by Joel Lacerda Azevedo, master in EU Law at University of Minho
Ensuring the right to social security when exercising the right of free movement has been a major concern of the Member States in the EU. In order to achieve this, it was necessary to adopt social security measures which prevent Union citizens who work or reside in a Member State other than their own from losing all or part of their social security rights, thereby contributing to the improvement of their quality of life.
The EU provisions on social security coordination do not replace national social security systems with a single European system, such harmonization would not be possible since the social security systems of a Member State are the result of long-standing traditions deeply rooted in the culture and national preferences[i]. Consequently, instead of harmonizing social security systems, EU provisions provide for their coordination. Each Member State is free to decide who is a beneficiary under its legislation, what benefits are granted and on what conditions, how those benefits are calculated and what contributions are to be paid[ii].
In order to grant EU citizens the social and health benefits to which they are entitled, coordination between the social security systems of the Member States is necessary. However, the current Regulations (EC) Nº 883/2004[iii] and (EC) Nº 987/2009[iv] no longer reflect the changing national social security systems and the case law of the European Court of Justice.
The European Commission’s December 2016 proposal focuses on four areas of coordination where improvements are required: economically inactive citizens’ access to social benefits, long-term care benefits, unemployment benefits and family benefits. The objective of this initiative is to continue the process of modernization of EU law on social security coordination set out in Regulations (EC) Nºs 883/2004 (basic Regulation) and 987/2009 (implementing Regulation), by further facilitating the exercise of citizens’ rights while ensuring legal clarity, a fair and equitable distribution of the financial burden among the Member States and administrative simplicity and enforceability of the rules. The proposal also seeks to strengthen administrative rules on social security coordination for posted workers. However, it does not intend to change existing rules on the export of child benefits, despite demands from several stakeholders[v].
Bearing in mind that the European Commission only proposes minor changes in the area of coordination of child benefits and maintaining the rule that child benefits are provided by the Member State where the parent works – positive in my opinion – and that the access of economically inactive citizens to social benefits has been widely debated, this article will only focus on long-term care benefits, unemployment benefits in cross-border cases and social security provisions to posted workers.
With regard to long-term care benefits, three challenges are identified: lack of clarity in the legal framework, lack of clarity for citizens and institutions, risk of loss of benefits, or double payments. Recalling the very limited EU action in coordinating national social security systems, with only a minor impact on their structure due to EU legal rules, in principle, the formation of the social security system remains the responsibility of each Member State.
In its proposal for a revision, the European Commission advocates the creation of a new chapter in Regulation (EC) Nº 883/2004 on the coordination of benefits for long-term care and also proposes a change in the rules on the coordination of such benefits which follows the same logic as the rules for coordination of sickness benefits[vi]. In other words, the Member State in which the person is insured provides the benefits of long-term care in cash, whereas when a person lives in another Member State than the one in which they are insured, the Member State of residence provides the benefits in cash and the Member State in which the person is insured provides a cash refund to the Member State of residence.
However, while I agree with improving the coordination of long-term care in the context of intra-Community mobility, I am concerned that this proposal may actually hamper the performance of the social security coordination system. This situation is due to the various national rules in this area, in particular if Member States provide such benefits in cash or in kind. In fact, only 11 Member States make a distinction in their social security system between benefits in kind and cash benefits. In some Member States there is a mix of both types of benefits, in others they are only provided in kind and in others only cash. Given this diversity, it would be very difficult to establish a set of rules that would determine how the benefits of long-term care are provided to insured persons residing in another Member State. The creation of a new system is liable to lead to bureaucratic burdens in some Member States. This would adversely affect the efficiency and effectiveness of social security systems and may even lead to gaps in the provision of long-term care benefits for some mobile citizens.
I believe a simpler solution is possible. Instead of introducing a new chapter and new rules on coordinating the benefits of long-term care, such benefits could remain part of the Regulation chapter on coordinating sickness benefits, while adding a list of the national institutions dealing with these benefits in the Annex of the Regulation.
With regard to the coordination of unemployment benefits in cross-border employment situations, the revision proposes new provisions concerning the aggregation of periods of insurance for the acquisition or maintenance of entitlement to unemployment benefits, the export of such benefits and the determination of the Member State responsible for paying unemployment benefits to cross-border workers.
In the case of the aggregation of unemployment benefits, the preferred option for the European Commission is to enforce a minimum period of three months of insurance in the Member State of the last activity in order to acquire the right to total previous periods of insurance «while requiring the Member State of last activity to ensure payment of benefits when this condition is not fulfilled». Concerning the export of unemployment benefits, the Commission’s option is to extend the minimum period for export of unemployment benefits from three to six months, while allowing the possibility of exporting the benefit until the end of the right to it. On the coordination of unemployment benefits for cross-border workers, the Commission’s option is to assign responsibility for the payment of unemployment benefits to the Member State of last employment when the cross-border worker has worked there for at least 12 months. In situations where this is not the case, it is the responsibility of the Member State of residence. As a result, the current refund procedure will be deleted.
Having in mind the positions of the European Commission and the Member States, in relation to the aggregation of periods of unemployment, I would firstly emphasize that the current Basic Regulation does not provide for any minimum period of qualification. This would be contrary to the coordination of social security systems and contrary to the principle of insurance. The basic and fundamental principle of the coordination of social security systems is the aggregation of periods of insurance.
Consequently, I do not fully agree with the Commission’s proposal for the aggregation of unemployment benefits to require a minimum period of three months of insurance in the Member State of the most recent activity before the right to add previous periods of insurance. The proposal is contrary to the principle of assimilation of the facts[vii]. At the same time, in my opinion, it is also appropriate in terms of equity and to avoid abuses of the rules where they may exist, to introduce a minimum period of work in the country of destination. Therefore, the specific proposal to revise Article 61 including a minimum period of insurance qualification in the Member State of the most recent activity before a worker has the right to aggregate past insurance periods obtained in other Member States is a good solution but three months does not seem proportionate to me in this respect. In my opinion, a possible compromise, requiring a month’s employment to be completed in a Member State before the principle of aggregation is applicable, provided that this was sufficient to discourage fraud, seems to be more reasonable.
Regarding the export of unemployment benefits, the Commission proposes in Article 65 that an unemployed person wishing to export his unemployment benefits would have to be registered for a period of at least four weeks in the employment services of the Member State which is exporting the benefits. I agree with this proposal as it can help to improve the control function of national authorities and improve the exchange of information. However, it will still be difficult for the Member State exporting the unemployment benefit to check whether the person is still unemployed or not and whether he or she is meeting the criteria for receiving the benefit (e.g. active job search). In addition, a waiting period of 4 weeks is a very short period for a successful job search in the country where the person became unemployed.
Currently, the Member State of residence of the cross-border worker is competent for unemployment services and therefore pays unemployment benefits if a cross-border worker becomes unemployed. At the same time, the Member State in which the cross-border worker has worked most recently contributes to the payment of those benefits by transferring a lump sum to the country of residence.
The Commission proposes to amend this rule so that the Member State in which the cross-border worker has worked most recently, provided that the period of work has been at least 12 months, is the State which pays the full amount of unemployment benefits. Although I see merit in this proposal, given that the worker has contributed to the social security system in the country, it raises a number of different issues for different Member States, due to the specificities of national social protection systems. These include control of the unemployed by the national authorities in the country of residence and country of employment, access to formation or other labour market integration measures, and financial equilibrium.
Lastly, we will focus on the issue of posted workers. I welcome the fact that the Commission retains the rule that the payment of social security contributions for posted workers is in the country of origin. I also support the fact that the Commission retains the rule that two or more Member States may, by mutual agreement, provide for exceptions to the rules, for example to provide a period of more than two years, when posted workers may be covered by the system social security system of the country of origin. I also agree with the clarification proposed by the Commission to Article 14 (1) of the Implementing Regulation according to which the requirement that a posted worker be affiliated to the social security system of the issuing Member State does not mean that he must be affiliated in the same Member State where the employer is established.
However, I do not agree with the amendment to Article 12 of the Basic Regulation to include the reference to the concept of posting «within the meaning of Directive 96/71/EC»[viii] and a new term «sent by an employer»[ix]. This proposal may blur the division of powers between the authorities responsible for implementing the social security coordination regulation and those responsible for labor law. Moreover, the reference in a regulation (binding in its entirety and directly applicable in all Member States) to a Directive (Member States bound to the result to be achieved) raises legal doubts. The proposal of introducing into the Basic Regulation the reference to the posting of workers Directive therefore runs counter to the Commission’s objective of ensuring legal clarity[x].
It is also cause for concern that the Commission proposes to maintain the rule of Article 12 of Regulation (EC) Nº 883/2004, according to which a posted worker sent to replace another posted worker cannot continue to be covered by the security system of the issuing Member State. I am somewhat apprehensive about these proposals because they mean that the social security situation of a posted worker depends on whether another worker has been posted before. These rules will be difficult to apply in practice because they are not very clear and raise questions, for example, who, when and how will determine what “substitution” means.
Other complications are created in the proposal, mixing posted workers and self-employed workers, while these two groups are completely different. I understand that the Commission’s objective has been to address abuses, but this situation can be better protected by improving the reliability of A1 forms[xi] and efficient controls. I support the Commission’s intention as regards Article 5 of the Implementing Regulation to clarify procedures for national authorities to certify which social security legislation applies to posted worker.
The Commission also proposes to insert a new Article 19 (3) in the Implementing Regulation, which obliges the issuing institution to carry out an appropriate assessment of the relevant facts and to ensure that the information is correct. Given that more than two million A1 forms were issued in 2015[xii], mainly for posted workers with only a few cases of fraud, it seems to me to be a very bureaucratic and unnecessary general requirement which could lead to serious delays in the issuing of A1 forms.
Finally, the proposal for a new Article 76a in Regulation (EC) Nº 883/2004 and a new Article 20a in Regulation (EC) Nº 987/2009 give the European Commission the power to adopt implementing acts specifying the procedure to be followed to ensure uniform conditions of application of the specific rules on the coordination of social security for posted workers. This includes the determination of situations in which A1 forms are to be issued, elements to be checked before issuance and withdrawal when challenged. In order to make these provisions more acceptable and to facilitate their implementation, it would be desirable that concrete implementing rules could be added to Regulation (EC) Nº 987/2009, which would then be directly applicable in all Member States[xiii].
[i] Council Recommendation 92/442 of 27 July 1992 (OJ 1992 L 245).
[ii] The EU and the Member States have a shared competence in the field of social policy [see Article 4 (2) (b) and Article 151 TFEU]. In addition, the EU Charter of Fundamental Rights recognizes the fundamental right to social security benefits for those legally residing and moving in the European Union (Article 34, social security and social assistance).
[iii] OJ L 166/1, 30.4.2004.
[iv] OJ L 284/1, 30.10.2009.
[v] European Commission. Proposal for a Regulation of the European Parliament and of the Council amending Regulation (EC) No 883/2004 on the coordination of social security systems and regulation (EC) No 987/2009 laying down the procedure for implementing Regulation (EC) No 883/2004, 13 December 2016, COM(2016) 815 final, p.2.
[vi] European Commission, Amending Proposal, cit., note 5, p. 8, para. 5.
[vii] In accordance with the principle of assimilation of the facts, Member States must take into account facts or events occurring in another Member State as if they had occurred on their own territory.
[viii] Directive 96/71/EC of the European Parliament and of the Council, of 16 December 1996, concerning the posting of workers in the framework of the provision of services.
[ix] Will the rules designed to protect “posted” workers also applicable to those who are “sent” abroad. However, it remains unsolved whether “sent” should be understood as synonymous with “posted” or if it has a different meaning, possibly not linked to posting criteria. See: AK Europe. Position Paper (February 2017). Proposal for a Regulation of the European Parliament and of the Council to amend Regulation (EC) 883/2004, p. 4. Available at: http://www.akeuropa.eu/_includes/mods/akeu/docs/main_report_en_452.pdf (last accessed 11/04/2018); German National Association of Statutory Health Insurance Funds (GKV-Spitzenverband) (2017). Statement by the German National Association of Statutory Health Insurance Funds of 2 May 2017 on the Proposal for a Regulation amending Regulation (EC) No 883/2004 on the coordination of social security systems and Regulation (EC) No 987/2009 laying down the procedure for implementing Regulation (EC) No 883/2004 of 13 December 2016, Berlin, p. 18.
[x] European Economic and Social Committee (EESC) (2017). Opinion EESC: EU rules on social security coordination, SOC/557 – EESC-2017-01461-00-00-AC-TRA (EN) 1/10. Available at: http://www.eesc.europa.eu/en/our-work/opinions-information-reports/opinions/coordination-social-security-systems (last accessed 11/04/2018).
[xi] Forms that certify social security benefits when moving within the EU. See Case C-113/89, Rush Portuguesa, on 30 June 2011 (EU:C:1990:142).
[xii] European Commission, Posting of workers, Report on A1 portable documents issued in 2015, pp. 12 et seq. Available at:
http://ec.europa.eu/social/main.jsp?catId=738&langId=en&pubId=7980&furtherPubs=yes (last accessed 11/04/2018).
[xiii] GKV-Spitzenverband, Statement by the German National Association of Statutory Health Insurance Funds of 2 May 2017, on the Proposal for a Regulation amending Regulation (EC) No 883/2004 on the coordination of social security systems and Regulation (EC) No 987/2009 laying down the procedure for implementing Regulation (EC) No 883/2004 of 13 December 2016, p. 29.
Picture credits: Social security benefits by SalFalko.