National Insurance for employers of employees from abroad

This page looks at some common issues for employers of employees coming from overseas.
More detailed guidance for employers is available in leaflet CWG2 Employer's Further Guide to PAYE and NICs.

Who pays Class 1 National Insurance contributions?

Liability for Class 1 National Insurance contributions

Liability for Class 1 National Insurance contributions occurs if a person works:

  • in the UK under a contract of service or
  • in an office with income taxable as employment income

There are also special rules for people in particular jobs and for people who have to work overseas.

National Insurance contribution types

Class 1 National Insurance contributions are made up of two parts:

National Insurance contribution Paid by
Primary Employee
Secondary Employer

If the employer is abroad

Employer

An employer of a person working abroad only has to pay Class 1 secondary National Insurance contributions if they:

  • have a place of business in the UK or
  • are resident or present in the UK.

However, employers can volunteer to pay the secondary National Insurance contributions if they wish.

'Host' employer

The 'host' employer is the liable secondary contributor if:

  • workers are seconded to a UK subsidiary or associate 'host' employer by a foreign employer after 6 April 1994 and
  • the foreign company does not have a place of business in the UK.

Overseas Employer / Employment Agency

Where the contractual employer is overseas and the employee is supplied through an employment agency in the UK, the employment agency in the UK will be the secondary contributor.

Where the employee is supplied by an employment agency outside the UK, the client company in the UK will be the secondary contributor.

When to pay

Usually there is liability to pay National Insurance contributions as soon as an employee starts work in Great Britain.

Top

Exceptions

Special rules apply if the employee came from:

  • a European Community (EC)/European Economic Area (EEA) member state, Switzerland or
  • a country with which the United Kingdom has a reciprocal Social Security agreement or Double Contributions convention.

The basic rule is that if an employee comes from a European Community (EC)/European Economic Area (EEA) member state, Switzerland or a country the United Kingdom has a reciprocal Social Security agreement, or Double Contribution convention with, you must operate Class 1 National Insurance from the outset of the employment as you would for your normal UK resident employees, unless the employee has:

    • Certificate E101 or E102 keeping them insured in another Member State;
    • Certificate of continuing insurance from a country the United Kingdom has a reciprocal Social Security agreement with, exempting them from UK contributions.

If the employee is not from a European Community (EC)/European Economic Area (EEA) member state, Switzerland or a country with which the United Kingdom has a reciprocal Social Security agreement, or Double Contribution convention:

NICs are not payable for the first 52 weeks starting from the first Sunday after the employee arrives in the UK for an employee:

  • not normally living or working in the UK
  • who has been sent to work here temporarily by an overseas employer; and
  • the employer has a place of business outside the UK even if the employer also has a place of business in the UK; and
  • the employee continues to work for the overseas employer

For more information see National Insurance for people coming to the UK.

Working out Class 1 National Insurance contributions

If liability for Class 1 National Insurance contributions exists, work out the earnings-related National Insurance contributions on the gross earnings in the employment.

Earnings paid outside United Kingdom

It makes no difference where or by whom, the employee is paid.

For example, if part of the earnings are paid outside the United Kingdom, or earnings go to dependants overseas, you must add these earnings to payments made in the United Kingdom.

Earnings paid in foreign currency

Convert any earnings paid in foreign currency to the sterling equivalent at the rate of exchange on the date of payment.

Because earnings are usually calculated a few days before payment, 'date of payment' means the date you assess and prepare the various pay and tax documents.

Top

How to pay

The way National Insurance contributions are paid depends on who is the employer while the employee works in the UK.

British employer

Normal payment arrangements apply. Follow the procedures in leaflet CWG2 Employer's Further Guide to PAYE and NICs.

Overseas employer

If the employer has a place of business in the UK, follow the procedures in leaflet CWG2 Employer's Further Guide to PAYE and NICs.

Host Employer or other UK business treated as the employer

Where the contractual employer is overseas and another business in the UK is treated as the employer, follow the procedures in leaflet CWG2 Employer's Further Guide to PAYE and NICs.

Agent in Great Britain UK will pay National Insurance contributions

The employer may have an agent in the UK who will pay the National Insurance contributions. If both the employee's primary and employer's secondary National Insurance contributions are payable, see leaflet CWG2 Employer's Further Guide to PAYE and NICs.

If the only liability is for the employee's primary National Insurance contributions, amend the action in leaflet CWG2 Employer's Further Guide to PAYE and NICs as follows:

  • enter the amount of the employee's National Insurance contributions in both columns (a) and (b) of the End of Year Return (EYR) and
  • at the end of the tax year, take the following actions:
    • separate the employee's EYR from that on which you recorded both the employer's and the employee's National Insurance contributions
    • prepare a separate P35 for these employees. You can get this from the Collector of Taxes and
    • note column 1 on the back of the P35 with 'Employee's contributions only'.