National Insurance contributions: new rules for workers moving around the European Union on or after 1 May 2010 and their employers

Do your employees move around EU states to work?  If not, you can probably ignore this.

The new regulations published by the European Commission replace regulations which came in to effect in the 1970’s and will apply in all EU member states.

In the current regulations workers are subject to the social security legislation of the Member state where they carry on their work and they pay contributions only to that Member state.  Under the new regulations that will continue to be the basic rule and, thus, for most people moving around the EU to work there will be no change.

In the UK employees coming to the UK from other Member states and their employers have to pay National Insurance contributions as soon as the employee starts work here.  Likewise employees going abroad to work in the other member states generally have to pay social security contributions in that country and stop paying here in the UK.

Employers can apply for employees who normally work in the UK paying Class 1 National Insurance to work temporarily in other Member states but to continue paying Class 1 National Insurance and be exempt from foreign contributions – the new regulations extend the work period from 12 months to 24 months.  The process for applying to HMRC for this concession is largely as per current regulations but the forms to be completed have been changed.

There are also rules which are specific to employees whose work is performed in two, or more, member states and also to certain types of employees including mariners; those self-employed in one state and employed in another – full details are contained in HMRC guidance which can be found at http://www.hmrc.gov.uk/nic/work/new-rules.htm.