An EU overhaul that would make the country of employment, rather than the country of residence, pay unemployment benefits to many cross-border workers is moving towards final approval, nearly a decade after it was first proposed.

The European Parliament approved the overhaul on July 7 by 511 votes in favour, 87 against and 61 abstentions. The file must now be formally adopted by the Council, a step expected in September, according to an EPRS briefing published this week. 

At the centre of the reform is a significant change for people who live in one EU country but work and pay contributions in another. 

Under the agreed text, a cross-border worker who has been employed, self-employed or insured in the country of employment for 22 uninterrupted weeks would receive unemployment benefits from that country, provided the worker meets its national eligibility conditions. 

The country of employment would pay the benefit for six months, after which responsibility would pass to the country where the unemployed person lives. Until now, the country of residence has generally been responsible. 

At the same time, the employment service in the worker’s country of residence would be required to keep the paying authority informed, particularly about whether the person is searching for work and complying with activation or job-placement procedures. 

Separately, unemployed people who move to another EU country to look for work would be able to continue receiving benefits from the country they left for six months, up from the current standard period of three months. Member states could extend that period until the person’s entitlement expires. 

The reform does not create a single European social security system. National governments would continue to decide who is insured, which benefits are available and the conditions attached to them. Instead, the EU rules determine which country is responsible when a person’s work, residence or insurance history crosses national borders. 

That distinction affects a growing number of people. According to EU figures, around 16 million Europeans live or work in another EU country. 

However, the change carries very different consequences across the bloc. For Luxembourg, where cross-border workers account for a large share of employment, the transfer of responsibility to the country of work is expected to create a substantial administrative burden. It has therefore secured an additional three-year transition period, which could be extended by another two years. 

The rules would also tighten controls on employees temporarily sent to work in another member state. Prior notification through the social security system, commonly associated with the A1 certificate, would become mandatory before postings take place. 

Exceptions would apply to business trips and activities lasting no more than three consecutive working days within a 30-day period. However, the short-term exemption would not cover construction, meaning postings in the sector would have to be notified regardless of their length. 

Posted workers can generally remain insured in their home country for up to 24 months. Nevertheless, the revised rules require them to have been affiliated with that country’s social security system for at least three months before being sent abroad, strengthening safeguards against artificial arrangements and social security fraud. 

For people working in two or more member states, the reform would also clarify how authorities determine an employer’s genuine registered office or place of business. Factors would include where important decisions are taken, where turnover is generated, where general meetings are held and where the company normally conducts its activities. 

The intention is to make it harder for businesses to use letterbox companies in one country while carrying out their real operations elsewhere. 

Information and social security certificates would be exchanged through the Electronic Exchange of Social Security Information, EESSI network, which links around 3,400 institutions in 32 participating countries, including the 27 EU member states, Iceland, Liechtenstein, Norway, Switzerland and the United Kingdom. 

The reform also introduces the first common EU definition of long-term care benefits, clarifies the treatment of family payments intended to replace income lost while raising a child and addresses access to sickness coverage for economically inactive mobile citizens. 

The breakthrough came under the Cyprus Presidency, which resumed negotiations in February and secured the provisional agreement with Parliament on April 22.

Cyprus Labour Minister Marinos Moushouttas said at the time that “freedom of movement is a fundamental principle of the European Union”, adding that uncertainty over social rights had made it harder for people to live and work across borders.

The original Commission proposal dates back to December 2016 and survived failed compromises in 2019 and 2021 before negotiators finally reached the April agreement. 

Once formally approved and published in the EU’s Official Journal, OJEU, the regulation will enter into force on the first day of the following month, although some of its provisions will apply two years later.