Learning lessons in a European border region

ITEM (Institute for Transnational and Euregional cross border cooperation and Mobility) is one of UM’s European institutes. ITEM regards the increasingly international Euregion as a European living lab. The institute looks at the negative and positive cross-border effects of policy and legislation as well as their consequences for citizens and society. A very topical subject that deserves attention and requires solutions is how borders restrict cross-border workers’ right to work from home. Especially with the current experiences during the corona pandemic, this is a subject that deserves attention and requires solutions. Under existing restrictions cross-border workers might soon have fewer opportunities to work from home than colleagues who live in their employer's country. Such inequality cannot be the intention and can certainly have stagnant effects in border regions.

Government commitments

The border workers issue is discussed in ITEM's annual cross-border impact assessment (link). The results of ITEM's research have already sparked discussions and debates at EU level as well as nationally in Germany, Belgium and the Netherlands. Recently, the Dutch government has promised to look at current regulations and find solutions with neighbouring countries and within the EU. Now it is important that the regulators keep their promises, so that the experiences in the Euregio Meuse-Rhine can soon lead to solutions that can of course also be applied in other European border regions. What is going on?

Working from home is increasing

Due to the corona pandemic, more people are working from home than ever before. In many cases, working from home is even an obligation. It is estimated that, across the EU, employees, on average, work from home about 40% of the time. In the Netherlands, this percentage is even higher at 49%. This also applies to cross-border workers. Positive experiences with working from home have led politicians and employers to the idea to promote working from home also after the pandemic.

Temporary exemption

In that case, a strange situation can arise for cross-border workers. The country of residence may levy tax on income derived from work performed at home. This can lead to a mismatch in tax and social security contributions. Furthermore, if more than 25% of hours are worked from home, cross-border workers might see their social security system change from country of employment to that of residence. Thus, under the current legislation, cross-border workers face a shift in taxation and social security if working from home exceeds 25 percent. Depending on the specific situation, cross-border workers might end up with financial advantages or disadvantages. In most cases, it means extra costs for the employer if contributions in the country of residence are higher, but also because of the added administrative burden. Until now, international and bilateral agreements allowed cross-border worker to work from home without effects on tax and social security obligations. However, this exemption is temporary while working from home will be structural.

Higher exemption threshold

However, this should be solvable. During the corona crisis, separate short-term agreements were made bilaterally to allow working from home without taxation in the country of residence and to leave social security unchanged. However, the schemes will expire in March and June 2022 respectively. Since it is expected that the percentage of employees working from home after the pandemic will amount to a minimum of two days a week, there is work to be done to arrive at a structural solution. ITEM understands the discussion around a 40% threshold. It is especially clear that the current rules are not fit for the future, as working from home is barely facilitated without major consequences. Increasing the percentage of 25 that is currently the threshold for social security would be a step forward. To achieve that, the institute mainly advises reaching better bilateral agreements between the countries involved. Each working from home percentage is arbitrary, but 40% seems to be an acceptable solution for cross-border workers and feasible in a policy context. A higher percentage would be even better. In the European Parliament, 60% has been suggested.

Governments on the move

Belgium, Germany and the Netherlands have indicated that they want to look into this. The clock is ticking though, mainly because structural adjustment of legislation and regulations is not a question of months. With the advice of ITEM in hand, companies, institutions and regional governments emphasize that something must be done quickly. Ultimately, it cannot and should not be the case that a cross-border worker will soon receive less freedom from employers to work from home than other colleagues do, or that employers themselves no longer opt for cross-border workers because of the complicated and expensive situation. In the first case, inequality arises and in the second, this leads to a restriction of free movement and has major consequences for the labour market in border regions. Scientific lessons have been learned by ITEM. The advice is clear. Now it's up to the governments.