UK-India social security agreement
For millions of cricket fans in the UK (and hundreds of millions in India), the recent dramatic Test series has dominated the news. However, another (even more important) bilateral matter has also been in the headlines, with the UK and India agreeing a Comprehensive and Economic Trade Agreement (CETA).
Alongside this, the government has published details of the UK-India Double Contributions Convention (DCC), which aims to ensure that employees moving between the countries are only liable to pay social security (SS) contributions in one country at a time.
The DCC:
- does not include provisions for access to SS benefits or pension entitlement in the host jurisdiction; but
- does allow workers to continue to pay into their home country SS scheme for a specific period.
Current position
Where, as is currently the case with the UK and India, there is no SS agreement between countries, domestic rules apply.
This means that:
- UK outbound employees (and their UK employers) remain liable to Class 1 National Insurance Contributions (NICs) on all earnings for the first 52 weeks they are working in India. Thereafter, the UK mandatory contributions cease, but for many workers the option to pay voluntary contributions is available.
- For UK inbound employees of an India-based employer, there is an exemption from UK NICs for the first 52 weeks; thereafter, both employee and employer become liable to UK NICs (provided there is a UK place of business or UK host employer).
How this will change
Under the DCC, employees of India-based employers who come to work temporarily in the UK will remain liable to Indian Provident Fund contributions for a period of up to 36 months, provided they remain employed by the Indian employer. Such staff are referred to as ‘detached workers’.
Similarly, UK-based employers sending detached workers to India will remain liable to Class 1 NICs for 36 months (as will the detached worker).
When this agreement comes into force (at the same time as the CETA), the 52-week exemption and liability periods for UK NICs under UK domestic legislation will no longer apply to those who fall within the scope of the DCC.
Note, however, that:
- employees who expect to be working in the UK for more than 36 months from the outset of their secondment should be liable to class 1 NICs from day 1;
- employees from India who are employed locally in the UK by a UK employer will also be liable to UK NICs from day 1;
- the implementation of this DCC will not impact the current UK immigration regime; all the existing immigration criteria will still need to be met.
When the CETA takes effect, there is likely to be an increase in workers moving between the UK and India. In such situations, it will be vital for workers and their employers to understand the social security implications.
Please contact us if you think you may be affected by these changes; we can help to make sure that there are no problems with your NICs compliance.