Cross-Border Catch-Up: A Practical Guide to Hiring Across European Borders

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Goli Rahimi: Welcome to the Cross-Border Catch-Up, the podcast for global employers who want to stay in the know about cutting-edge employment issues worldwide. My name is Goli Rahimi, and I’m here with my colleague, Kate Thompson. We are both cross-border attorneys here at Ogletree Deakins. Today we’re tackling a topic that affects nearly two million people across Europe, and that’s cross-border commuters. These are workers who live in one EU country, but hop across the border to work in another. So, if you’re an employer thinking about hiring one of these workers or perhaps you’ve already hired one, please do stick around, because there’s a lot to unpack here. So, Kate, thank you so much for joining us today.

Kate Thompson: Of course, Goli, thanks for having me. So today we’re going to cover everything from who qualifies as a cross-border commuter to which laws apply, how to handle payroll, tax implications, and where to get help when things get confusing, because they often do get confusing when we’re talking about this topic. So, let’s start with the basics. What exactly is a cross-border commuter? So, under EU law, it’s anyone who works in one member state while living in another. And here’s the thing that surprises a lot of people. You don’t have to commute every day. Even if you only travel to your workplace in one country once a week, these considerations might still apply to you.

Goli Rahimi: Oh, that’s really interesting. So, could you tell us what makes these workers different from, say a migrant worker or somebody who just moves abroad entirely?

Kate Thompson: Yeah, definitely. So, it’s all about the dual connection. So, a traditional migrant worker leaves their home country completely to live and also work somewhere else, but a cross-border commuter keeps one foot in each country. So, they maintain ties to where they live and where they work. And we’re not talking about a small number of people here. Goli, like you mentioned at the beginning of the podcast, the EU internal border regions cover about 40% of EU territory and they’re home to almost two million cross-border commuters. So, think about regions like the Greater Region spanning Belgium, France, Germany, and Luxembourg, or the Upper Rhine area connecting France, Germany, and Switzerland. These are incredibly busy cross-border labor markets. And the numbers have only grown since the pandemic, which I’m sure is not a surprise to hear. So, you now have people who move to a cheaper region or closer to family during lockdowns, and ultimately, they’ve stayed there while keeping their jobs across the border.

Goli Rahimi: So, I think it comes as no surprise to anyone, but this sounds like it has created some interesting legal questions. So, Kate, let’s talk about an example where you have an individual who lives in France, but they commute across the border to work in Belgium. Which countries laws apply?

Kate Thompson: So, the answer is actually both, but for different things. So, the laws of the country where the person works, that’s going to govern the employment relationship. So, think labor law, working conditions, and most social security rights. But the laws of where they live cover things like residence formalities or property taxes and most other taxes. So, if you are an employer in Belgium hiring someone who lives in France, then Belgium employment law applies to how you treat that worker. And here’s the really crucial point. EU regulations clearly state that employers must treat that cross-border worker the same as their home base employees. Ultimately, EU regulations are very clear on this, equal treatment and remuneration, working conditions, dismissal, even things like reinstatement if they become unemployed.

Goli Rahimi: So, let’s take a more practical example. Okay, say you have a German company that offers all of its employees a transportation allowance or a childcare subsidy. If that company hires someone in France who then commutes to work in Germany, we’re saying that that French resident is actually entitled to the very same benefits as their German colleagues.

Kate Thompson: Yeah, exactly. So equal work, equal treatment. And it really extends to things like access to training, promotion opportunities, memberships in a trade union, really the whole package.

Goli Rahimi: Why don’t we shift gears a little bit? We can talk about payroll at a really high-level. So, if you’re running a business in one country and you hire someone who lives in another, how are you paying them? So, can you ask the employee to open a local account so you can avoid those international transfer fees? Well, unfortunately, no, because the EU rules actually say that you can’t require that.

Kate Thompson: Yeah, Goli, and that really surprises a lot of people. So, if you’re paying in euros, you’re legally obligated to accept bank accounts located in any EU country, and that’s the EU Cross-Border Payment Regulation at work. Ultimately, it’s designed to make the single market actually function like a single market. And from a worker’s perspective, that’s really important for them to know. Workers have the right to be paid into their existing EU bank accounts.

Goli Rahimi: So, along those same lines, let’s talk about taxes. Again, at a very high-level, because we are not the tax attorneys here, but this is typically where we see things get really messy, because some countries have bilateral trade agreements and these agreements could impact how income and other taxes must be handled.

Kate Thompson: The goal of these agreements is to prevent double taxation. So, that’s the idea that you shouldn’t have to pay income tax in both countries, but how they do that varies drastically. Some agreements say that you’re taxed where you live. Others say that you’re taxed where you work. Some even split it depending on whether you’re in a designated frontier zone. So, it’s important to be careful, especially as many of these bilateral agreements haven’t been updated in decades. They don’t account for modern working arrangements like hybrid or remote work. So, you’ve got 21st century work patterns that are governed by treaties written when everyone assumed that you would be physically present in the office five days a week.
Let’s be honest, even with all these protections and resources, cross-border work isn’t always smooth sailing. There are real challenges. There’s differences in national security legislation that can create headaches, especially around things like invalidity, benefits, pensions, and healthcare access. Some benefits just ultimately aren’t portable across borders. And the interaction between taxes and social security really creates another layer of complexity, different tax rates, different social security contribution levels, questions about how compulsory social contributions are created for tax purposes. So, there’s a lot to think about here.

Goli Rahimi: Practical stuff like, “Hey, can I use my company car in the other country?” That can even get surprisingly complicated.

Kate Thompson: Yeah, exactly. And then there’s the coordination problem, getting clear, consistent information from multiple national authorities who may not always communicate well with each other. That’s really an obstacle. And despite the EU’s best efforts, we’re still dealing with 27 different national systems that don’t always talk to each other. Employment law, tax law, many social benefits really remain national competencies. And the coordination framework helps, but it can’t eliminate all of that friction.

Goli Rahimi: So, to wrap up, Kate, what would be the bottom line for our listeners?

Kate Thompson: So, hiring cross-border commuters can be a fantastic way to access a wider talent pool. The EU framework really provides strong protections for these workers, and there are real resources available to help both employers and employees navigate the system. But at the end of the day, do your homework. You want to understand which countries’ laws apply to what, get proper tax advice for the specific country pair that you’re dealing with, take advantage of support services that are offered within the EU to deal with cross-border commuters, and don’t be surprised if there are some bumps along the way.

Goli Rahimi: Awesome. I think, unfortunately, that’s about all the time that we have for today’s episode. If you enjoyed listening to us, please do subscribe, share with your colleagues, and leave us a review. Kate, thank you so much for all of your insights today, and thank you to our audience for joining us for today’s Cross-Border Catch-Up. Follow us to stay in the know about cutting-edge employment issues worldwide.

Announcer: Thank you for joining us on the Ogletree Deakins podcast. You can subscribe to our podcast on Apple Podcasts or through your favorite podcast service. Please consider rating and reviewing so that we may continue to provide the content that covers your needs. And remember, the information in this podcast is for informational purposes only and is not to be construed as legal advice.