A1 certificate for business trips and secondments: what it really means
Hardly any other topic is currently causing as much headaches for HR managers as the A1 certificate – at least when it comes to business trips and secondments abroad. Yet it's not even particularly new, and it's far from the most important part of the employee assignment process abroad. What misunderstandings and even myths there are in the matter of the A1 certificate, this article explains with the help of a practical example.
A German kitchen builder is to install customized kitchens at a hotel customer in Luxembourg within ten days and send some fitters to the hotel for this purpose. At the same time, the company's managing director wants to travel to Luxembourg for a five-day meeting with a potential customer. So far, so normal – everyday business life as experienced by hundreds of internationally operating companies and quite a few HR managers in this country. However, for quite some time now, the issue of the A1 certificate seems to be playing an unprecedented role in this context. There is no other way to explain why we are receiving so many requests for advice on this matter.
The personnel manager of the kitchen manufacturer – let's call him Christian Karl for our practical example – also wanted to make sure whether it was sufficient to apply for the A1 certificate for both constellations. Like him, HR professionals seeking advice are often primarily concerned with getting confirmation that they are doing everything right by requesting this confirmation. What they often underestimate: Applying for this proof may amount to just two percent of what is required for a "proper" posting or foreign service trip. There is no question that an A1 certificate is mandatory, but its importance is overestimated. Rather, it is only one small component in a large catalog of administrative requirements that human resources management must fulfill and which vary in scope depending on the country of residence.
Activity and duration determine the administrative burden
This was also the experience of Mr. Karl when he wanted to send the fitters and the managing director to Luxembourg. What he didn't realize was that even though the country of assignment was the same and only a short period of time was planned in both cases, the administrative requirements he had to meet were vastly different. The decisive factor – completely independent of the A1 certificate – was the planned activity on site.
First, a few basic facts as a reminder: In order to avoid paying social security contributions within the European Union, both in the home country and in the country of employment, and to have the option of remaining in the home system, Regulation (EC) no. 883/2004. The requirements for issuing the A1 certificate are checked by the respective office; in most cases, this is the employee's health insurance fund. The A1 certificate is, in a way, the confirmation of the fulfillment of all conditions. In practice, an employee may work for his German employer in another EU member state and continue to be covered by the health, pension and unemployment insurance of his home country. However, this is possible for a maximum of 24 months. And this regulation does not only apply to long-term assignments, but also to (short) business trips. However, the A1 certificate is only used to confirm that you remain in your home country's social security system. If, however, you want to have access to health services in an EU host country, you will need the European Health Insurance Card or the S1 certificate, depending on the duration of the assignment abroad.
A1 certificate is not a passport
Moreover, an A1 certificate is not a work or entry permit. It also does not have the character of a passport, which must be shown when crossing the border. Nevertheless, it should always be carried along for both reportable and non-reportable business trips. Because: A posting is not only present in those cases in which employees are deployed abroad to carry out a project. Participation in conferences or seminars, i.e. any border crossing for professional reasons, also requires the carrying of an A1 certificate.
And indeed: In many European countries, the absence of this document is punished with sanctions and fines that can be up to 10.000 euros can be high. An employee who cannot prove that he or she continues to be employed in the home country subject to social security contributions must theoretically transfer to the host country's system and also pay the contributions for it. The situation also becomes critical if an employee has to claim social insurance benefits in the host country – for example, as a result of an accident at work – but does not have proof of the relevant social insurance in the form of the A1 certificate. In the worst case, the employee's employer's liability insurance association in the host country, for example, may initially refuse to pay the sickness and accident costs due to the lack of proof of social insurance, but rather due to the professional nature of the stay abroad.
No difference between business trip and secondment
Since the entry into force of Regulation (EC) 883/2004 in 2010, employers and employees have been legally obliged to notify the competent insurance institution of any cross-border activity within the EU/EEA and Switzerland. Important: Since there is no distinction in social security law between a posting and a business trip, this means that an A1 certificate is required for every cross-border activity, no matter how short, from the first day onwards. The legal framework does not currently provide for a de minimis time limit for business trips or postings. Even if the stay in another EU country is only for a few hours, it is currently still a posting.
There are rumors to the contrary, and in March of this year the European Commission proposed that in future no A1 posting form should be required for short business trips to other EU countries. However, the EU Council rejected this proposal in June 2019. There have even been rumors that the A1 certificate could be abolished, but this contradicts the nature of any posting and would not bring any significant administrative relief.
Video about the A1 certificate
Back to the kitchen builder: The responsible HR manager Christian Karl had to consider both cases separately, with a different administrative burden in the further procedure. Both constellations have in common that the application for the A1 certificate was unavoidable. At least the business trip of the managing director was somewhat easier, because for him no obligatory notification has to be made. For business and international trips where there is no contractual relationship with a Luxembourg resident, no posting notification needs to be submitted in Luxembourg. All Mr. Karl had to do in this case was to apply for the A1 certificate for the foreign assignment of the managing director.
Posting notification is required for assemblers
For the business trip of the kitchen fitters however still far more was to be settled. In order for the kitchen fitters to carry out the installation work in the hotel, Mr. Karl had to notify the General Directorate for Medium-Sized Businesses (Direction generale des classes moyennes) of the Ministry of the Economy (Ministere de l'Economie) of this fact. The latter subsequently issued a certificate of this advance notification. Mr. Karl also had to apply for a Luxembourg VAT number at the Administration de l'enregistrement, des domaines et de la TVA (see screenshots of the electronic platform "e-Detachement").
Strictly speaking, Mr. Karl would also have had to make sure in advance that the fitters were actually authorized to stay and work in Luxembourg. If one of them is not an EU citizen, then a permit and a residence permit for third-country nationals must still be applied for. The formalities also include providing the date of commencement and the expected duration of the posting – as specified in the service contract – as well as the place of work in Luxembourg (i.e. the hotel) and the expected duration of the work. Furthermore, Mr. Karl had to provide the surnames, first names, dates of birth, nationalities and occupations of the workers and their capacity in which they are employed by the kitchen manufacturer. In addition to the certificate of posting, fitters must carry either the original or a certified copy of the A1 form with them when they start their business trip.
A copy of the employment contract and, in the case of part-time work or a fixed-term employment contract, a certificate of compliance issued by the competent inspection authority of the country in which the posting company has its registered office or usually carries out its work must also be available at the start of the project. Furthermore, kitchen builders must provide a copy of the medical certificate of employment issued by the occupational health services of the country of origin responsible for the sector in question or, exceptionally, by a corresponding approved service from Luxembourg.
EU requires employers to comply with all administrative steps
If the business trip lasts longer, Mr. Karl must keep the data of the assemblers constantly up to date by sending the pay slips as well as the corresponding payment vouchers for the entire duration of the assignment the work records indicating the beginning, the end and the duration of the daily working time. All the aforementioned documents must be translated into French. During the posting, the employer must ensure compliance with the Luxembourg legal provisions applicable to the posted employees in terms of labor law and income tax.
This sounds like an enormous administrative burden and it often happens that companies seeking advice from the BDAE cannot believe that they really have to comply with all these administrative requirements. But the fourth sentence of Article 9 2014/67 of the EU regulation requires just that: "Member States shall ensure that procedures and formalities relating to the posting of workers under this Article can be completed by undertakings in a user-friendly manner, as far as possible by means of distance communication and electronic means."
In case of violation of the administrative requirements of the Grand Duchy of Luxembourg, employers face fines of 1.000 to 5.000 euros per employee, in case of repetition 2.000 to 10.000 euros per employee. A maximum fine of up to 50 % may be imposed.000 euros come. In this context, companies should also pay particular attention to the new requirements in the context of joint and several liability when using subcontractors in the construction industry. Furthermore, in the event of particularly serious violations, the ITM may also order the stoppage of work. Employees posted to Luxembourg may also sue their foreign employers in a Luxembourg court if they violate the rules. This right remains even after the deployment is complete.
All of these administrative requirements are the so-called notification requirements, which cause a similar amount of headaches for HR professionals as the issue of A1 certification. And these, in turn, function primarily as a control measure for compliance with the EU regulation and the Posted Workers Directive. This, in turn, has as its primary goal the standardization of employee deployment across the EU and ensuring a minimum level of protection for posted workers in the host country.
These positions and activities do not require a posting notice
- Work assignments of managing directors and self-employed persons,
- Delivery of goods in factory traffic,
- Outreach to the maritime sector,
- Transportation (requirements currently suspended)