New National Insurance rules for secondees

Until 31 May 2010, employees relocating to another European country for up to a year automatically pay national insurance under their home country system and are not transferred to the payment regime of the host country. When the year is up, an application can be made to extend home country payments for another year. In special circumstances, a secondment period of up to five years is possible. This system operates under EU Regulation 1408 of 1971.

This Regulation falls away at the end of May to be replaced by Regulation 883 of 2004. The good news is that the automatic payment period is extended to two years, reducing the bureaucracy usually associated with secondments. The five-year extension period remains the same.

However, there is a sting in the tail for some employers and their secondees. Under the new system, employees based in one country – say, the UK – but who regularly work both there and overseas may be required to transfer into another national insurance system. This could affect groups such as lorry drivers and airline pilots, who often work in the UK while staying within other jurisdictions for long periods. This could have implications for pension and benefit rights within the home country.

Employers should plan for the change now and, in the case of staff who spend a lot of time overseas, advice should be sought on whether Regulation 883 will affect their national insurance status. Any review of secondment and deployment practices should bear in mind that the rules affect not only EU citizens but all workers who have a legal right to employment within the European Union.