How does homeworking influence cross-border workers’ tax and social security position?

There are many advantages to homeworking. That is why many employers offer their employees the option to work at home. We previously wrote that homeworking does, however, present risks for employers. We published an article on our website about the employer’s liability for the employee’s home office.

With respect to cross-border workers, however, there is yet another homeworking risk. Homeworking can have unforeseen consequences for an employee’s tax position and social security position and for the employer’s deduction and other obligations. This risk is higher when the employee works part-time.

We will address this risk briefly in this article. Please note: this article only covers a few main themes and is certainly not an exhaustive summary!

We will address this risk briefly in this article. Please note: this article only covers a few main themes and is certainly not an exhaustive summary!

If the employee works one or more days a week at home at any point (for example because the daily commute to Germany becomes onerous) this can have consequences for the taxation and social security situation.

If the employee works one or more days a week at home at any point (for example because the daily commute to Germany becomes onerous) this can have consequences for the taxation and social security situation.

In the example given above, the employee works one day or more at home every week. But even if the employee only works the odd day at home, this would already impact the tax situation.

Consequences of homeworking on social security

The main rule is that an employee is covered by social security in the country in which he or she works.

But as soon as an employee starts working at home as in this example, he or she is employed in two countries simultaneously (namely Germany and the Netherlands). What applies then?

What is important for the social security situation is whether the employee works more or less than 25% of the total working hours at home. If the employee works less than 25% of the working hours at home, he or she is entirely subject to the German social security legislation. But if the employee works 25% or more of the time at home, or rather outside of Germany, the Dutch social security legislation applies.

An employee can only be pay social security contributions in one country. This is in contrast to taxation, which can be split over two countries.

Let’s look at this in more detail. If an employee works full-time and works one day a week at home (20%), the 25% regulation is not met and the legislation of the country in which the employer is established, namely Germany, applies. But if the employee concerned also visits customers in the Netherlands as well as one day a week homeworking and therefore works at least 25% of the time in his country of residence (the Netherlands), the employee will be subject to the Dutch social security system.

As stated, the above risk is even greater for part-time workers. In the case of a part-time contract, the 25% limit will be reached earlier.

In summary, as soon as an employee who resides in the Netherlands works for a German employer and works for at least 25% of the time in the Netherlands, he or she is automatically fully insured in accordance with the Dutch social security system. For the German employer, this means that it no longer needs to pay social security contributions in Germany but in the Netherlands. The German employer must register for this at the Tax Office in the Netherlands and must establish a complete Dutch salary administration for the deduction and payment of the employee and employer contributions. As you can imagine, this can end up being more expensive for the employer.

But vice versa this also applies to you as Dutch employer when you employ employees who work over the border.

That is why we advise you, as employer of employees who live over the border (so-called cross-border workers), to map out the financial consequences of homeworking before you allow employees to start working partially from home.

And if you allow the employee to work from home, in some cases it can be wise to request a so-called A1 statement. This form confirms the employee’s social security position.

Do you have any questions about this? If so, please feel free to contact one of our employment lawyers. As employment lawyers we are delighted to offer you support and advice!

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