Member Article

The transitional period linked to the Covid-19 pandemic ends on 30 June 2023. As a result, the social security thresholds for teleworking come into effect again, with all the obligations and administrative formalities that this entails.

However, some cross-border teleworkers and their employers will be subject to new rules under the new European telework framework agreement_ signed by Luxembourg on 5 June 2023.

1. What is the purpose of the framework agreement?

The agreement aims to promote cross-border teleworking, while ensuring that teleworkers continue to be affiliated to the social security system of the country in which their employer is based. It establishes clear guidelines for teleworking in EU Member States and countries treated as such (Iceland, Liechtenstein, Norway and Switzerland).

It offers significant opportunities and advantages to cross-border workers from the signatory countries, and also has important HR and legal implications for Luxembourg employers.

2. Who can benefit from the framework agreement?

The framework agreement defines habitual cross-border telework as an activity which can be performed from any location, including the employer's premises, and is carried out in one or more Member States other than the one where the employer's premises are located by relying on information and communication technology. The teleworker must remain connected to the employer's working environment in order to carry out the tasks assigned to them.

On the basis of this definition, employees must satisfy all the following conditions in order to benefit from the framework agreement:

	The country in which the employer has its registered office and the employee's country of residence must both be signatories of the framework agreement.
	Teleworking activity performed in the employee's country of residence must be at least 25% and less than 50% of the employee's total working time (if the activity is less than 25% of their working time, the usual European provisions on social security coordination apply).
	It must be possible for the employee to connect to the employer's IT infrastructure in order to ensure they complete their work.
	The employee must not carry on any other activity in their country of residence or any other country.

However, the framework agreement does not cover work activities in more than Member State or secondments.

3. What are the consequences for employers?

Employers need to take account of the following:

	Social security implications: Cross-border employees who habitually work in Luxembourg may, depending on their place of residence, be able to telework from home more often without becoming disaffiliated from the Luxembourg social security scheme. Employers’ administrative formalities in this area have been greatly simplified. Cross-border employees who telework from home and whose teleworking time exceeds the threshold set by the framework agreement will in principle be reaffiliated to the social security system of their country of residence.
	Administrative formalities: Any teleworking activity regularly carried out by an employee who is not resident in Luxembourg must be declared to the Social Security Centre (Centre commun de la sécurité sociale or CCSS). For now, declarations can be made here_. Employers will be sent a token to make their declarations online.
	Interaction with tax implications: The framework agreement only applies in relation to social security. The tax rules are governed by specific bilateral agreements and remain unchanged at present (see our summary diagram above). If these thresholds are exceeded during the year, the cross-border employee is taxable in their country of residence for the days worked outside Luxembourg. Given the framework agreement and with the aim of becoming more attractive to staff, local employers will certainly be looking very hard at the possibility of exceeding the tax thresholds, with the resulting consequences. This will require an assessment of the position, based on employees' place(s) of residence.
	Contractual obligations: Employers with teleworking employees should ensure that the employment contracts of cross-border workers include specific provisions about teleworking which comply with legal and regulatory requirements, as well as with their own internal rules.
	Management of working time: It is essential that employers put in place appropriate monitoring mechanisms to track the teleworking days of cross-border workers, to be able to comply with the limits set by the framework agreement.
	Teleworking policy: The framework agreement means that local employers need to review their teleworking policies and calibrate them for each category of staff within the business (tax resident in Luxembourg, resident in another signatory to the framework agreement, and resident in a non-signatory country).

4. Which countries have signed the framework agreement?

The countries bordering Luxembourg that have signed the framework agreement are Germany, Belgium and France, thus enabling their resident employees to benefit from the new, more favourable teleworking arrangements. You can see the list of signatory countries here_.

5. When does the framework agreement come into effect?

The framework agreement applies from 1 July 2023. However, a transitional rule allows regular teleworking by cross-border employees from 1 July 2023 to be declared up to and including 30 June 2024.
The framework agreement is valid for five years and will be automatically renewed for the same period, unless terminated with three months' notice or by mutual agreement of the countries concerned.

Our Employment Law, Pensions & Benefits_ team will be happy to answer any questions you may have and help you complete all the necessary formalities.
Stay tuned as we will be organising a conference on this topic in September. If you no longer receive our Newsflashes, you can subscribe to them here_.