Change in the social security rules pursuant to the new EC regulation

15 June 2010

Social security systems are currently coordinated by Regulation 1408/71/EEC and by Regulation 574/72/EEC on the implementation thereof.

Regulation 883/2004/EC (hereinafter: Regulation) was adopted on 29 April 2004 in order to replace Regulation 1408/71; it contains important changes with respect to the earlier regulations.

The regulation is directly effected in the EU Countries as well as in Hungary.

The regulation is expected to take effect on 1 May 2010, together with the regulation on its implementation.

The new regulation has been adopted in respect of the European Union, however, the earlier regulation remains in effect in respect of Norway, Liechtenstein, Iceland and Switzerland.

The “keywords” of the new regulation

  • Clear, accurate, simpler wording
  • Electronic administration
  • High-level electronic co-operation between the competent institutions
  • Simplified regulations


Activity performed in two or several member states

The earlier rules connected to the maintaining of the social security legal status in the home country by an employee are changing. An element of key importance in the new regulation is the determination in which country the employee mainly performs the major part of his activity.

The social security status of a person usually working as an employee in two or more member states is determined as follows:

  • The rules of the country of his residence must be applied if the major part of his activity is performed in the given member state.
  • The rules of that member state must be applied in which the employer’s registered head office or permanent establishment is located if the person performs the major part of his activity in a member state other than the state of his residence.

An activity performed in a member state cannot be deemed as a major activity if in terms of the business turnover, the working hours, or the wage, it represents less than 25 percent of the total business turnover, working hours, or wage.


Social security status in several member states at the same time

The new regulation further strengthened the earlier rule according to which a person may only have social security status in one member state. The earlier regulation contained some exceptions in the case of which the social security status could be maintained in two member states, however, this is not allowed by the new regulation.


Implementation of a new information system

Electronic data exchange will be implemented between the institutions of the individual member states, which will gradually replace the earlier documents (E101, E102). The member states will supply all data to each other, which are required for the determination of the social security contribution of the persons subject to the regulation. The content of the individual documents and the format of the standardised electronic messages will be determined by the administrative committee. The system is expected to fully switch to the use of new forms and applications from 2012, till then the old and new systems will operate concurrently.


Changes in the rules applicable to foreign assignment

In accordance with the current regulation, the employee on foreign assignment will remain insured by the home member state if the term of the assignment does not exceed 12 months. The period of 12 months can be extended by further 12-months period if due to an unforeseeable circumstance the term of the assignment is extended.

According to the new regulation, the employee on assignment will remain insured in accordance with the laws of the home member state if the duration of the foreign assignment is not expected to exceed 24 months, provided that the purpose of the foreign assignment is a purpose other than the replacement of another person. The new regulation, however, does not contain the possibility of extending the foreign assignment.

The earlier practice according to which an employee could remain insured in accordance with the laws of the home member state even for 5 years is not included in the regulation. The member states, however, may agree on exceptions to the above rules, which will probably include the possibility of a longer foreign assignment.


Collection of contributions

Another novelty is that in accordance with the new regulation, the institution of a member state will be obliged to collect the contributions due to the institution of another member state. The courts and administrative authorities must recognise enforceable decisions and must enforce them at the request of the competent institution of the other member state.