On 1 May 2010, new rules were introduced for people moving around the European Union to work. European Union Regulation 883/2004 (amended by Regulation 988/2009) and Implementing Regulation 987/2009 co-ordinate all the social security systems of the Member States. They change some of the UK's National Insurance contributions rules for people moving around the EEA and their employers. The rules largely replace similar regulations 1408/71 and 574/72.
The new rules were extended to Switzerland from 1 April 2012 and to Norway, Iceland and Liechtenstein from 1 June 2012. Prior to this the UK continued to apply the existing rules in regulation 1408/71 to these countries.
On 1 May 2010 the European Commission introduced Regulation 883/2004 (which is amended by Regulation 988/2009) and Implementing Regulation 987/2009 ('the new Regulations') which will co-ordinate all the social security schemes in the European Union. They will largely replace Regulation 1408/71/EC and Implementing Regulation 574/72/EC ('the old Regulations') that have been in place since the 1970's. The Regulations are directly applicable in the UK and impact on the UK’s National Insurance contributions rules for people moving around Europe.
The European Commission has published the Regulations and you can view them on their website (Opens new window)
From 1 May 2010 the new Regulations apply in the Member States of the EU:
Austria, Belgium, Bulgaria, Cyprus, Czech Republic, Denmark, Estonia, Finland, France, Germany, Greece, Hungary, Italy, Latvia, Lithuania, Luxembourg, Malta, Netherlands, Poland, Portugal, Republic of Ireland, Romania, Slovakia, Slovenia, Spain, Sweden and the United Kingdom.
Although not EU Member States the new rules were extended to Switzerland (from 1 April 2012) and to Norway, Iceland and Liechtenstein (from 1 June 2012).
The new EU Regulations apply to nationals of the EU Member States (from 1 May 2010), to nationals of Switzerland (from 1 April 2012), and to nationals of Norway, Iceland and Liechtenstein (from 1 June 2012). They also apply to stateless persons and refugees residing in a Member State, members of their families and survivors if those people have previously been subject to the legislation of a Member State.
Before the new Regulations were extended to Switzerland, Norway, Iceland and Liechtenstein the UK continued to apply the old Regulation 1408/71.
The UK has also opted out of applying the new EU rules to third country nationals legally resident in a Member State and will continue to apply the old rules.
Where under the EU Regulations the UK's social security legislation applies, the employee and employer (or person treated as the employer) must pay UK Class 1 National Insurance contributions (and the employer pays Class 1A National Insurance on certain UK taxable benefits and Class 1B National Insurance where there is a PAYE Settlement Agreement.) All the earnings are treated as arising from activity in the UK.
Where, under the EU rules, the social security legislation of another Member State applies then no UK National Insurance is due.
The EU Regulations provide for a system of forms so that employers and employees can demonstrate that they are entitled to operate the legislation of one Member State and be exempt contributions under the legislation of another. Under the old EU Regulations this was the E101 Form. Under the new EU Regulations the E101 will be replaced by Form A1.
For employees coming to the UK from the other Member States, you should operate National Insurance contributions from the start of the employment unless you hold a valid E101 (or from 1 May 2010 Form A1 or an E101) showing that they are exempt National Insurance in the UK and subject to the legislation of another Member State.
For employees going to work in another Member State, you should apply to HM Revenue & Customs (HMRC) NIC&EO to find out whether the employee should remain in UK National Insurance and you can be issued Form E101 (or Form A1 after 1 May 2010). As long as the UK's legislation continues to apply, you should continue to operate employer and employee National Insurance rather than the contributions of the other Member State.
The basic rule in the old and the new Regulations is that people are subject to the social security legislation of the Member State where they carry on their work. They pay their contributions only to that Member State.
Here in the UK that means that just like under the old rules, 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.
Similarly, when people go abroad to work in the other Member States they generally have to pay social security contributions in that country and stop paying here in the UK.
There are some important exceptions to this basic rule:
Old Regulations 1408/71 and 574/72
Key points
For more information about the conditions in Administrative Commission Decision 181 (PDF 40K)
New Regulations 883/2004 and 987/2009
Key points
Decision A2 replaces the old Administrative Commission Decision 181. The new rules are broadly similar to the old rules.
Application forms and a more detailed account of the posting rules can be found on NICO International Caseworker page
Old Regulations 1408/71 and 574/72
Although no longer relevant to EU nationals moving around the EU, rules in 1408/71 and 574/72 can still apply to third country nationals resident in a Member State moving between the UK and another EU Member State.
Key points
New Regulations 883/2004 and 987/2009
Key points
If less than 25 per cent of the person's working time is carried out in the UK and/or less than 25 per cent of the person's remuneration is earned in the UK this will be an indicator that a substantial part of all the activities of the worker is not pursued in the UK. Other criteria may also be taken into account. HMRC may look at the past but must also look at the position in the next 12 months. This will allow HMRC to take account of changing circumstances.
You can find more about this on webpage: Working in the European Economic Area
Application forms and a more detailed account of the posting rules can also be found on the webpage for NIC&EO International Caseworker
On 28 June 2012 a new rule was introduced to Regulation 883/2004 for flight and cabin crew. They and their employer will now be subject to the legislation of the Member State in which the crew member’s 'Home Base' is situated. This is where they normally start and end their periods of duty and so will usually be the State in which they live.
You can find more about this on webpage: Working in the European Economic Area.
The basic rule in 883/2004 is that mariners are subject to the social security legislation of the Member State where the vessel they are working on is flagged. Those on UK vessels will continue to pay contributions to the UK and so will any employer in the UK or another Member State.
Where the mariner is remunerated by an undertaking in the Member State where he resides, the legislation of the Member State of residence applies. Under these rules, the person paying the remuneration is to be treated as the employer under the legislation that applies.
Example of the exception
Steve is resident in the UK. He works on a Dutch flagged vessel. Steve is paid his remuneration by an agent of the shipping company. The agent is in the UK. Steve is subject to UK National Insurance and the agent is treated as his employer for National Insurance purposes.
Briefly:
Civil servants and HM Armed Forces are subject only to the legislation of the country that employs them.
There are special rules for the self-employed.
There are special rules for people who are normally self-employed in one Member State and also normally employed in another Member State. They are subject to the legislation of the Member State where they normally carry on the employment.
Member States have the discretion to agree exceptions to the normal rules in the interests of individuals and where the strict application of the Regulation would result in an unjust outcome. This allows HMRC to make exceptional agreements with other Member States to keep a person in UK National Insurance if that would be in their interests, or to agree to exempt a person from National Insurance and apply the legislation of another Member State.
In the UK, the old EU rules in 1408/71 are being kept for third country nationals legally resident in a Member State. This is because the UK has chosen to opt out of laws extending the new Regulations to third country nationals.
Hank is a US national who has lived and worked in the UK for ten years and pays Class 1 National Insurance. The UK Border Agency has agreed he can live and work legally in the UK. His UK employer Big Bank posts Hank to the Frankfurt office for six months. Because he is a US national legally resident in the UK, the new rules do not apply to Hank. Hank continues to be subject to the old rules. Big Bank should apply to HMRC Residency for a Form E101 for Hank and he remains subject to UK National Insurance in Frankfurt. He is exempt from German contributions.
There are important transitional rules in the new Regulation.
E101 issued before 1 May 2010
If a valid E101 was issued before 1 May 2010 under the old Regulations and the employee is sent to the other Member State before 1 May 2010, then the E101 will continue to be valid for the remaining duration of the E101 after 1 May 2010.
Switzerland, Norway, Iceland and Liechtenstein
If a valid E101 was issued under the old Regulations for a posting to or from Switzerland, Norway, Iceland or Liechtenstein and the employee was sent to the other State before the new Regulation was extended to it (1 April 2012 for Switzerland or 1 June 2012 for Norway, Iceland and Liechtenstein) then the E101 will continue to be valid for the remaining duration of the E101 after that applicable sign up date.
Form E101 expires post 1 May 2010 (or 1 April 2012 for Switzerland, or 1 June 2012 for Norway, Iceland or Liechtenstein) but the posting abroad is unexpectedly extended for a further 12 months
If an individual's E101 which has been issued for 12 months under the posted worker provisions of the old Regulations expires and the work unexpectedly lasts for a further 12 months, a person can apply for a Portable Document A1 to be issued under the new Regulations for a further period of up to 12 months. The crucial factor will be that the posting does not exceed the maximum period of 24 months from the date of the original posting.
Other transitional rulesThere is a maximum transitional period of ten years during which a person who was correctly subject to the legislation of a Member State under the old Regulations in 1408/71 can then continue to be dealt with under the legislation of that Member State after 1 May 2010 (or 1 April 2012 for Switzerland, or 1 June 2012 for Norway, Iceland or Liechtenstein), provided that their relevant situation remains unchanged or unless they ask to move to the provisions in the new legislation. These transitional rules apply only if as a result of the new Regulations 883/04, a person would be subject to the legislation of a different Member State to that determined under the old Regulations 1408/71.
A relevant change in the situation is if it leads to a re-evaluation of the provisions of the legislation applicable. Relevant changes would include:
This list is not exhaustive.
Employers pay UK National Insurance if their employees are subject to UK National Insurance legislation. However, generally, prior to 1 May 2010 (1 April 2012 for Switzerland, or 1 June 2012 for Norway, Iceland or Liechtenstein) this was only enforced by HMRC on those employers who are present, resident or who have a place of business here in the UK.
Where the employer is a foreign employer with no place of business in the UK, a UK 'host employer' or the client business in the UK that employees are made available to carry out work for, is then treated as the employer for National Insurance contributions purposes.
From 1 May 2010 (1 April 2012 for Switzerland, or 1 June 2012 for Norway Iceland or Liechtenstein) if their employee is subject to National Insurance under the new Regulations, an employer in another Member State will have exactly the same obligations to operate National Insurance as an employer with a place of business in the UK as if that employer has a place of business in the UK. That means that they are responsible for all the same obligations as UK employers in terms of deducting employee contributions, paying employer contributions, keeping records, filing of returns to HMRC and so on.
Where a person operates PAYE in relation to an employee, or a person was prior to 1 May 2010 (1 April 2012 for Switzerland, or 1 June 2012 for Norway, Iceland or Liechtenstein) a host employer responsible for National Insurance, it will be acceptable for that person to act as agent for the foreign employer in relation to National Insurance.
If you are a foreign employer in another Member State, with employees in UK National Insurance and no agent in the UK operating National Insurance for you, you should contact HMRC to register for a National Insurance only scheme by telephone or email. Please tell us that you are registering under EC Regulations 883/2004.
How to register as an employer
Q. I want to apply for an employee to remain subject to UK
National Insurance under the transitional rules who do I apply
to?
A. If you are applying for a person to be accepted as continuing
to be subject to UK legislation under the transitional rules
you apply to NIC&EO International Caseworker.
Q. I want to apply for a certificate A1 for an employee who
do I apply to?
A. If you are applying for a person to be accepted as subject
to UK legislation as a posted worker you apply to NICO International
Caseworker. If you are applying under the rules for people normally
carrying out activity in two or more Member States then you
should apply to the Member State of residence.
Q. Your guidance is a summary of the main rules. Where can
I find out more detailed guidance about the rules for moving
around the EU?
A. The Administrative Commission of the European Union is the
statutory body that advises Member States, employers and others
about the meaning of the regulations. It has published detailed
guidance about the rules.
Read the practical guide on the European Commission website (Opens new window)
