Welcome back to the Freelancers’ Couch. This week we tackle a question from a globe-trotting freelancer on doing business in the EU in a post-Brexit marketplace.
Q: One of the reasons I became a contractor was to have the flexibility to work remotely, but also when required, parachute in for clients in the UK and the EU. What are my chances, as a Brit, regardless of residential status, of continuing work in the UK and the EU as an independent worker or agency contractor?
The Freelancers’ Couch went to Osborne Clarke’s Workforce Solutions team to find some answers.
For years, many UK staffing and consultancy companies have supplied contract workers into various EU countries on a “parachute” basis (such that the, often British, contractor or consultant is deployed to a local client in, say, Germany by a consultancy or staffing company in, say, London). Most of the larger international staffing companies headquartered in the UK started their international operations on this “go global lite” basis.
The EU-UK Trade and Co-operation Agreement (TCA) allows EU countries to prohibit remote recruitment operations, and it is not impossible that many countries will prohibit them in the way that Switzerland effectively has (the Swiss law requiring anyone who places a worker with a Swiss employer to have a local establishment and licence), according to Osborne Clarke’s Workforce Solutions Team.
“Perhaps more problematic for many UK staffing and consultancy companies in the short term is that the TCA prohibits the use of the temporary stay provisions where the stay involves a contractor or consultant parachuted by a UK consultancy or staffing company,” said the legal firm in a report, Brexit deal: seven major issues for workforce solutions and consultancy businesses.
The provisions require the worker either to have been employed for 12 months before being parachuted or to be engaged on a bona fide self-employed basis (which will not include many time- and material-based engagements).
In either case, the permission to be in-country under the “contractual services” and “independent professional” rules will generally only last as long as the relevant client project, with a 12-month time limit and the relevant worker needing a minimum amount of relevant specialist experience to qualify (six years seems to be the norm).
Recruitment re-think
This will force many UK staffing and consultancy companies to rethink the basis on which they deploy UK contractors and consultants into EU member states. One option will be to move away from time-and-materials-based engagement to genuine statement of work arrangements that involve agreeing with the client a fixed price for a defined deliverable and back to backing that arrangement to the worker.
“We are advising many companies who are moving to this model. Alternatively, the UK staffing and consultancy companies will need to establish themselves locally and employ/sponsor the relevant workers – which will take time and investment,” reported Osborne Clarke.
Taxing issues
In the law firm’s estimations, the remote deployment/parachute model can expose its users to taxation and regulatory problems, including in relation to permanent establishment rules relating to business licencing, corporation tax and VAT. Using in-country payroll companies or PEOs to engage and/or pay deployed contractors will not remove or reduce this risk.
Osborne Clarke suggests users of that remote deployment/parachute model should take legal advice as soon as possible – getting the contractual structure wrong could lead to serious liabilities.
What about EU workers who are already here and UK workers who are already in the EU?
Transitional rules may allow contractors and workers who have some form of settled status and have the right paperwork in place to be used:
- Any EU worker already resident in the UK or UK worker resident in the EU prior to midnight on the 31 January 2020 will be entitled to remain and continue to enjoy the benefits of residence (work, healthcare etc).
- Each country has its own method for obtaining proof of lawful residence, which in the UK is the EU Settlement Scheme (EUSS) done through an app, and individuals have until the 30 June 2021 to make an application for their proof of residence. If they have not applied by this date, they will become illegally resident on the 1 July 2021. In the UK, this will form either pre-settled status (valid for five years) or settled status (permanent), and it is issued electronically.
- There are similar schemes throughout the EU, only with variations on methods of application (in France, for example, it is done via the local police station) rather than on requirements and outcomes.
Right to work?
Right to work is more of a grey area, says Osborne Clarke.
“The Home Office has confirmed that employers have no right to demand that individuals apply under the EUSS and share their outcome (due to conflicts around discrimination), and confirm that a copy of an EU passport remains perfectly acceptable. However, this contradicts the Prevention of Illegal Working Regulations which confirm that any copy taken after 1 Jan 2021 would not confirm a lawful right to work (as it doesn’t confirm arrival prior to this date).
“In addition, any EU national in the UK after 1 July 2021 without status under the EUSS would be here illegally, even if resident before 1 January, and thus an employer would face a penalty for employing an illegal worker”.
osborne clarke workforce solutions
Be prepared for June
Osborne Clarke is advising clients to gently “suggest” their workers obtain and share their status before the end of June, and have this “encouragement” become more forceful nearer the time – when they expect the guidance to be clearer.
“In the run-up to the end of June companies may decide that they must have EUSS evidence on file, and terminate employment if this is not forthcoming,” said the firm.
This session on The Freelancers’ Couch was made possible through Osborne Clarke’s Workforce Solutions