International Assignments: Substantial changes to EU social security regulations in May 2010

30 January 2012 |

New liabilities for EU employers not present in the UK; employees working in two EU member states may no longer be able to stay in their home country social security system

The revised EU social security regulations for individuals who work temporarily outside their home EU Member State will take effect in May 2010 (recently put back from 1 March 2010).  The new regulations (883/2004) will replace the existing regulations (1408/71) and will reflect developments in case law and Administrative Commission decisions since the last regulations were introduced.  The new regulations aim to give host countries more say in where contribution liabilities arise and to resolve weaknesses in the existing system.


The new regulations apply to nationals of EU Member States with the option of extending the regulations to all EU residents.  The UK has not adopted this extension due to concerns about the payment of certain family benefits.  There will still be 3 main groups for employees: those on a short assignment, those on longer assignments and those who work regularly in more than one EU country.

Short term assignments

A short assignment is currently anything up to 12 months but in future will be anything up to 24 months.  Home country contribution liabilities will be compulsory during the 24 month period provided certain conditions are satisfied.  The conditions are that:

  • the employee is already paying contributions in the home country; and
  • the home country employment contract continues; and
  • the employee is not replacing an employee who has already completed a posting to that same location.

Once implemented more consideration is likely to be paid to whether an employee is replacing another.  HMRC’s view is that where a position remains constant but is filled by a series of seconded employees, only the first employee will be able to remain within the home country NIC system.

Longer Assignments

Longer assignments will last between 2 – 5 years.  Just as under current regulations there is some degree of choice over where contributions are payable at the end of a short assignment.  An employer may decide to do nothing with the result that the host country social security contributions become payable.  Alternatively, employees may be kept in their home country scheme, provided it is in their best interests to do so and both the home and host country social security authorities agree.

Employment in more than one EU Country

There will be substantial change for employees working in more than one EU country.  Employees seeking to remain in their home country social security scheme must now spend at least 25% of their workdays in their home country or to have at least 25% of their salary flowing from employment in that country.

The change will make it impossible for employees to remain in their home country scheme if their employer’s business need does not allow such significant levels of activity in their home country.  If there is legitimate scope for their employment to be split into two distinct roles between two employers – one in each state, then this may provide a remedy.  However, dual contract arrangements are subject to significant scrutiny by HMRC and it is unlikely to be a solution in many cases.

One clear consequence of the change is the decline in planning opportunities involving one or two day’s employment each month in another EU country.

In particular, those working in positions such as aircrew and long distance lorry drivers may be unable to stay in their home country scheme because of the 25% requirement.  Continuing industry dissatisfaction with the proposals may well lead to pressure to make a late change to the legislation.

Significant new liabilities for EU employers not present in the UK

From implementation if an employee liability arises in a particular Member State then an employer contribution liability automatically will follow.  HMRC has said that for this to apply in the UK the employer must have some presence or place of business in the EU.  In other words, an EU employer will have the same liabilities and obligations as an employer already based in the UK.

This means EU employers will have to pay over national insurance contributions via the UK Pay As You Earn withholding and accounting scheme.  An EU employer will need to decide whether to instruct an accountant, solicitor or payroll bureau in the UK or make their own arrangements.

It is assumed that such EU based employers will be required to operate the UK statutory sick pay and statutory maternity pay arrangements etc.  Confirmation is awaited from the Department for Work and Pensions although, as there will be a deemed presence in the UK and an employer’s national insurance contributions liability, it is difficult to see why such employers would escape operation of such statutory benefits procedures.


An employer contribution liability will arise where an offshore manning agency is based in the EU.  HMRC have confirmed that a liability to employer’s national insurance contributions does not arise where the employer is in the Channel Islands (not part of the EU) or elsewhere outside the EU.  This is provided the employer has no presence in the UK.  Therefore, avoidance of the employer share of the contribution should continue to be possible even if it does mean the employer having to move location.

Paperless system

It is anticipated that a paperless system will be introduced involving the use of electronic applications and authorisations confirming where contributions are due.  However the UK and some Member States may not be ready to operate electronically until late 2011.  Although the new rules will be applied the existing application process and certificates will continue for the time being.

Transitional arrangements

A transitional period is expected and current E101 certificates will be valid until expiry.  HMRC said that if there are no material changes to circumstances further periods of home country liability will be possible.  Comment is required on whether an employer contribution liability will arise at 1 March 2010 where the employment structure is such that no secondary NIC is currently due.  HMRC’s position seems to be that as long as the circumstances remain unchanged no secondary liability will arise.  If that is confirmed we recommend that any E101 applications under Article 14(2)(b) should be made in plenty of time before 1 March 2010 for a certificate to be issued.

EU-wide collections

It will be possible to collect NIC arrears in another EU country where such arrears cannot be collected in the UK, e.g. because an employee subject to NIC is not resident in the UK.  Some individuals are currently able to avoid such liabilities as there is no workable collection mechanism.  This will change with the contributions being collected in their home country but only where the arrears accrue from 1 March 2010 onwards.


Those with employees on assignment where they remain in the employee’s home country social security system should review the position in light of the new regulations and consider appropriate strategies.

EU employers with employees currently liable to pay UK national insurance will have to establish payroll systems and meet their employer’s contribution liabilities.

For further information and to discuss possible strategies for the new legislation please contact Jim Yuill ( , Bina Gayadien ( or Guy Abbiss ( on  +44 (0) 203 051 5711.


Content is for general information purposes only.  The information provided is
not intended to be comprehensive and it does not constitute or contain
legal or other advice.  If you require assistance in relation to any
issue, please seek specific advice relevant to your particular


Content is for general information purposes only. The information provided is not intended to be comprehensive and it does not constitute or contain legal or other advice. If you require assistance in relation to any issue please seek specific advice relevant to your particular circumstances. In particular, no responsibility shall be accepted by the authors or by Abbiss Cadres LLP for any losses occasioned by reliance on any content appearing on or accessible from this article. For further legal information click here.

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