What you need to know about expatriate statuses
Expatriates are no longer just executives who leave to run a subsidiary abroad. They are also retailers, self-employed workers, consultants, investors who set up shop elsewhere, and employees who are offered local contracts. What kind of social security coverage will they receive?
To find out exactly what your status will be, it’s important to consider:
- The length of time you’ll be spending abroad: is it permanent? If not, how long will you be staying?
- Who decided that you would be sent abroad? Are you going there at your employer’s request, or was it your own decision?
In the end, the two statuses are very different. It’s important to distinguish carefully between them.
Duration: Determined in advance, usually less than 3 years.
Source: The employer requests the secondment.
Reimbursement of health expenses: by the employee’s home social security system or that of the host country.
Home country health insurance: will not work.
Expatriate health insurance: essential in most countries.
Secondment status is precisely defined by European social legislation. It applies to any person:
-who is an employee of a company established in an EU member country who leaves to work in another EU or EEA member country, in Switzerland, or in any of around forty other countries that have signed a bilateral agreement to avoid foreign workers having to make social security contributions in their country of residence (secondment is also possible in countries that have not signed such an agreement, but social security contributions must then be made to both countries).
-whose employer makes social security contributions in their home country so that they continue to benefit from social security coverage.
They are generally on a specific assignment of limited duration.
Theoretically, secondment also exists for freelancers, but it is tightly regulated. It is limited to 24 months. The freelancer must prove that they have firm plans and business to conduct in the home country before the departure. They then need to maintain the situation, and pay taxes in the home country during their secondment. This means that it is only worth considering for periods of less than 1 year.
You will be affiliated with the social security system of your host country, but you can also request reimbursements from your home social security system.
For more information visit the CLEISS information website.
This status provides significant protection for the employee, but it has several disadvantages:
-It’s very expensive for the company, which is required to pay social security contributions in the home country, potentially on a larger amount than home country salary in order to include specific costs such as housing or children’s education.
-Additional social security costs also have to be paid because, in terms of health insurance, the local system may not allow access to private sector care.
-Expatriate health insurance will be more complicated for the employee to manage. They will have to submit the reimbursement requests to the home country Social Security system first, and then send them to their complementary health insurance. Direct payments in case of hospitalization are also complicated to manage. Faced with these cumbersome procedures, most expatriate insurers have stopped offering complementary policies for seconded employees. Only two insurers still offer such plans.
Seconded status is therefore generally used for assignments that last from several months to a maximum of one year.
Duration: often indefinite
Source: Either the employer offers a position abroad or the employee finds it for themselves.
Reimbursement of health expenses: follows the rules of the host country’s social security system.
Home country health insurance: will not work.
Expatriate health insurance: essential in most countries
More and more employees are working abroad in this way. This can be because their employer offers them a position abroad, or because they find one themselves. They are then under a local employment contract, with all the local social security protection that comes with it.
According to European social security regulations, a person who moves abroad to pursue a professional activity is an expatriate from the day of their departure. They are no longer affiliated with the social security system of their country of origin, and must be covered by the local system in the country where they work.
If you move to a country that is a member of the EU or the EEA, or to Switzerland, make sure you obtain form E104 from your home social security office, and give it to your local employer or directly to the health coverage office in your new country once you arrive. You will be registered immediately.
If you move to another country that has signed a bilateral agreement with your country of origin, your rights will generally be maintained, but it is advisable to double check in each case. To do so, consult the CLEISS (Centre of European and International Liaisons for Social Security) website for information on the agreements that have been signed with around thirty countries.
Even if you take out a local health insurance policy, you should be aware that in many countries they are completely different from those that may exist in your home country:
- They are often limited to people in precarious financial situations. Others are expected to obtain private insurance.
- They may be limited to public clinics and hospitals that may not correspond to your usual standard of health care.
If this is the case, it is advisable to take out voluntary insurance with a global health insurance policy.
Your employer may also offer to provide you with local insurance. However, many expatriates prefer to negotiate an equivalent in the form of a budget that will allow them to finance their own global health insurance. This is because, in every country in which medicine is practiced at various speeds and is of variable quality, local insurance that provides access to establishments that are up to European standards is rare and very expensive.
Duration: indefinite, generally long, depending on the investments made
Source: personal decision
Reimbursement of health expenses: follows the rules of the host country’s social security system.
Home country health insurance: will not work.
Expatriate health insurance: essential in most countries, temporary 12-month insurance possible but risky.
This is the expatriate population that has seen the greatest increase in numbers over the last ten years.
It includes consultants, merchants, artisans and investors who often export a particular expertise. The duration of their time abroad is often long because their projects include financial investments that cannot be liquidated quickly without losses.
The regulations are the same as for employees (see previous section) but the stakes are higher: If you have invested €500,000 in a business, you can’t risk losing it because of a health issue. You need an insurance package that will cover your medical expenses and, if necessary, your loss of income.
Only around twenty countries worldwide offer expat freelancers a health insurance system that gives them free access to a quality health care system without requiring them to subscribe to local or international private health insurance. A few of them are: Canada, New Zealand, Australia, Belgium, Austria, Japan and Luxembourg.
In other countries you may be required to subscribe to a local health insurance plan, but it is important to know that, in general, they are completely different from what you may be familiar with. They are limited to public clinics and hospitals that may not correspond to your usual standard of health care.
If this is the case, it is advisable to take out voluntary Expat health insurance.
For your first year, you have the option of choosing temporary health insurance. It will cover any emergencies that may arise for 12 months. You may even be able to renew it once or twice.
It has the advantage of being inexpensive, but it presents a major risk: If you do run into health problems, you will be allowed to renew it, and since all local and international private health insurance plans require you to fill out a health questionnaire, you will no longer be able to find an insurance that will cover you. You will have to pay for your care yourself or return to your home country permanently.
Overall, regardless of your country of residence, you will pay less for Expatriate health insurance than you would pay in social security contributions in countries such as France or Germany. The difference is that it isn't a tax but a voluntary insurance that you must choose and subscribe to for yourself. That means that you’ll need to budget for it from the start in your business plan, and find a solution that will work for the duration of your project.
This term refers to insurance that pays benefits in the event of death or, more frequently, a medical leave of absence or disability. If you are self-employed and, following an accident or illness, you can never work again, your professional income will be zero. Now, and for a long time to come.
To continue receiving an income, you will need to have purchased life and disability insurance.
If your family stays in your country of origin: they continue to benefit from their own social security, according to the spouse’s professional activity.
If your family follows you abroad: be sure to check the conditions for coverage of family members by local health insurance providers, especially in the case of non-marital unions, civil partnerships and blended families. For example, cohabitation as a legal concept doesn't exist in the United States, and the PACS (French civil partnership contract) system is strictly French and may not be recognized abroad.
If you have are planning to have children: Many expats take advantage of this new start to have children. It’s a lovely plan, but the coverage of maternity expenses cannot be improvised; if you don’t plan for them in advance, you may find yourself in serious difficulty. Expatriate maternity coverage is becoming increasingly difficult to find for two reasons:
-The costs of a pregnancy with complications can easily exceed €100,000 in most countries.
-Health care costs for babies born prematurely or with serious complications can exceed €500,000.
-Insurers are becoming more and more cautious about these risks, and are protecting themselves with 10 month waiting periods and strict requirements for coverage.
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