Social security in the UK takes the form of National Insurance Contributions (NICs), these contributions provide entitlement to certain state benefits, including the UK state pension. The actual entitlement to such benefits and the amount payable can depend on the individual’s NICs record (accrual of payments). The social security position differs based on the overseas work location and the exact circumstances of the individual working overseas.
HMRC has issued guidance on paying social security payments for overseas workers. The arrangements are country specific:
If an individual works permanently in an overseas location then typically social security would only be due in that location and not in the UK. There are separate regulations for individual who work temporarily overseas, listed below.
Social Security payments abroad
1. Within the European Economic Area (EEA) and Switzerland
If the employee temporarily works in a country within the EEA or Switzerland, they may be able to maintain their UK National Insurance contributions under EU regulation 883/04 and avoid paying social security in the host location. If the regulations are applicable, the individual would need to apply for a ‘Portable Document A1’.
Note: It can take up to 4 months for the Portable Document A1 to be authorised by HMRC, the application should therefore be submitted as soon as possible to ensure compliance, although this does not restrict the individual from working overseas.
It should be noted that individuals who are not working temporarily in another member state, for example those who were living in the overseas location prior to their employment with the University, will not be covered by the posted worker regulations and it is highly likely that social security will be due in the overseas location.
2. Working in countries with bilateral Social Security agreements
If the employee is going to live in a country outside of the EEA and Switzerland but with which a Reciprocal Social Security Agreement (or ‘Totalisation’ agreement) is in place with the UK, they should be able to maintain contributions to UK National Insurance and avoid paying social security in the overseas locations. This can be checked by completing form CA9107, a ‘Certificate of Coverage’ would then be issued by HMRC which evidences that the terms of the agreement apply to the individual.
Countries with reciprocal social security agreements with the UK are:
Barbados, Bermuda, Bosnia-Herzegovina, Canada, Chile, Croatia, Guernsey, Israel, Jamaica, Japan, Jersey, Mauritius, Montenegro, New Zealand, North Macedonia, Philippines, Republic of Korea, Serbia, Turkey, USA.
3. Rest of the world
For individuals working temporarily in a country outside of the EEA and Switzerland and reciprocal agreement countries, typically they will be required to pay National Insurance for the first 52 weeks of the period spent working overseas provided they meet the below conditions:
- the employer has a place of business in the UK; and
- the employee is ordinarily resident in the UK; and
- the employee was living in the UK immediately before starting work abroad.
Once the initial 52 week period has elapsed, mandatory National Insurance contributions (class 1) should cease. It is possible for the individual’s National Insurance record to be maintained by making voluntary class 2 contributions. Please refer to this guidance.
The employee may also be liable for Social Security payments in the country of work/residence. The rules regarding Social Security liabilities are entirely separate from income/employment tax in most countries. Payment of overseas social security will be the individual’s responsibility and, as with income tax, the mechanism of the individual paying this should be agreed with the department with the support of the Tax Team.
High Risk Example: The individual is working in China for a period of 12 months, Chinese social security will be due and UK National Insurance continues for the initial 52 week period. The individual and the University are liability to dual contributions.
Low Risk Example: The individual is working in the US for a period of 12 months, having worked in the UK immediately prior to this. They are able to obtain a Certificate of Coverage and are exempt from paying US social security – UK national insurance contributions continue as normal.