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Getting NICs right for internationally mobile employees

Employers with internationally mobile employees can struggle to keep on top of complex tax and social security obligations across multiple jurisdictions.

To help employers get the UK social security element right, HMRC have recently updated their guidance dealing with the National Insurance Contributions (NIC) position for earnings paid to globally mobile staff.

Who’s affected?

HMRC define internationally mobile employees as those who:

  • Live in the UK but work overseas
  • Come to the UK from abroad for periods of work
  • Move in and out of the UK for work
  • Work in multiple countries, potentially with an overseas-based employer

These workers present particular payroll challenges, especially if salary or bonuses are paid after the employee has either returned to their home country, or taken a job overseas.

What do employers need to know?

Getting international social security obligations right can be complicated. Factors to consider include:

  • the employee’s residence status for social security purposes,
  • which overseas country the employee is working in, and
  • where their employer is based.

Having established those facts, employers then need to apply the correct rules, which vary depending on the overseas country involved. A common set of Regulations applies to EEA countries, but the UK also has Reciprocal Agreements with some non-EEA countries, whilst other countries may not fall into either category.

To help employers navigate this complexity, HMRC have published guidance on how to calculate NICs for employees working abroad and on NICs for employees coming to work in the UK.

The guidance is contained within HMRC’s National Insurance Manual. It has recently been updated to clarify that, once an employer has established whether an internationally mobile employee is liable to NIC at the time they carry out their employment duties, the treatment will continue to apply to any deferred remuneration paid after the employment has ended, or the employee has moved country.

What if previous mistakes are identified?

HMRC’s guide for employers on PAYE and NIC can help employers understand the correct NIC treatment for a range of employees, including internationally mobile individuals, for the current tax year as well as previous years.

Despite employers’ best efforts, the complexity of interpreting the relevant factors and sets of rules in order to arrive at the correct NIC payments means mistakes may occasionally happen. Guidance on how to correct payroll errors is available online, but professional advice may be needed to help employers understand whether any previous errors have been made, and to minimise the risk of issues going forward.

 

This article reflects the position at the date of publication. If you are reading this at a later date you are advised to check that that position has not changed in the time since.  

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