Determining the applicable legislation is priority during secondment period. A1 certificate confirms that the employee is subject to specific legislation of a country. The obligation of paying social and health insurance contributions may be imposed on the employer or the seconded employee
The fifth of the publications in series “12 Rules of the Cross-Border Secondment of Employees” concerns the rules of social and health insurance obligations for seconded employees. In this series we will present the most important issues related to the process of seconding employees to Poland and from Poland. Each publication will present an individual issue in details. The entire series of articles will be a compendium of general knowledge on the cross-border seconding of employees.
Social insurance for an employee delegated to work abroad
European Union regulations constitutes that persons who perform work in more than one EU Member State, EEA or Switzerland can be subject to the legislation of only one Member State. Therefore, it is necessary to determine the applicable legislation in order to define an employee’s insurance obligations. Thus, as a rule, there shouldn’t be a situation where a taxpayer would pay social security contributions in two or more countries.
The rules of determining the applicable legislation have been defined in the Regulation of the European Parliament and of the Council (EC) No. 883/2004 on the coordination of social security systems. Those rules can differ depending on the form of professional activity and the personal conditions of the taxpayer.
IMPORTANT
In the case of an employee delegated by a Polish employer to perform work abroad, if the delegation period does not exceed 24 months and the employee was not delegated to replace another person, as a rule, the employee is subject to Polish legislation.
In case of performing work outside the EU and the EEA, a social security contract applies, concluded between Poland and the country to which the employee was seconded. These agreements are based on:
- the equal treatment principle,
- the one applicable legislation principle,
- the summing up all of the insurance periods principle,
- the export of benefits principle.
The scope of the contracts varies. It usually includes benefits: retirement pensions, disability benefits, survivors’ benefits, and sickness benefits. Contracts may also include health benefits, family benefits, and unemployment benefits.
Currently, Poland has concluded international social security agreements with:
- Yugoslavia (Currently applicable to: Montenegro, Serbia, Bosnia and Herzegovina),
- Macedonia,
- USA,
- Canada,
- Quebec,
- South Korea,
- Australia,
- Ukraine,
- Moldova,
- Israel,
- Belarus,
- Mongolia,
- Turkey.
IMPORTANT
The confirmation of the jurisdiction of the legislation is an A1 certificate, which is issued on the request of the seconded employee or the employer (in EU/EEA countries), and a special document issued by the social security authorities of the country from which the employee has been seconded (in countries with which Poland has concluded the social security agreement).
The regulations of the Polish act that regulates the issues of health insurance constitutes that meeting the conditions for being covered by social insurance is unequivocal with coverage that person with the obligation of health insurance. In consequence of the above, being a subject to social security insurance in Poland means also being subject to health insurance contributions.
Obtaining an A1 certificate
An application for a certificate on form A1 may be submitted by: an employee, employer or self-employed person. It is also possible to submit such an application through a proxy; for this purpose, you must first register the appropriate ZUS PEL power of attorney with ZUS.
Pursuant to Art. 12 of Regulation 883/2004, a certificate of compliance with social security provisions may be issued to a person seconded by the employer to another Member State, provided that the expected duration of the secondment does not exceed 24 months.
However, in accordance with Art. 13 section 1 and 2 of the above regulation, a certificate of compliance with social security provisions is issued to a person performing work in two or more Member States. He is then subject to the legislation of the Member State where he resides if he pursues a significant part of his work there. However, if he does not perform a significant part of his work at his place of residence, he will be subject to the legislation of the country where the employer’s registered office is located.
From April 1, 2022, applications for A1 certificates should be submitted to the Social Insurance Institution only in the form of electronic documents via the Electronic Services Platform (PUE) of ZUS.
Polish legislation on social security for posted employees
The insurance conditions of employees, who are subject to Polish social security legislation and who were seconded by a Polish employer to perform specific work abroad, meets the insurance conditions of employees working in Poland. However, the method of calculating the basis for calculating contributions is subject to change.
The obligation to pay social security contributions of the employee seconded to work abroad, rests on his employer. On the other hand, in case of an employee seconded to perform work on the territory of Poland, if he is a subject to Polish social security insurance, his employer should register in Poland for the social security purposes. However, there is a possibility for the employee to take over duties of the payer, and it will result with a lack of obligation to register in Poland for the foreign employer.
Summary
Establishing the right legislation is crucial to meeting your obligations to pay social security and health insurance contributions. Certificates such as A1 are necessary to confirm which legislation the employee is subject to, which helps avoid double taxation of contributions and ensures correct insurance settlement within the international framework. In order to correctly determine the appropriate legislation and obtain an A1 certificate, please contact our tax advisors.
Co-author: Karolina Nieścior, Tax advisory services
The series of “12 Rules of the Cross-Border Secondment of Employees” consists of the following articles:
- Cross-border secondment of employees
- Secondment and delegation
- Employee seconded to work in Poland
- Employee abroad – taxes in Poland
- Secondment – social and health insurance
- Secondment – documentation
- Secondment – double taxation agreements
- Secondment – income taxation in different countries
- Secondment – annual tax return
- Cross-border secondment of workers Directive
- Secondment – tax advisor assistance
- Secondment – additional questions
