What rights do expatriate workers have?
Once again, globalization has transformed the reality of employers and employees, generating new legal and formal needs for diverse employment situations.
This is the case for expatriate workers.
Expatriate workers are those who are temporarily sent to another country by their company to perform specific functions.
They are therefore faced with a regulatory framework that combines local labour laws, international agreements and specific regulations that protect their rights.
If a contract is initially signed to perform duties in one country, and subsequently the worker is transferred to another territory , it is essential to know the labor, tax, and social security rights and conditions that protect these workers.
Throughout this article we will address the keys to ensuring that these professionals can carry out their activity with full legal guarantees and fair conditions.
What is labor expatriation?
As one might guess, expatriation is a common phenomenon in the internationalization processes of companies.
However, it is important to define the concept of labour expatriation.
Since, depending on details such as the duration of the displacement and the legal framework, there are similar concepts that can lead to confusion.
On the one hand, there is job displacement or displaced workers..
In this case, the worker is temporarily reassigned to perform a specific task. This period is the shortest and usually does not exceed 12 months.
It is a highly considered and regulated situation, since the worker maintains the conditions of the original contract with the contracting company and remains subject to the social security of the country of origin.
A clear example is European legislation through Directive 96/71/EC on the posting of workers in the framework of a transnational provision of services within the European Union.
On the other hand, there is labor expatriation.
This is considered to be any temporary international transfer that involves a return to the country of origin, so that they can work in the same organization from another territory.
In this situation the duration of the displacement period is longer and ranges from 12 months to 5 years.
This long duration increases legal complexity.
Therefore, the main difference with displacement arises: with expatriation the worker is linked to the social security system of the host country where the work is carried out.
Therefore, it is a broader term with less regulation.
There may be two situations:
- Expatriation with original contract. Where the contract with the company of origin is maintained. This type usually applies when there are international social security agreements, such as bilateral agreements or the European Union regulation on the coordination of social security systems.
- Expatriation with a new contract. Where a contract is established with the subsidiary in the host country, although the relationship with the parent company in the country of origin is maintained. However, this situation usually occurs when there are no international agreements or the duration of the stay exceeds the limits designated in the legal framework.
It's easy to get confused here. The key is that there's no single rule that applies to all expatriation cases.
Whether or not the worker retains their affiliation with the social security system of the country of origin depends on factors such as: the length of stay, the existence of international agreements or the company's policy.
Finally, there is the circumstance of localization or local contracting.
It is a process that involves signing a contract directly with the entity in the destination country.
In this case, the employment relationship with the country of origin is terminated and the duration of the work is usually indefinite.
This means that the worker is fully subject to the labour and tax legislation of the country where he or she will provide his or her services, and is no longer considered a temporary transfer.
What rights do displaced workers have?
Once the concepts are clear, it is easier to define the regulatory framework established in Spain for these conditions.
European Regime
As mentioned, within the European Union there is a specific regulatory framework for posted workers :
Directive 96/71/EC of the European Parliament and of the Council of 16 December 1996 on the posting of workers in the framework of the provision of services.
This has its origin in Article 54 and Articles 56 to 62 of the TFEU, and its objective was to guarantee the minimum protection of the labour rights of posted workers, while promoting the free provision of services in the internal market.
However, in the years following its adoption, challenges arose such as the wage gap between displaced workers, malpractice and the lack of clarity of the established standards.
Consequently, Directive 2014/67/EU on compliance assurance and the revised Posting of Workers Directive ( Directive (EU) 2018/957 ) emerged.
The scope of this legal framework is not limited to companies incorporated within the EU, but also includes companies from third countries with operations within the EU and temporary employment agencies.
However, it only regulates movement within the territory of the EU and the European Economic Area (EEA).
Furthermore, business trips are not considered displaced workers.
basic conditions required during the displacement they include from:
Minimum rest periods, maximum working time, minimum length of paid annual leave, remuneration, equal treatment and non-discrimination, health and safety, accommodation conditions and reimbursement of expenses.
In short , if these working conditions are more favorable for workers in the country of origin than in the country of destination, the employer must maintain them during the period of assignment.
In addition, the worker must be provided with basic information in writing: country of destination, duration, currency, any benefits related to the assignment of work, repatriation information, remuneration, methods of reimbursement of expenses and any necessary supplement.
Finally, notification of the transfer is mandatory to the authorities of the destination country, and must include: the identity of the employer, the number of posted workers, the employer's contact person, the address of the posted workplace, the expected duration of the posting, including the start and end dates, the type of service provided during the posting, and a contact person who will contact the authorities of the destination country.
For the remainder of the employment relationship, the labor law rules of the country of origin would continue to apply.
Regarding social security , in the European Union it is regulated by Regulation (EC) No 883/2004 of the European Parliament and of the Council of 29 April 2004 on the coordination of social security systems. According to this regulation, posted workers will continue to be covered by the social security system of their country of origin, provided that the posting generally lasts less than two years.
With regard to taxation, the right to collect income tax was maintained in the country of origin for 183 days and passed to the host country only after that period had elapsed.
Spanish regime
In Spain, the previous directive is transposed by Law 45/1999, of November 29, on the posting of workers within the framework of a transnational provision of services.
In the case of travel to destinations in third countries outside the European Union, Spanish legislation will apply: the Workers' Statute (Royal Legislative Decree 2/2015).
Although the Workers' Statute does not regulate international work transfers in detail, it establishes the basic principles applicable to any transfer, ensuring that the worker:
- Maintain your minimum labor rights, such as salary, working hours and vacations.
- Be informed in a clear and transparent manner.
- Receive adequate compensation to cover relocation expenses.
Article 40
Article 40 relates to geographical mobility and is the main reference for work-related travel in Spain.
Although the law is more specific to transfers within the national territory, these key principles established for international transfers ensure that workers maintain basic labor rights and that companies assume the costs of the transfer.
In these cases it is essential to determine if there are bilateral agreements between Spain and the destination country.
The social security and tax aspects of the worker will be regulated within this agreed framework.
In the absence of agreements between the two countries, the worker will be subject to the local laws of the country where he performs his work, both in labor and social security matters.
What rights do expatriate workers have?
In principle, when the duration of the transfer does not exceed two years, the applicable regulations would be the same as the conditions for a posted worker.
In the case of mobility within the EU , the directives would apply, and for mobility to third countries, a combination of any existing agreement between both countries and the national laws of the destination country would apply.
What happens when the expatriation exceeds two years?
Mobility within the EU
According to Directive 96/71/EC and Directive 2018/957/EU (posting of workers):
- If the displacement exceeds 12 months, extendable up to a maximum of 18 months, the full conditions of the destination country that are most favorable to the worker must be applied, except those relating to the termination of the employment contract and affiliation to social security.
- When the displacement exceeds 18 months, the worker becomes mostly regulated by the labor framework of the destination country, including more labor rights and obligations for the company.
Regarding Social Security, Regulation (EC) 883/2004 establishes that if the posting lasts more than 24 months or must be extended, the employer may:
- request an extension; this is not granted automatically and will be subject to a mutual agreement between the country of origin and the country of destination;
- allow the worker to register in the social security system of the destination country.
Mobility outside the European Union
In these cases, the applicable law would depend on the existence of bilateral agreements with the destination country.
Unless clearly specified in the contract or in a prior agreement between the parties, if an expatriate worker is sent from Spain to a country outside the European Union , Spanish law will apply as the main regulation, provided that the employment relationship is maintained with a Spanish company.
This is based on the general principles of Private International Law, specifically the Rome I Regulation (Regulation (EC) 593/2008), and Spanish labor legislation.
As a reinforcement of the social security protection rights for people employed in Spain by a company that carries out its activities in Spanish territory, there is Order ISM/835/2023, of July 20, which regulates the situation assimilated to registration in the Social Security system of workers posted abroad to the service of companies that carry out their activities in Spanish territory.
This law provides for four cases of situations similar to discharge:
- Countries without applicable international instrument: When the worker is transferred to a country with which Spain does not have an agreement on the coordination of Social Security systems.
- Countries with an international instrument that excludes the worker: If there is an agreement, but it does not include the worker due to his or her nationality or other reasons.
- Countries with an agreement that allows maintaining Spanish legislation: When the agreement allows the worker to continue to be covered by Spanish Social Security during the transfer, but the maximum period and any possible extensions have been exhausted.
- Countries with an agreement that does not contemplate the displacement of workers: If the agreement does not provide for the figure of the worker transferred by his company to the territory of the other party.
In the first two cases, assimilation to discharge is automatic and mandatory.
In the last two, a voluntary agreement between the company and the worker is required to maintain the link to the Spanish system.
Therefore, thanks to this legislation, continuity of access to benefits from the Spanish system is guaranteed, such as: healthcare, temporary disability, maternity/paternity, retirement and other contributory benefits.
If the worker exhausts the maximum coverage period under the agreement (generally 2 years), he/she can remain in the Spanish Social Security under this order, with prior agreement between the company and the worker.
The maximum time is 5 years.
Finally, it is a flexible law that takes into account the existence of previous international agreements and whose main objective is to promote the basic rights of workers in this situation, ensuring the most favorable protection.
Special cases
What happens to workers who work in more than one state?
In this case, they are subject to the legislation of the country where they habitually reside, whether they are employees or self-employed.
Are workers hired in Spain by foreign companies considered expatriates?
Workers hired by foreign companies to work in Spain are subject to Spanish Social Security legislation if they were residents of Spain before being hired. These workers are not considered transferred workers, and therefore the general rule applies to them, subjecting them to the Social Security legislation of the country where they work.
Conclusion
In conclusion, when faced with a situation of displacement, expatriation or localization, it is essential to be aware of the applicable legal framework in order to guarantee the most favorable conditions for the worker.
Undoubtedly, the most beneficial situation for this type of movement is the existence of a bilateral agreement or international agreement that avoids double taxation and coordinates existing regulations.
RRYP Global , international labor law attorneys.
