. 1408/71) the State of work principle applies. There are no exceptions for cross-border and frontier workers. If at the same time a double taxation treaty with a frontier worker s clause is in force, a frontier worker may be faced with different rules for taxation 79

90 Article 13, paragraph 1 of Regulation 883/04 (State of residence in example 1) and the payment of social security contributions (State of employment). Depending on the geographical direction in which he works, this can work to his advantage or disadvantage. 11. Multinational workers a. General A multinational employee is an employee who conducts his professional activities in more than one Member States at any given time. Neither the country where the employer is based nor the country of residence of the employee necessarily have to be one of these countries of employment. It could thus be a resident of Switzerland who, working for a French international hotel chain, conducts quality inspections in the French and Swiss subsidiaries of the group. But it could also be a Swiss resident who, working for this French employer, carries out quality inspections in Germany, Austria and Liechtenstein. The European regulatory framework also guarantees the right of free movement for this group of employees and ensures that they do not lose their accumulated social rights. In the event of multinational employment this is a case of the connections between the applicable social security legislation, income taxation and employment legislation. Different guidelines apply to each of these areas of the law. The guidelines for statutory social security are set out in coordinating Regulation 1408/71 (article 14, paragraph 2) 90, there is no free choice. Those concerning income taxes can be found in the bilateral double taxation treaties which the country of residence of the employee has concluded with each of his countries of employment (article 15 paragraphs 1, 2 and 3 of the OECD model convention). Here again there is no mention of a right of choice. The only area in which there is any choice is the employment legislation declared applicable, although this is also restricted by a number of international and national legal principles and decisions (Convention on contractual obligations & national legislation, inter alia transpositions of the Directive regarding the posting of workers 96/71/EC). These guidelines are explained below. It is a somewhat complex issue. Therefore this will once again be applied to four concrete examples which, because of their frequent occurrence, can also be considered as standard cases. In a fair number of cases a multinational employee will not be covered by social insurance in his country of residence. He then falls into a similar position as the cross-border employee : i.e. covered by social insurance in one Member State and resident in another Member State. Regulation 1408/71 thus guarantees the multinational employee the same guarantees of social security benefits and services as the cross-border employee. How these cross-border rights concerning sickness, maternity, unemployment, child and invalidity benefits and old age pensions are coordinated, was described item by item in Chapter 11 Cross-border workers (section c). 80

b. Social security b.1 General principles Regulation 1408/71 determines exclusivity concerning the applicable social security legislation (article 13, paragraph 1 of Reg. 1408/71) 91. While multinational employees only exercise activities in employment, the Regulation makes no exceptions for them on this exclusivity principle (for the exception see b.4). Thus a multinational employee can only be subject to one country s social security legislation (even if he has multiple labour contracts with different employers from different Member States). The regulation operates the State of work principle (article. 13(2) paragraph a) as guidelines. The fact of two or more countries of employment however undermines this approach. Therefore specific guidelines have been drawn up for multinational employees. These make a distinction between employees in the international transport sector (article 14 (2) a) and other multinational employees (article 14 (2) b) 92. b.2 Transport workers Article 14, paragraph 2 a) Reg 1408/71: For those who are required to conduct their work in the territory of two or more Member States, the applicable legislation is determined as follows: a. A person who is a member of the travelling or flying personnel of an undertaking which, for hire or reward or on its own account, operates international transport services for passengers or goods by rail, road, air or inland waterway and has its registered office or place of business in the territory of a Member State shall be subject to the legislation of the latter State. Nonetheless: i. where the said undertaking has a branch or permanent representation in the territory of a Member State other than that in which it has its registered office or place of business, a person employed by such branch or permanent representation shall be subject to the legislation of the Member State in whose territory such branch or permanent representation is situated; ii. where a person is employed principally in the territory of the Member State in which he resides, he shall be subject to the legislation of that State, even if the undertaking which employs him has no registered office or place of business or branch or permanent representation in that territory. In principle a transport employee is covered by social insurance in the Member State in which the subsidiary of the employer who has taken him on is established. There is one exception to this employer s country principle: if the employee is primarily active on the territory of his own State of residence, than the social security of his country of residence is considered to apply. Examples: A resident of Poland who works for a Czech international freight company drives to all destinations will be covered by social insurance are in the employer s country, the Czech Republic (article 14, paragraph 2 sub a Reg. 1408/71). A pilot resident in the Netherlands works for a Dutch airline. However he has an employment contract with the Belgian subsidiary of this company. The pilot will be subject to Belgian social security legislation (article. 14, paragraph 2 sub a i Reg. 1408/71) A resident of Germany, who works for a Danish transport company, solely covering the route Copenhagen-Munich, must be covered by social insurance in his country of residence. He is still primarily operating on German territory (article 14, paragraph 2 sub a ii Reg. 1408/71). 91 Article 11, paragraph 1 of Regulation 883/04 92 Regulation 883/04 does not make a distinction between transport workers and other multinational employees. In the new Regulation 883/04, the following applies to all multinational employees (Article 13, paragraph 1 of Regulation 883/04): Article 13. Pursuit of activities in two or more Member States 1. A person who normally pursues an activity as an employed person in two or more Member States shall be subject to: (a) the legislation of the Member State of residence if he pursues a substantial part of his activity in that Member State or if he is employed by various undertakings or various employers whose registered office or place of business is in different Member States, or (b) the legislation of the Member State in which the registered office or place of business of the undertaking or employer employing him is situated, if he does not pursue a substantial part of his activities in the Member State of residence. In Article 14, paragraph 2 of the implementing regulation that is being prepared - COM(2006) 16 final - defines a proportion of activities as substantial if it represents more than 25% of all the activities pursued by the worker in terms of turnover, working time or remuneration or income from work. 81

Problems of interpretation can arise in the application of article 14, paragraph 2 a) ii of Reg. 1408/71. Reg. 1408/71 gives no concrete definition for the concept primarily. The Member States have thus the freedom to interpret it as they wish. This leads to situations where national administrations apply conflicting criteria. The Belgian administration thus follows the rule at least 51% of the effective working time, while the Dutch administration uses the rule at least 70%. This causes problems whenever a Belgian driver employed by a Dutch transport company carries out an average of 60% of his working time on Belgian territory. To avoid and/or remedy this kind of disputed responsibility use is often made of the last expedient: article 17 of Reg. 1408/71. The problem is then resolved in the interests of the employee in question via administrative discussion between the competent bodies of the two Member States. Article 17 of Reg. 1408/71 : Two or more Member States, the competent authorities of these States or the bodies designated by these authorities may by common agreement provide for exceptions to the provisions of Articles 13 to 16 in the interest of certain categories of persons or of certain persons. Formalities to be completed for transport employees: Someone who carries out work on the territory of Member States other than that in which he is covered by social insurance, must be able to demonstrate his insurance status to the local social insurance inspectorate on request. For truck drivers, until recently a ruling was applied that has been put in question for legal reasons: he had always to carry an E110 form (Declaration for international transport workers). This document was filled out and distributed by the employer. It provided evidence of social insurance and at the same time gave the goods driver (and his accompanying family members) the right to health care on the territory of the Member State where he happened to be at that time. In 2002 the Administrative Commission (AC) took the decision (AC decision no 186) to use form E101 (Declaration concerning the applicable legislation) for international drivers, as for posted workers. The E101 declaration is issued by the social security institution in the competent Member State. Since the ruling has not yet been incorporated into the implementing regulation Reg. 574/72 a number of Member States still require form E110. To ensure his right (and that of his accompanying family members) to health care in other Member States it is now recommended that he should apply for a European Health Insurance Card (an EHIC) h from the health insurance institution in the competent Member State. b.3 Other multinational workers Article 14, paragraph 2 b) Reg. 1408/71: For those who are required to conduct their work in the territory of two or more Member States, the applicable legislation is determined as follows: a. <transport regulation, see b.2> b. A person other than that referred to in (a) shall be subject: i. to the legislation of the Member State in whose territory he resides, if he pursues his activity partly in that territory or if he is attached to several undertakings or several employers who have their registered offices or places of business in the territory of different Member States; ii. to the legislation of the Member State in whose territory is situated the registered office or place of business of the undertaking or individual employing him, if he does not reside in the territory of any of the Member States where he is pursuing his activity. 82

If the State of residence of the worker is also one of his States of employment, he will be socially insured in his country of residence (Article 14, paragraph 2 b) i) of Reg. 1408/71). However, if the State of residence is not one of his States of employment, and if he has just one employer (or several employers from a single Member State), he will be subject to the social security legislation of State where the employer has his registered offices (Article 14, paragraph 2 b) ii Reg. 1408/71). If the worker s State of residence is not his State of employment, but he has several employers from different Member States, he will be subject to social security legislation in his State of residence (Article 14, paragraph 2 b) i Reg. 1408/71). Examples: A worker who lives in Switzerland and works in Switzerland, France and Italy, is subject to the social security legislation of Switzerland, the country where he works, regardless of which Member State his employer is based in (this does not mean the State of employment principle is over-ruled, but rather that the State of residence, as one of the places of employment, takes precedence) 93. A worker who lives in Switzerland and works half time in Germany for an employer from Germany and half time in Liechtenstein for an employer from Liechtenstein is subject to social security legislation in Switzerland, the State where he lives (State of work principle gives way to State of residence principle) 94. A worker who lives in Switzerland and works simultaneously in France and Italy for an employer established in France is socially insured in France, the Member State where his employer is established 95. A worker who lives in Switzerland and works simultaneously in Germany, Austria and Liechtenstein for an employer established in France, is similarly covered by social insurance in France, the Member State where his employer is established (State of work principle gives way to State of registration principle) 96. 93 In the new Regulation 883/04, this only applies if a substantial proportion of work is done in Switzerland. If this is not the case, the State where the employer has his registered offices applies. 94 This also applies in Regulation 883/04 95 This also applies in Regulation 883/04 96 This also applies in Regulation 883/04 97 A very significant change in the new Regulation 883/04 is that it is no longer possible for a person to be subject (in split fashion) to the legislation of two Member States. The legislation of the Member State where a person is in paid employment takes precedence over the legislation of a Member State where this person has self-employed status. Formalities to be completed for other workers: Someone who carries out work on the territory of Member States other than that in which he is covered by social insurance, must be able to demonstrate his insurance status to the local social insurance inspectorate on request. In principle this means that the multinational worker must be in possession of a form E101 (Declaration of the legislation applicable). The E101 declaration is issued by the social security institution in the competent Member State. To ensure his right (and that of his accompanying family members) to health care in other Member States it is recommended that he should apply for a European Health Insurance Card (an EHIC) from the health insurance institution in the competent Member State. b.4 Workers with self-employed (secondary) activities Here there may be an exception to the exclusivity principle (Article 14 c, paragraph 1, b) Reg. 1408/71) 97. This, however, only applies to residents of Belgium, Spain, Denmark, Greece, Italy and France (Annex VII Reg. 1408/71). If they are in paid employment and simultaneously combine this with self-employed (secondary) activities, they are subject to social security legislation as both employed and self-employed persons. Article 14, paragraph 2 of Reg. 1408/71 applies to them as em- 83

ployed persons, while the guidelines of Article 14 a, paragraph 2 of Reg. 1408/71 (rules applicable to persons who are self-employed) apply to the self-employment. In the case of multinational work this can therefore lead to split subjection in two different Member States. In all other cases, the exclusivity principle applies. In determining which rules apply, paid employment takes precedence over self-employment (Article 14 c, paragraph 1, a) Reg. 1408/71). c. Taxation c.1 Principes généraux The rules on taxation can be found in the applicable Bilateral treaty to prevent double taxation that the State in which the worker lives has concluded with his State of employment. These rules determine which Member State is entitled to tax the worker s income. In this way, the double taxation of the same income is avoided. It is essential for multinational workers to have a good grasp of what insiders call the 183-day rule. Most double taxation treaties follow the OECD model convention. There are successive versions of the OECD model convention on which the bilateral treaties may be based. The OECD-model convention states that the taxation of income from work (wages) in first instance is allotted to the State of residence. However the State of employment will tax wages earned for work carried out on its territory (the State of employment principle). The State of residence nevertheless retains its right to levy taxes on this income if the following conditions are satisfied: a) the worker is not present in the state of employment for more than 183 days per calendar year (previous OECD model convention) or a period of 12 consecutive months (new OECD model convention), and b) wages are paid by or on behalf of an employer who does not live in the State of employment, and c) the wages are not paid on behalf of a fixed establishment or representation which the employer has in the State of employment. If any one of these three conditions is not satisfied, the worker s income will be taxed in the State of employment with retrospective effect and thus from the first day of his presence. For transport workers in the shipping and air transport sectors Article 15, paragraph 3 of the OECD model convention makes an exception to the above principles. c.2 Transport workers For sea-going or flying personnel Article 15, paragraph 3 of the OECD model convention establishes an exclusivity principle. They are taxed in one treaty state, the place where the employer has his registered offices. For employees in international road transport fiscal coordination is less unambiguous. Exclusivity is generally not guaranteed. In most double taxation treaties lorry drivers are subject to the same rules (State of employment conditional on the 183 day rule) as other employees (see c.3). 84

There are, however, double taxation treaties - e.g. the Franco-Belgian treaty (Article 11, paragraph 2 b) - which extend the rules for sea-going and flying personal to road and rail transport workers in a certain sense. This state of registration principle can however only be applied to income for days worked on the territory of the two treaty States themselves. For days worked in other, third Member States the double taxation treaty between the State of residence and the Member State in question comes into force. Depending on the rules applicable, either the State of residence or the third State of employment will retain or acquire the power of taxation. Under Article 18 of the Franco-Belgian treaty, France acquires no powers to tax this part of the income of a Belgian goods driver in French employment. Here again, there is no guarantee of exclusive taxation. Examples: There is no State of registration principle, such as that applying to the shipping and air transport sectors, for a resident of the Netherlands who works for a Luxembourg-based international transport company driving to all European destinations. As a result he is subject to the State of work principle, conditional upon the 183-day rule. This means that for the days he works in Luxembourg, he will also be taxed there (salary-splitting). If he works for fewer than 183 days in the other Member States, he will be taxed for those days in the State of residence (the Netherlands). A restricted State of registration principle applies to a resident of Belgium who works for Frenchbased international transport company driving to all European destinations (Article 11, paragraph 2, b) of the Franco-Belgian double taxation treaty). Income earned on those days when he is working on Belgian or French territory is naturally taxed in France (employer s place of registration). However, for the days when he worked in another Member State, the double taxation treaty between these State and his State of residence, Belgium, must be consulted. If he has worked there for fewer than 183 days Belgium retains the power to tax that part of the income. Otherwise, that part of the income is taxed in the other Member State. c.3 Other multinational workers For other employees the State of employment principle applies (Article 15 paragraph 1 OECD model convention), conditional upon the 183-day rule (Article 15 paragraph 2 OECD model convention). But this by no means implies an exclusivity principle. The multinational worker may find himself in a situation where he is taxed by two or more Member States (salary-splitting for taxation purposes). The bilateral double taxation treaties guarantee only that the same income or parts thereof will not be liable to tax in two or more Member States. c.4 Taxation in the State of residence If a part of the income of (the family of) the multinational worker is taxable in the State of residence, this State will tax the income progressively (i.e. taking into account the real income position). The State of residence first calculates theoretical tax based on all income earned domestically or abroad ( global income ). As a resident, the worker is entitled to the customary deductions, tax-free sums, family tax allowances etc. Only after calculating the tax theoretically due does the State of residence exempt the earned income already taxed in other Member States (see Chapter 4 paragraph g.) c.5 Taxation in other State(s) of employment than the State of residence If a part of the multinational worker s income is taxable in Member State other than his State of residence, such Member State may only tax the income earned there, and at the rate applying to non-residents. However, when the greater part of his income is earned in this Member State, the worker is en- 85

titled to the same tax advantages - such as professional expenses tax free allowances, deductions for dependent children, etc. - as national workers. In this event it is possible that in these Member State will also apply progressive taxation, i.e. taking account of the worker s global income (see c.4.) c.6 The trade union view The tax situation of multinational workers threatens to be quite obscure from time to time. Even in a purely inter-european employment structure, they are faced with a jungle of articles from different double taxation treaties. When we realise that, within a highly Europeanised business environment, more and more workers are ending up in this situation, it becomes inexplicable that the Member States are unwilling to forego their fiscal sovereignty and give the European Union the right to take the initiative in simplifying matters - at the very least in terms of coordination. As has actually happened in the case of social security legislation (Reg. 1408/71). Salary splitting also threatens to give rise to disparities between social security and tax liabilities. This can have both financial advantages and disadvantages for the worker concerned. An unequivocal and single principle for subjection to both social security and income tax regimes would remove risks of this kind. d. Employment legislation In principle a free choice applies to the employment legislation applicable. This choice must be explicit. Otherwise, the choice must be sufficiently clear from the provisions of the employment contract or from the circumstances of the situation (Article 3 of the Convention on Contractual Obligations). The preference must be expressed in an explicit clause relating to choice of jurisdiction in the employment contract. However, this choice of jurisdiction is restricted by Article 6, paragraph 1 of the Convention on Contractual Obligations. It may not cause the employee to lose the protection of the objectively applicable law, i.e. the law that would be applicable if no choice of jurisdiction were made. In practice this means that the workers can always invoke the protective provisions of the objectively applicable law. The objectively applicable law is defined as follows by article 6, paragraph 2 of the Convention on Contractual Obligations: a) by the law of the country in which the employee habitually carries out his work in performance of the contract, even if he is temporarily employed in another country or b) if the employee does not habitually carry out his work in any one country, by the law of the country in which the place of business through which he was engaged is situated; unless it appears from the circumstances as a whole that the contract is more closely connected with another country, in which case the contract shall be governed by the law of that country. This provision applies to both a) and b). Further, the mandatory rules of the Member State with which the activities have a close connection can override the legislation applicable. These rules take precedence. 86

Article 7, paragraph 1, Convention on Contractual Obligations Mandatory rules When applying under this Convention the law of a country, effect may be given to the mandatory rules of the law of another country with which the situation has a close connection, if and in so far as, under the law of the latter country, those rules must be applied whatever the law applicable to the contract. In considering whether to give effect to these mandatory rules, regard shall be had to their nature and purpose and to the consequences of their application or non-application. 98 According to Regulation 883/04, the worker will be covered by insurance in his State of residence (Germany) if he spends more than approximately 25% of his working time driving/working in that State of residence. Every Member State has the judicial freedom and sovereignty to raise elements of its employment law to the status of mandatory rules. This occurs when it is judged that failure to observe these rules endangers public order within the Member State. It also prevents social dumping. In cases of multinational employment it is therefore important to consult the trade union in the State of employment to establish which statutory and customary working conditions (collective agreements) are mandatory rules on their territory. The posting Directive (96/71/EC) has meanwhile ensured that, in each Member State, the statutory and customary provisions (collective agreements) concerning the minimum wage, minimum holidays, equal pay for women and men etc. in the construction and related sectors are mandatory rules (see also Chapter 9, point c.2). In practice it rather seldom comes about that no explicit choice of jurisdiction is made in cases of multinational employment. The choice will be determined by a number of factors. Linking up with the social security legislation applicable can be one argument. And often there are additional benefits for sickness, incapacity for work and old age agreed in employment contracts and collective agreements. e. Examples e.1 International driver Employer is established in Employee lives in Employee works simultaneously in: Denmark Germany All EEA Member States e.1.1 Social security These goods lorry drivers will be covered by social insurance in the employer s country, Denmark (Article 14, paragraph 2 a) i Reg. 1408/71) 98. In confirmation of the applicable legislation the worker receives an E101 declaration issued by the competent institution of the Member State to whose social security system he is subject. i.e. Denmark. Form E101 can in principle apply for an indeterminate time, but must be periodically extended. e.1.2 Taxation Income earned on the days that he worked in Denmark will be taxed in Denmark (salary-splitting). Working days outside Denmark, if he worked for fewer than 183 days in the other Member States, are subject to tax in Germany. In determining the amount of income tax due, the State of residence (Germany) will exempt the part of the income taxed in Denmark. The exemption with progression following the proportional method is applied. That means that the income is taxed progressively in Germany. 87

99 According to Article 13, paragraph 1 of Regulation 883/04: Germany if a substantial proportion of the driving/work is in Germany. 100 According to Regulation 883/04, the worker will be covered by social security in the Netherlands (the State where the employer has his registered offices) if he spends less than approximately 25% of his working time in his State of residence (Belgium). e.1.3 Employment law A German goods lorry driver, working for a Danish international goods transport business driving to destinations in different Member States, will logically opt for the employment law of the employer s State. In this way a symbiosis with the applicable social security law is achieved. The main proportion of taxation will be in Germany (salary-splitting). International Driver Member State Employer is established in Denmark Employee lives in Germany Employee works in All EEA Member States Covered by social insurance in Denmark 99 Taxable in Denmark and Germany Choice of employment legislation Denmark e.2 Multinational construction worker Employer is established in Employee lives in Employee works simultaneously in The Netherlands Belgium Belgium and the Netherlands e.2.1 Social security This worker, who works in both Member States from the start of his employment, is subject to social security legislation in Belgium, the State where he lives and also partly works, under Article 14 paragraph 2 b) i) of Reg. 1408/71 100. The Dutch employer will have to deduct Belgian social security contributions on the whole salary in Belgium. In confirmation of the applicable legislation the worker receives an E101 declaration issued by the competent institution of the Member State to whose social security system he is subject. i.e. Belgium. Form E101 can in principle apply for an indeterminate time, but must be periodically extended. e.2.2 Taxation To establish where the worker is taxed, the Dutch-Belgian double taxation treaty must be consulted. Since 2003, rules for frontier worker have no longer been included in this treaty. This means that the income from work carried out on Belgian territory is subject to Belgian income taxes. The income from work carried out on Dutch territory (Dutch wages) - where the employer is established - is subject to the Dutch taxation (Article 15, paragraph 1 of the Dutch-Belgian double taxation treaty). The construction worker s income is therefore split for tax purposes (salary-splitting). His pay is divided into a part taxed in Belgium and a part taxed in the Netherlands, in proportion to the number of days he has worked on Dutch or Belgian territory respectively. e.2.3 Employment law The construction worker - resident in Belgium - who works for a Dutch construction company and works on construction sites in both the Netherlands and Belgium can conclude an employment contract under either Dutch or Belgian law. If Dutch employment law tribunal and the Dutch collective agreement are chosen, Belgian mandatory rules and collectives agreements will apply to work activities carried out 88

in Belgium where these are more advantageous than the Dutch employment law and working conditions. As well as the Convention on Contractual Obligations (Articles 3, 6 and 7) the Directive on posting (96/71/EC) will apply as implemented in Belgium. Belgian employment law and working conditions could equally be chosen. If Belgian employment law is are chosen, Dutch employment law and working conditions (the collective agreement for the construction sector) will apply to work activities carried out in the Netherlands where these are more advantageous than the Belgian conditions. 101 According to Article 13, paragraph 1 of Regulation 883/04: Belgium if a substantial proportion of the work is in Belgium; if this is not the case, the Netherlands. 3.2.4 Synthèse To ensure the maximum coherence between taxation, social security and employment law and working conditions, the obvious first choice would be Belgian employment law and Belgian working conditions (collective agreement): this multinational worker is in any case compulsorily subject to the Belgian social security and his income is also partly taxed in Belgium. Multinational construction worker: Employer is established in (1) Employee lives in Employee structurally employed (2) in Member State the Netherlands Belgium the Netherlands and Belgium Covered by social insurance in Belgium 101 Taxable in the Netherlands and Belgium (salary-splitting) Choice of employment legislation Belgian law (Construction collective agreement) plus if more favourable - additional applicable Dutch labour labour law (plus Construction collective agreement) for work executed on Dutch territory Remarks : (1). This standard example mentions a sole employer. It might however be that a Belgian construction worker works in the Netherlands for a Dutch employer and additionally half a day per week in Belgium for a Belgian employer (secondary job). Here again the Dutch employer will have to provide Belgian social insurance for his Belgian employee (article 14, para 2 b) i) Reg. 1408/71). Salary splitting applies for taxation. There are two sorts of labour law and working conditions applicable. The E101 must be requested from the competent country (the Belgian social security service). Using an article 17 declaration (Reg. 1408/71) the employee can also be covered by social insurance in the Netherlands. In that event the Belgian employer will have to pay the Dutch social contributions on the part-time job in Belgium. (2). The situation is substantially different when the Dutch employer employs the employee (construction worker) in the Netherlands and only sends him to work in Belgium on one occasion. This can be treated as a posting (see chapter 9). In that event an E101 declaration for the duration of the posting must be requested from the competent institution of the country from which he has been posted (the Dutch Social Insurance Bank). On the basis of article 14, paragraph 1 a) of Reg. 1408/71 the employee can continue to be covered by social insurance in the Member State from which he has been posted (the Netherlands) and where he was also covered by social insurance before his posting. For consistency it makes sense to elect for the Dutch labour law concerning Dutch working conditions (Construction collective agreement). However, during the period of posting in Belgium the compulsory aspects of Belgian labour law apply along with the Directive regarding the posting of workers 96/71/EC. Taxes must also be paid on the income earned in Belgium from the first working day in Belgium (salary-splitting). 89

102 According to Regulation 883/04, the commercial representative is only covered by social security in Belgium if he works for more than 25% of his working time in Belgium, his State of residence. If this is not the case, he must be covered by social security in France. 103 According to Article 13, paragraph 1 of Regulation 883/04: Belgium if a substantial proportion of the work is in Belgium, the State of residence; if this is not the case, France. e.3 Multinational commercial representative in paid employment Employer is established in Employee lives in Employee works simultaneously in: France Belgium Belgium, Luxembourg and the Netherlands e.3.1 Social security Under Article 14, paragraph 2 b i) of Reg. 1408/71 this commercial representative is subject to the social security legislation of the Member State where he lives and works i.e. Belgium 102. The French employer will have to deduct Belgian social security contributions on the whole salary. In confirmation of the applicable legislation the worker receives an E101 declaration issued by the competent institution of the Member State to whose social security system he is subject. i.e. Belgium. Form E101 can in principle apply for an indeterminate time, but must be periodically extended. e.3.2 Taxation To determine the state of taxation, the double taxation treaties between the State of residence, Belgium and France, the Netherlands, and Luxembourg respectively will have to be consulted. Since no work is carried out in France, France has no powers of taxation. In the double taxation treaties between Belgium and the Netherlands and Luxembourg respectively, the 183-day-rule applies. If there are fewer than 183 physical presence days in the Netherlands and Luxembourg respectively, and the French employer has no fixed establishment in the Netherlands or Luxembourg, all powers of taxation are allocated to the State of residence, Belgium. e.3.3 Employment law The choice will focus on French or Belgian employment law. In the absence of an explicit choice of jurisdiction the law of the employer s State will apply (article 6, paragraph 2, b) Convention on Contractual Obligations). Nevertheless, in this example it is better to opt for Belgian employment law and working conditions. The commercial representative mainly works in Belgium (State of residence) where he has his office, is covered by social insurance and is liable to taxation. In any case, Belgian mandatory employment rules automatically apply even if he opts for French employment law. Within Belgian employment law, the status of the commercial representative and the termination of the employment contract are elements considered as mandatory rules, like those of all collective agreements that are declared generally binding. Nor does the choice of Belgian employment law cause the worker to lose the protection of French law (article 6, paragraph 1, Convention on Contractual Obligations). Choosing Belgian law provides the multinational worker (commercial representative in paid employment) with a logically consistent and convenient situation. Représentant de commerce multinational Employer is established in Employee lives in Employee works in Member State France (no fixed establishment in other countries) Belgium Belgium, Luxembourg and the Netherlands Covered by social insurance in Belgium 103 Taxable in Belgium Choice of employment legislation Belgium 90

e.4 Multinational mechanic Employer is established in Employee lives in Employee works in France Belgium Germany (2/3) and the Netherlands (1/3) e.4.1 Social security 104 This system is also applied in Regulation 883/04 (Article 13, paragraph 1 b). This multinational worker (mechanic) is subject to social security legislation in the employer s State, France, under the rules set out in Reg. 1408/71 (Article 14, paragraph 2 b) ii)) 104. In confirmation of the legislation applicable the worker receives an E101 declaration issued by the competent institution of the Member State to whose social security system he is subject. i.e. France. Form E101 can in principle apply for an indeterminate time, but must be periodically extended. e.4.2 Taxation To establish where this multinational employee (mechanic) is taxed, all the double taxation treaties which the State of residence (Belgium) has concluded with both the States of employment (Belgian- Dutch and Belgian-German double taxation treaties) must be consulted. Since fewer than 183 days are worked in the Netherlands, Belgium (the State of residence) is entitled to tax the income for the 1/3 of the work that is carried out on Dutch territory. Since he works for more than 183 days in Germany, German taxes apply to the income from the 2/3 of his work that is carried out on German territory. In this situation it is assumed that the employer has no fixed establishment in Germany or the Netherlands. This worker thus falls into a salary splitting situation. Although his wages are paid from France, 1/3 is subject to income tax for residents of Belgium and 2/3 are subject to the German non-residents system. The State of residence (Belgium) will theoretically tax the global income, i.e. the income earned in Germany and the Netherlands, and then exempt ( exemption with progression following the proportional method ) the income taxed in Germany. In Germany the multinational employee whose total (family) income is mainly earned in Germany is treated as having unlimited tax liability. This means that he will be entitled to the usual tax advantages (tax rebates, tax-free sums, family deductions etc.). e.4.3 Employment law This multinational worker (mechanic) has social insurance in France and is liable for taxation in Belgium and Germany. The obvious thing is to opt for French employment law, since this would ensure coordination between French social security law and French employment law and working conditions. The employer is also established in France. Another possibility is German employment law and working conditions. A argument for German employment law is that the German mandatory rules are applicable, that 2/3 of the employment takes place in Germany and a major proportion of the income tax is also due there. The only argument in favour of Dutch employment law is the fact that 1/3 of the employment takes place there. The argument in favour of Belgian employment law is the fact that the employee lives in Belgium and must pay personal taxes on 1/3 of his income. The choice is not straightforward. In some Member States statutory social security is supplemented by collective or individual agreements. In this event it is sensible to opt for French employment law and French working conditions. If French employment law is chosen, this does not exclude the possibility of opting for German employment law for given elements (notice periods, competition conditions etc.). 91

Maintenance mechanic Competent Member State Employer is established in France Employee lives in Belgium Employee works in Germany (2/3) and the Netherlands (1/3) Covered by social insurance in France Taxable in Belgium (1/3) and Germany (2/3) Choice of employment legislation: France (2nd choice Germany) 12. Migrant workers a. General By a migrant worker we mean a worker who has lived and worked in more than one Member State. An example of this is the Irish nurse who, using the employment services of the EURES network, is recruited by a hospital in Denmark and consequently moves to that country. European legislation guarantees her free access to the Danish labour market and also ensures that she does not thereby lose the social rights she previously acquired in Ireland. b. Working regulations and right to stay Articles 1 to 6 of Reg. 1612/68 guarantee the free movement of EEA nationals in the single labour market (see Chapter 2) She can therefore automatically work without a work permit in all other Member States. Non-EEA nationals, third country nationals, do not enjoy this freedom of movement. If an EEA national migrates to another Member State with his family, the family members can also work in the other Member State under the same conditions as the worker himself (Article 23 of the Residence Directive 2004/38/EC) - this is regardless of their nationality, so this also applies to third country nationals. If the migrant worker is employed in a Member State he can automatically claim the same tax and social advantages as national employees (Article 7, paragraph 2 of Reg. 1612/68). If a national employee from a specific national sector, for example, is promoted to a higher salary scale by reason of long service, the years of service which the migrant worker has completed in a comparable sector in another Member State must be recognised and taken into account (Schöning-Kougebetopoulou Decision, C-15/96) If an EEA citizen works in a Member State, he also has the right of residence there. This is all governed by Directive 2004/38/EC, which has been transposed into national legislation. Provided that the person concerned maintains employee status (or equivalent status according to Article 7, paragraph 3 of Directive 2004/38/EC), he is assured of the right of residence in the host Member State. Once he has resided for 5 years continuously in this Member State, he will acquire the right of permanent residence there. He can only lose that right of permanent residence if he is away from the host Member State for more than two consecutive years. 92

Example : The Irish nurse and her family members - even if one of them is not an EEA citizen - thus do not need work permits to work in Denmark. In terms of labour conditions, she must be treated the same as a nurse with Danish nationality. If seniority conditions exist for nurses in the Danish health care sector, account must be taken of her years of service in Ireland when determining her right to these advantages. If she obtains an employment contract for an indeterminate period, she also has the right to remain in Denmark for an initial period of five years, and, if her employment continues, on a permanent basis. Chapter 2 (Free movement of employees) and Chapter 6 (Right of residence) of this Guide provide further details on this subject. 105 Article 11, paragraph 1 a of Regulation 883/04 106 All these provisions have been brought together and incorporated in a general article (Article 6) in the new Regulation 883/04. c. Social security c.1 Applicable social security law Anyone working in a Member State is also subject to social security (lex loci laboris in accordance with Article 13, paragraph 2 of Regulation 1408) 105. The legislation of the Member State in question may place no nationality or residence conditions on EEA citizens for the purposes of entry to the social security system. Migration from one social security system to another can nevertheless cause problems. In many Member States the right to a social security benefits is dependent on the claimant having paid social security contributions for a given period (standard period or waiting time). Standard conditions are also often applied to the duration and/or rate at which benefits and pensions are paid. Many migrant workers were already covered by social insurance in the Member State of origin. They have consequently acquired benefit rights there. If the social security of the new State of employment imposes waiting times or standard conditions, the transfer to the new system is likely to interrupt the worker s social security insurance. European legislation regards this as an obstruction to the free movement of employees. The coordinating Regulation 1408/71 therefore sets out special coordinating rules for each branch of social security 106. These should neutralise, as far as possible, the danger of interrupted social insurance in the event of migration. The coordinating rules are based on a principle established under Article 42 of the EC Treaty which requires Member States to take account of all insurance periods completed by EEA nationals, including those completed in another Member State, in determining entitlement to benefit and/or calculating its rate and duration. The exchange of information between the Member States regarding social insurance periods takes place by means of E-forms. c.2 Sickness and maternity In principle the migrant worker can claim benefits under the statutory sickness insurance in his new State of residence and employment. In a number of Member States waiting periods are applied to sickness insurance (the right to continued wages payments during sickness and/or health care costs). This is the case in Belgium, Denmark, Finland, France, Ireland, Norway, Austria, etc. To avoid an interruption in the migrant worker s sickness cover, Reg. 1408/71 has established the following provisions: 93

107 Article 6 of Regulation 883/04 108 This also applies to Regulation 883/04, in which the aggregation provision for the payment of unemployment benefits is regulated by Article 61. Article 18, paragraph 1 Reg. 1408/71: Aggregation of insurance, work or residence periods The competent institution of a Member State whose legislation makes the acquisition, retention or recovery of the right to benefits conditional upon the completion of insurance periods shall, to the extent necessary, take account of insurance periods completed under the legislation of any other Member State as if they were periods completed under its own legislation 107. This article protects migrant workers from interruptions in their right to continued wages payments during sickness, sickness benefit and/or health care costs. However, this only applies if he was previously covered against sickness (and health care costs) by statutory social insurance in another Member State. He must also be able to demonstrate this to the health insurance service (e.g. the national health service) in his new State of residence and employment) using form E104 (Statement of periods of insurance, employment and residence). It is therefore important that the migrant worker requests this form E104 from the medical insurance service of the Member State where he was previously insured before he leaves. Example : A nurse lives and works in Ireland. She then goes to live and work in Denmark. Suppose that she becomes ill after three weeks. In Denmark, an employee is entitled from the first day of incapacity to sickness benefit - paid by the employer - if during the eight weeks preceding the first day of incapacity he has worked for at least 74 hours in Denmark. If the incapacity lasts longer than two weeks, or if at the start of incapacity the worker is not entitled to sickness payments from the employer, then the local authority pays the benefit, on the condition that the employee was in paid employment during the thirteen weeks before he became incapacitated, and has worked for at least 120 hours during this period. If the Irish nurse can supply form E104 - to be requested from the Irish Social Welfare Office - to demonstrate that before her employment she has been insured against sickness for more than 8 weeks, and more than 13 weeks in Ireland, these insurance periods completed in Ireland are treated as comparable and aggregated with the Danish social insurance periods. In this way the Irish nurse can establish her right to Danish sickness benefit. c.3 Unemployment All Member States have their own unemployment rules. Generally the right to unemployment benefit, and the length of time for which it is paid, are dependent on a minimum number of hours, days, months or years that a employee has worked in a given period in this Member State. If the migrant worker becomes unemployed soon after his arrival, there may once again be an interruption in his insurance. Here again the European coordinating Regulation 1408/71 has established preventative measures. Art 67 Reg. 1408/71 : The competent institution of a Member State whose legislation makes the acquisition, retention or recovery of the right to benefits subject to the completion of insurance periods shall take into account, to the extent necessary, periods of insurance or employment completed under the legislation of any other Member States, as though they were periods completed under the legislation with it administers, provided, however, that the periods of employment would have been counted as insurance periods had they been completed under that legislation. 108 This article protects migrant workers from interruptions in their right to unemployment benefit. To demonstrate that he was previously covered by social insurance as an employed person in another Member State the migrant worker needs form E301. Form E301 is a declaration on the periods to be 94

taken into account for granting unemployment benefit. This form must be delivered, on application for unemployment benefit, to the unemployment benefit service of the new State of residence. It is advisable for the migrant worker to obtain this form E301 from the unemployment institution in the Member State where he was formerly insured before moving to the new Member State. Most Member States also give income-related unemployment benefits. If the migrant employee worked for longer than 4 weeks in his new State of residence, only the wages he has earned there are taken into account. If, however, he has worked for less than 4 weeks the amount of unemployment benefit will be fixed on the basis of notional wages 109. This notional figure is determined in turn on the basis of the wages habitually paid in the new State of residence for the occupation that the migrant worker formerly pursued in his previous State of residence (Article 68, Reg. 1408/71). Form E301 therefore also contains information on the occupation of the cross-border worker, how much he was paid and the reason for the termination of his contract. 109 The period of 4 weeks has been removed in Article 62 of Regulation 883/04. 110 Article 64 of Regulation 883/04 Example : Suppose that the Irish nurse previously worked for 5 years in Ireland. After 6 months work in Denmark she is dismissed due to restructuring. In Denmark an unemployed worker is entitled to income-related unemployment benefit if he has been in paid employment and paying his insurance contributions for at least 52 weeks in the previous 3 years. If the Irish employee can demonstrate, using form E301, that before her Danish job she worked for 5 years in Ireland, the Irish insurance period must be taken into account and aggregated with the Danish insurance period by the unemployment service. Form E301 is issued by the Social Welfare Office. In calculating the amount of the unemployment benefit, account is only taken of earnings in Denmark. If the unemployed migrant worker wants to return to his previous State of residence or go to another Member State to seek work, he may export his unemployment benefit for 3 months (Article 69 of Reg. 1408/71) 110. See chapter 9 (Jobseekers). c.4 Invalidity The migrant worker may in principle be entitled to invalidity benefit in his new State of employment. As well as possible difficulties with waiting periods and standard requirements, there may also be other problems. In the absence of European harmonisation there are still great differences between invalidity systems in the Member States: There are differences in the amount and duration of invalidity pensions; A number of Member States have separate statutory insurance for the self-employed and disabled; Almost all Member States have separate insurance schemes for accidents at work and occupational diseases (occupational risk insurance) as well as the invalidity scheme. Only in the Netherlands is there no such social insurance; There are large differences in the number of degrees of incapacity for work: in Belgium, Luxembourg and the United Kingdom there is just one class of incapacity; in Germany and Portugal two; in France and Denmark three; in Spain and Greece four; in the Netherlands seven. The lack of harmonisation can mean that a migrant worker is declared 100% incapacitated in one Member State and 0% and in another; Last but not least, a large number of invalidity schemes are acquired rights systems (comparable with retirement pension schemes), while others are risk systems (comparable with sickness benefit and/or unemployment schemes). 95

111 Regulation 883/04 will in practice bring about a major change in the coordination of invalidity allowances for employees who have only worked in Member States with a risk system. Article 44, paragraph 1 of Regulation 883/04 does not put an end to the single pension method as such, but it does make it subject to an extra condition: the Member States with risk systems who are prepared for coordination to continue using this method must make that choice clear by explicitly ensuring that they are included in Annex VI of Regulation 883/04. If they do not do this, they are implicitly choosing coordination using the pro-rata system (part pension method; see c.5.2.), which in Regulation 1408/71 is actually rather characteristic of the coordination between/with acquired rights systems. Article 44, paragraph 1 of Regulation 883/04 therefore ensures that the single pension method can only continue to be applied if the employee has only worked in Member States given in Annex VI. Within the European Union very large differences exist between invalidity insurance systems. There is no question of harmonisation. The basis of the coordination of these systems rests on the distinction between the two fundamentally different types of invalidity insurance: risks systems (a) and acquired rights systems (b). a. Risk systems In risk systems the rate at which the invalidity pension is paid is independent of duration of the invalidity insurance. These invalidity pensions may be compared with statutory sickness benefit insurance: they may well be income-related, but the length of the insurance period has no influence on the amount of the pension. If the employee is not (or is no longer) covered by social insurance at the start of the permanent incapacity for work, there is no entitlement to a pension. Risk systems exist in Belgium, Spain, France (with exception of the mine workers scheme), Greece (only the insurance scheme for agricultural workers), Ireland, the Netherlands, Finland (for those born with a disability or whose incapacity develops at an early age) and the United Kingdom. b. Acquired rights systems Under acquired rights systems the rate at which invalidity pension is paid will depend on the duration of the invalidity insurance. These invalidity pensions may be compared with retirement pensions: the longer the claimant has been insured, the higher the invalidity pension will be. The acquired benefit rights are in addition earned. If the employee is no longer covered by social insurance at the start of permanent incapacity for work, his right to an acquired - previously earned - invalidity pension revives. Acquired rights systems exist in Germany, Austria, Finland (except for those born with a disability or whose incapacity develops at an early age), Italy, Luxembourg, Denmark, Portugal, Greece (except the insurance scheme for agricultural workers), France (the special mineworkers scheme), Sweden and the new Member States (Poland, the Czech Republic, Lithuania etc). A migrant worker is generally subject to two or more social security systems. Invalidity insurance may be of either the risk or acquired rights type. Since previously acquired rights may not be lost, coordination under Reg. 1408/71 must take account of the existence of these two fundamentally differing types of invalidity scheme. Four different scenarios may confront migrant workers who are declared incapacitated, each of which gives rise to a different method of coordination. The employee has only worked in Member States with a risk system (c.4.1); The employee has only worked in Member States which have acquired rights systems (c.4.2); The employee has most recently worked in a Member State with an acquired rights system and previously worked in a Member State with a risk system (c.4.3); The employee has most recently worked in a Member State with a risk system and formerly worked in a Member State with an acquired rights system (c.4.4). c.4.1 The employee is exclusively insured in a risk system: single pension method In the existing regulation, Reg. 1408/71, the coordination between risk systems is governed by Article 39, paragraphs 1 and 2. The migrant worker who has only been insured in Member States with risk systems is entitled to a single invalidity pension paid by the Member State in which he was most recently employed. In calculating the rate of this pension no account is taken of the legislation of the Member States in which he was previously insured. This coordination method, which results in one invalidity pension, is known as the single pension method 111. 96

Example : A migrant worker who most recently worked for 8 months in the United Kingdom (risk system) and previously worked for 10 years in Ireland and 10 years in France (both States with risk systems), is entitled to a single invalidity pension from the Member State where he most recently had social insurance, i.e. the United Kingdom 112. c.4.2 The employee has been exclusively insured under acquired rights systems: pro-rata system Coordination between acquired rights systems is governed by Article 40, paragraph 1 of Reg. 1408/71 113. By analogy with a retirement pensions, invalidity pension rights have been acquired in all Member States. Since acquired rights cannot be lost, Article 40 paragraph 1 is therefore based word for word on the pro-rata system established for the coordination of retirement pensions under Article 46 of Reg. 1408/71 114. In applying the pro-rata system each Member State, on the basis of its own national legislation, must establish whether, and to what extent, the claimant is incapacitated. After this an invalidity pension is calculated as if the worker had completed all his insurance periods in the EEA in this Member State (the theoretical sum ). Finally, the actual invalidity pension is calculated, on a pro-rata basis. 112 Ireland and the United Kingdom appear in Annex VI of Regulation 883/04. However, this is not the case for France. This means that method c.4.4. will be applied when Regulation 883/04 comes into effect. If the employee were to have worked in Sweden instead of France, the single pension method will continue to apply, because Sweden, like the United Kingdom and Ireland, appears in Annex VI of Regulation 883/04. 113 Article 46, paragraph 1 of Regulation 883/04 The pro-rata invalidity pension is the sum of: 114 Article 52 of Regulation 883/04 = length of insurance period in the Member State x total length of insurance periods in all Member States theoretical invalidity pension in this one Member State 115 Article 46, paragraph 1 of Regulation 883/04 Example : If the migrant worker has worked consecutively for 10 years in Austria, 10 years in Italy and 10 years in Germany - all States with acquired rights systems - there will in principle be a claim for 10/30 of the Austrian invalidity pension, 10/30 of the Italian invalidity pension and 10/30 of the German invalidity pension. In the case of the pro-rata coordination method, establishing benefit rights entails a long-drawn out and administratively complicated process. The calculation can only take place if each Member State knows how long the employee was insured in the other Member States. The medical examination - on behalf of the other Member States - takes place in the incapacitated worker s State of residence. Both the insurance institutions and the worker may have problems of interpretation and translation. In practice it frequently happens that a cross-border worker is declared wholly incapacitated in one Member State and only partially or not at all incapacitated in another. In the application of the pro-rata system, the lack of harmonisation of the incapacity criteria often has a distressing impact on the worker. c.4.3 The employee was most recently insured under an acquired rights system and was formerly insured under a risk system: pro-rata system The employee was most recently insured under an acquired rights system, but was previously insured under a risk system. In such cases the pro-rata method for acquired rights systems is applied, once again in accordance with article 40, paragraph 1 of Reg. 1408/71 115. However, this calculation requires recourse to an artificial device. Although the risk system does not conform to the logic of earned or 97

116 Article 54, paragraph 2 of Regulation 883/04 acquired rights, in this instance it is treated as though it did. In the interests of the employee, the risk system is treated as a notional acquired rights system. In this way the right to benefit previously acquired or earned under the risk system is not lost. Each Member State, including those operating a risk system, makes a pro-rata calculation as described in under c.4.2: establishing the degree of incapacity, followed by calculating the theoretical invalidity pension and the proportion of benefit corresponding the period of insurance. Example : A migrant worker has spent five years working in Spain (risk system) and then goes to work in Luxembourg (acquired rights system). Suppose that after working for 10 years in Luxembourg he becomes permanently incapacitated. In principle he is entitled to 5/15 of the Spanish invalidity pension and 10/15 of the Luxembourg benefit. It goes without saying that the criticisms of the pro-rata system that were made in paragraph c.4.2 also apply here. c.4.4 The employee was most recently insured under a risk system and was previously insured under an acquired rights system: anti-accumulation method This situation will arise, for example, in the case of a German worker employed in Belgium or France, both States operating risk systems, who was previously insured under the German acquired rights system. Or in the case of a cross-border worker who was most recently insured under the Spanish risk system but who was previously insured under acquired rights systems in Sweden or Luxembourg. If the migrant worker was most recently insured under a risk system, he is in principle entitled to a full invalidity pension in that Member State. However the employee may also have a claim, under his previously acquired rights, to invalidity benefit from a Member State with an acquired rights system. In that event the Member State with the risk system will or should deduct this sum from the full pension that would normally be paid (anti-accumulation method under Article 46 b, paragraph 2 Reg. 1408/71) 116. If on the other hand no right exists to an invalidity pension from the Member State with an acquired rights system - for example, if the criteria for invalidity are not the same - then the Member State with the risk system, where the employee was most recently insured, remains liable to pay the full invalidity pension. In that event benefit is paid under the single pension system. The obvious lack of harmonisation in this case does not result in a reduced invalidity pension. Example : A migrant worker, who has most recently worked in the Netherlands for 10 years (risk system) and previously worked for 2 years in the Czech Republic (acquired rights system) is entitled in principle to a full Dutch invalidity benefit. However this will be reduced by the amount of any Czech invalidity benefit due. c.5 Retirement In principle a migrant worker may claim an old age pension from all the Member States, where he has ever been covered by social insurance. The pensions paid will be in proportion to the periods in which has actually been insured in each State (pro-rata). In the absence of European harmonisation national pension systems differ greatly. Some systems are workers insurance schemes (Spain, Ireland, Belgium, Portugal etc.), others are residents schemes (the Netherlands, Sweden, Denmark.) Pensionable age also varies from one Member State to another (65 in the Netherlands, 67 in Norway, France: 60, etc.). In some countries it is possible to retire at a younger age with anticipatory benefits 98

(Germany, Belgium, Luxembourg), in others not. The structure of pensions also differs considerably. There are pensions based on average earnings (Belgium, France, Germany etc.) whilst in other States retirement pensions are independent of income (the Netherlands, Denmark etc.) Some Member States (e.g. Germany) also apply waiting times. Old age benefits can also divided into statutory insurance benefits and supplementary pension schemes. Statutory old age benefits of Member States are coordinated by Reg. 1408/71 (Articles 44 to 53 of chapter 3, Old age and death) 117. This does not apply to supplementary pensions, which are governed under the pensions Directive 98/49/EC. c.5.1 Coordination of statutory old age pensions 117 In Regulation 883/04, Articles 50 to 59 regulate the coordination of old age and survivors pensions. 118 Article 7 of Regulation 883/04 119 Article 7 of Regulation 883/04 The following principles apply to the coordination of old age pensions: Pensions rights acquired in a Member State are guaranteed. The redemption of statutory old age pensions, refund of contributions or transfer to another Member State is not possible. An old age pension acquired in a Member State will be paid at age applicable in that State. Old age pensions are automatically exportable to other Member States (Article 10 Reg. 1408/71) 118. This does not apply supplementary payments which do not depend on contributions (non-contributory benefits) and those which are means-tested. An old age pension acquired in a Member State will be paid at age applicable in that State. Old age pensions are automatically exportable to other Member States (Article 10 Reg. 1408/71) 119. This does not apply supplementary payments which do not depend on contributions (non-contributory benefits) and those which are means-tested 119. If a migrant worker has been insured for less than one year in a Member State the old age pension for that period is paid not by that State but by the Member State in which he was most recently insured (Article 48, Reg. 1408/71) 120. The rules for calculating pensions are established in Article 46 Reg. 1408/71 121. 120 Article 57 of Regulation 883/04 121 Article 52 of Regulation 883/04 Examples : An employee works in Italy. Previously he lived for 5 years in the Netherlands (not necessarily in work) and worked for 10 years in Belgium. He applies for his old age pension at the age of 60. Whether or not he is entitled to an anticipated Italian, or Belgian, old age pension is dependent on the number of periods for which he was covered by social insurance. He becomes entitled to an Italian or Belgian old age pension at the age of 60 by aggregating the insurance periods completed in the Netherlands, Belgium and Italy. If he is entitled to a Belgian and an Italian old age pension from the age of 60, that does not mean that he is also entitled to a Dutch pension at the same age. A Dutch statutory old age pension is not paid before the age of 65, regardless of whether the claimant has worked or simply lived in the Netherlands. A French employee once worked for 10 months in Germany and 6 months in Luxembourg as a frontier worker. Since he was covered by social insurance for less than a year in both Member States he has no claim to a German or Luxembourg old age pension (Article 48 Reg. 1408/71). However, for these periods the worker is entitled to an old age pension paid by the Member State where he most recently worked. (France). A Swedish employee worked for 4 years in Germany in paid employment. Under German law there is no entitlement to a German old age pension since the employee was not covered by social insurance for at least 5 years there (Wartezeit). However if the worker was also insured in another Member State he can still become entitled to a German pension by the recognition and aggregation of all insurance periods (a regulation pension). 99

122 et R. 883/04 c.5.2 Calculation of statutory old age pensions Article 46 of Reg. 1408/71 122 sets out the method of calculating pensions. Each Member State must carry out three calculations: the national pension (1), the theoretical sum (2) and the pro-rata pension (3). 1. National pension calculation: The national pension is the old age pension to which a cross-border worker is entitled for the insurance years in a Member State. This is determined in accordance with the national legislation of this Member State. There is no account taken of insurance periods acquired in other Member States. 2. Theoretical pension calculation: The theoretical pension is the sum to which a cross-border worker would be entitled if all the insurance periods completed in other Member States had been completed in this one Member State (notional figure). The employee is not entitled to this theoretical sum. The calculation is just a stage in calculating the pro-rata pension. 3. Pro-rata pension calculation ( regulation pension ): The pro-rata pension is obtained by multiplying the theoretical pension sum (2) by a fraction. This numerator of this fraction is the length of the insurance period completed in the Member State; the denominator is the total duration of all insurance periods competed in all Member States used in calculating the theoretical sum. The pro-rata old age pension totals: length of insurance period in the Member State total length of insurance periods in all Member States x theoretical old age pension in this one Member State Finally the national pension amount (1) is compared with the pro-rata pension (3). Each Member State then pays the higher pension sum. Example : Take the example of an Austrian lab technician who, after working for 5 years in Austria and 20 years in Germany, then works for 15 years in Italy. He is insured for a total of 40 years. The Italian pensions service calculates as follows. First the Italian old age pension under Italian law is worked out. Then the theoretical pension (the regulation pension ), which he could have acquired if he had been insured for 40 years in Italy, is calculated. Then the pro-rata pension is calculated. This is 15/40 of the theoretical pension. The Italian national old age pension is compared with the pro-rata pension. The highest sum is paid. Similar calculations must also be carried out in Austria and Germany. 100

c.5.3 Applying for statutory old age pensions Migrant workers must apply for their old age pensions in the Member State where they live. The institution in the State of residence, generally the national pension service, is responsible for requesting pensions in the other Member States. For this reason it is also known as the managing body. 123 et R. 883/04 In calculating the pension each Member State must take account of the insurance periods completed in the other Member States. The foreign pensions services must, as quickly as possible, send a summary of insurance periods to the managing body. The managing body must then ensure that the pensions institution in each Member State is also informed of the overall insurance period position. These exchanges of information take place using form E205. It can take a considerable time to process pension applications. It is therefore of great importance that migrant workers about to take their pension allow enough time (at least a year) when applying to the institution in their State of residence. Many Member States offer the chance to have a pension calculation carried out beforehand. It is advisable for cross-border workers to take up this opportunity and request such pension calculations (prognoses) in advance from each Member State in which they have previously been insured. c.5.4 Supplementary pensions The rules of Regulation 1408/71 123 do not apply not to supplementary pensions. Migrant workers must therefore apply for any supplementary pensions themselves. It is also of the greatest importance to keep any information about such pensions carefully, and to maintain regular contact with the pension insurers and/or pension fund in question. This will help to avoid gaps in cross-border pensions at a later date. 101

d. Tax and contributions due on foreign pensions A migrant worker receiving a foreign invalidity or old age pension must pay tax on this pension in his State of residence. Exceptions in the applicable double taxation treaty may mean that the pension is taxed in the source country (the former State of employment). An exception is commonly made for public sector pensions. If under the applicable double taxation treaty statutory and/or supplementary pensions are taxable in the paying Member State, such pensions are tax-exempt in the Member State where the pensioner lives. The exclusivity principle applies to social security contributions. That means that the pensioned worker can only be subject to the legislation of a single Member State. If the migrant employee has a pension from his State of residence as well as from a foreign country, he will be covered by social insurance in the State of residence. Whether or not the State of residence levies social security contributions from the foreign pension depends on the national legislation of the State of residence. 102

PART III : Sources of information 103

Sources of information The sources of information described below are available in a large number of languages. The links included here will take you to the English language versions. Click through to change the language. EURES mobility portal http://europa.eu.int/eures The EURES portal for labour mobility offers information tools providing help and support to workers and jobseekers who want to go to live and/or work in another Member State. Available in all languages. Information on the Action Plan on Skills and Mobility http://europa.eu.int/comm/employment_social/news/2002/feb/ap_en.html The European Commission s Action Plan on Skills and Mobility can be found at this web address. It is available in the languages of the old Member States (2002, 42 pp.). Information on living and working in the Member States http://europa.eu.int/scadplus/citizens/en/inter.htm http://citizens.eu.int Outstanding and very extensive information sources on living and working in the Member States. You can select where you live now, and to which Member State you want to go to live or work. The information is very extensive and is available in every language. http://europa.eu.int/eures/main.jsp?acro=lw&lang=en&catid=490&parentid=0 The living & working section on the EURES website takes you to the living and working conditions data bank. By selecting a Member State you can find information on housing, schools, taxes, costs of living, health care, social security, comparability of qualifications etc. The labour market data bank is another valuable information tool, which provides details of the most recent labour market developments listed by country, region and industry. 104

Legal information on the free movement of employees http://europa.eu.int/scadplus/leg/en/s02203.htm This website provides the most important information on the free movement of workers and the coordination of social security. Introductory texts - available in all languages - enable you to consult the most important Regulations, Reg. 1612/68, Reg. 4108/71 and the Directives on the right of residence. http://europa.eu.int/eur-lex/nl/consleg/ind/nl_analytical_index_05.html Practical information on the free movement of workers from the new Member States http://europa.eu.int/comm/employment_social/free_movement/index_en.htm These information folders (Free movement of workers from the new Member States) provide a practical overview of the rights of workers from the new Member States. Available in all languages, including those of the new Member States (2003, 4 pp.). The EURES website (see above) has an overview of the decisions which individual Member States have taken regarding the right of access and free movement of workers from the new Member States during the transitional period, 2004-2011. OECD model convention http://www.oecd.org/document/37/0.2340,en_2649_33747_1913957_1_37427.00.html The Organisation for Economic Cooperation and Development website contains the OECD model convention to prevent double taxation plus related supporting information (commentaries etc.). Convention on Contractual Obligations http://www.rome-convention.org/instruments/i_conv_orig_en.htm Website publishing the text of the Convention on the law applicable to contractual obligations of 19 June 1980 (Convention on Contractual Obligations) plus additional information on the Convention. 105

Social security systems in the Member States www.tress-network.org tress is the number one website about social security coordination. tress stands for training and reporting on European Social Security. The website - in all the languages of the European Union - is about the coordinating Regulations 1408/71 and 883/04 and their implementing regulations. This website also includes European Court of Justice case law covering this topic. http://ec.europa.eu/eulisses EUlisses is a new EU web portal offering the visitor easy access to EU and national information on the social security rights and obligations of citizens on the move in Europe. EUlisses only gives information on pensions. The purpose of EUlisses is to provide these citizens with EU and national information on their social security rights and obligations. Answers are also given to frequently asked questions. In addition, it is intended that the visitor should use the links provided to the national bodies for social security and the online services offered by these institutions. http://europa.eu.int/comm/employment_social/soc-prot/schemes/index_en.htm Website with the Guide Your social security rights when moving within the European Union - Update 2002. The Guide provides an extensive and outstanding overview of the social security systems of the Member States of the European Economic Area Broadly (EEA). The Guide is available in all languages (225 pp.). http://europa.eu.int/comm/employment_social/missoc/index_en.html Website providing an extensive and systematic overview of the social security systems of the Member States of the European Economic Area, in German, French and English. http://europa.eu.int/comm/employment_social/missceec/index_en.html Website providing an extensive and systematic overview of the social security systems of the new Member States of the European Union, in English. Practical information on the coordination of social security systems http://europa.eu.int/comm/employment_social/soc-prot/schemes/index_en.htm Web address of the Guide The Community provisions on social security - your rights when moving within the European Union. A practical overview of the ways in which the coordination of social security is governed. The Guide is available in all the languages of the old Member States (55 pp.). 106

Right of residence of Community citizens and third country nationals a http://europa.eu.int/scadplus/leg/nl/s17000.htm European Union website on the free movement of persons (right of residence) etc. Posting http://ec.europa.eu/employment_social/labour_law/postingofworkers_en.htm This general website on labour law contains, with the text, inter alia, of the posting of workers Directive 96/71/EC and the report on its implementation (COM (2003) 458). EUROCADRES (ETUC) http://www.eurocadres.org/mobilnet/index.htm The European Trade Union Confederation (ETUC) union for professional and executive staff has a website on mobility in four languages. Ploteus «http://europa.eu.int/ploteus Ploteus is the portal on learning opportunities in the European Area. Helps you to find more information on education, training, and the recognition of diplomas throughout Europe. Miscellaneous addresses http://europa.eu.int/public-services/european_union/citizens/topics/topics_en.htm http://europa.eu.int/citizens/index_en.html www.onthemove-eu.hi.is http://europa.eu.int/comm/education/programmes/europass/index_en.html 107

About the authors : Bart Vanpoucke was born and grew up on the French-Belgian border (b. Kortrijk, 1965) where he still lives (Avelgem). Since 1990 he has worked for the Belgian socialist trade union, ABVV/FGTB. In October 1999 he was appointed adviser on cross-border employment. As EURES adviser in the Euregio Hainault, Nord/Pas-de-Calais, West-Vlaanderen & Kent (EuresChannel), he mainly advises Belgian, French and British cross-border workers. Ger Essers was born and grew up on the Dutch-German border (b. Kerkrade 1946). He now lives on the Dutch-Belgian border (Maastricht). After a career in education, he has worked for the Dutch trade union FNV as an adviser on cross-border working since 1993. He used to be a EURES adviser in the Euregio Rijn-Maas-Waal, and advises Dutch, Belgian and German cross-border workers. We would like to thank the following for their valuable advice: Marion Weerepas (lecturer at Maastricht University) Arlette van Maas de Bie (Lawyer at Holland Van Gijzen, Lawyers and Notaries) Bruno De Pauw (Deputy advisor, International Affairs Department of the Belgian Ministry of Social Affairs). The manuscript was completed on 01/03/2007. All rights reserved. No part of this publication may be reproduced, stored in a retrieval system of any nature, or transmitted in any form or by any means, electronic, mechanical, photocopying, recording or otherwise, without the prior written permission of the publisher. Although the greatest care has been taken in the preparation of this publication, the authors and publisher cannot be answerable for, nor accept any responsibility for the presence of any (printing) errors or omissions. ISBN

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Guide for the Mobile European Workers European CONFEDERATION Trade EUROPEENNE Union Confederation DES SYNDICATS (ETUC) (CES) 5, Boulevard du Roi Albert II 1210 Bruxelles Tel. 00-32-2/224 04 11 Fax 00-32-2/224 04 54/55 www.etuc.org