Cross-border telework: Social security considerations for employers and employees

With the rise of telework, cross-border arrangements, e.g. involving Sweden and Germany, are becoming increasingly common. These situations often raise questions about social security coverage—specifically, which country’s social security system applies to the employee. The legal framework for such scenarios is primarily governed by Regulation (EC) No 883/2004, which coordinates national social security systems, as well as the Framework Agreement on Cross-Border Telework.

Under Regulation (EC) No 883/2004, an employee can be covered by the social security system of only one member state at a time, typically the state of employment. The state of employment is defined as the country where the individual performs their work, whether as an employee or self-employed, regardless of their place of residence or the location of their employer’s registered office.

This general rule has exceptions in specific situations, such as when an employee is temporarily posted to another member state or when the employee works simultaneously in multiple member states, as often occurs with cross-border telework. In such cases, the employee is typically covered by the social security system of their country of residence, provided they carry out a substantial part of their work there. However, determining the country of residence can be complex, especially when an employee is registered in two countries, maintains residences in both, and has significant ties to each.

The country of residence is also crucial for applying the Framework Agreement on Cross-Border Telework. According to the Framework Agreement, an employee engaged in habitual cross-border telework is covered by the social security system of the state where the employer’s registered office or principal place of business is located—provided that less than 50% of the employee’s total working time is spent teleworking in their state of residence.

In light of the above, employers permitting cross-border telework are advised to update their telework policies to align with the Framework Agreement on Cross-Border Telework. Employers should also seek guidance from relevant authorities, such as Försäkringskassan in Sweden or Deutsche Rentenversicherung in Germany.

While cross-border telework arrangements can be complex, a clear understanding of the applicable legal framework enables the creation of compliant and flexible solutions. For tailored advice and case-specific assessments, particularly involving Germany and Sweden, feel free to reach out to me or one of my colleagues.