When moving employees between countries, the National Insurance/social security position is often overlooked but with huge impact on employer and employee costs as well as the risk of penalties, this area should be given the due care and attention it deserves ahead of time. Scrutiny from HMRC and overseas authorities is on the rise and authorities are linking up with one another more and more to share data so social security is now, more than ever, a crucial consideration for employers with globally mobile employees.
This article is the first in a series on social security for globally mobile employees and will cover the rules for paying UK National Insurance Contributions (NICs) when an employee is posted to the UK from another country or leaves the UK to work elsewhere. Look out for our next article in the series covering multi-state workers.
Employees Coming to Work in the UK
When an employee comes to work in the UK, NICs should be deducted unless an exception applies. Exceptions to NICs depend on where an employee is from.
If an employee comes from the European Economic Area (EEA) or Switzerland and they obtain an A1 certificate from the authorities of the country they come from to continue paying contributions there then UK NICs are not due for the period that the certificate covers. Where the UK assignment is for a period of less than 24 months, home country social security continues to apply and no UK NICs are payable whether an A1 is obtained or not, albeit, it is likely that HMRC will still request an A1 so ensuring an A1 is in place would be a more prudent approach.
Similarly, when an employee comes from a country with which the UK has a Reciprocal Agreement (RA) or Double Contribution Convention (DCC), the individual obtaining a Certificate of Coverage from the overseas authorities will mean contributions overseas will continue and no UK NICs will be due for the period covered.
An employee from a country outside the EEA or Switzerland and which the UK has no RA or DCC with will be exempt from UK NICs for the first 52 weeks of work in the UK if certain criteria are met; thereafter UK NICs would be due. If any of the criteria for the 52 week exemption are not met then UK NICs would be payable from day one. The criteria are:
- The employee is not ordinarily resident in the UK
- The employee normally works outside the UK for a foreign employer
- The employee is sent to work in the UK for a time by that foreign employer
- When in the UK the employee continues to work for that foreign employer
Employees Leaving the UK to Work Abroad
If posted to an EEA country or Switzerland then UK NICs can continue to be paid for a period rather than paying contributions overseas by obtaining an A1 certificate. Where the overseas assignment is for a period of less than 24 months, UK NICs can continue with no overseas contributions being due whether an A1 is obtained or not but again, it is likely that the overseas authorities will request an A1.
If the country of posting is a RA or DCC country then instead of paying contributions in that country which would be the automatic position, again UK NICs can continue for a period by obtaining Certificate of Continuing Liability from HMRC to provide to the overseas authorities.
If the country of posting is neither in the EEA or Switzerland nor a country with a RA or DCC with the UK then the 52-week rule may apply. If the criteria are met then UK NICs must continue for 52 weeks after departure from the UK before the liability ceases. However, if the criteria are not met then there would be no continuing liability in the UK when the employee is posted overseas. The criteria are as follows:
- The employer has a place of business in the UK
- The employee is ordinarily resident in the UK
- The employee was living in the UK immediately before starting work abroad
What this can mean in practice is a double social security hit for the first year of an individual’s assignment abroad – UK NICs and potentially host country social security if the domestic legislation states liability from day one of posting.
The above rules are the rules that apply generally to workers coming into or leaving the UK, but there are special rules for mariners and those working on the UK Continental Shelf, which will be covered in our later blogs.
It is worth noting that gaps in an individual’s National Insurance record can affect their entitlement to state benefits in the UK such as pensions as well as affecting their ability to obtain a certificate of coverage on a future assignment. If an employee is not required to pay UK NICs but wants to ensure they protect their entitlement, it may be possible for them to make voluntary Class 2 or Class 3 contributions depending on their circumstances. In some cases, employers may wish to consider paying voluntary contributions on an employee’s behalf, particularly if they are likely to be posted overseas regularly.
If you require any advice on the social security implications of mobilising employees or being mobilised yourself, please contact Charlotte Stewart, Integrated Employment Solutions Manager (firstname.lastname@example.org), Karen Groat, Integrated Employment Solutions Manager(email@example.com) or Isla Mayfield, Integrated Employment Solutions Assistant Manager (firstname.lastname@example.org).