From 1 May 2010, the National Insurance (NI) rules that apply to employees who work in more than one EU Member State will change.
The current general rule is that employees are subject to the social security legislation of the Member State in which they carry on their work. This rule remains under the new regulations.
But there are some exceptions to this general rule and this is where the changes take place.
UK employees working temporarily in another Member State
Currently, providing certain conditions are complied with and HM Revenue & Customs (HMRC) agrees, such an employee will remain subject to UK NI if, at the outset, the work is not expected to last more than 12 months.
However, this can be extended for a further 12 months, subject to the agreement of HMRC and the other Member State.
This rule allows employees to continue to pay UK NI thereby protecting their entitlement to UK social security benefits such as the state pension and unemployment benefits, whilst not having to pay foreign social security contributions.
Under the new rules, the need to apply for an extension after 12 months will be removed and a 24 month period will be allowed from the outset.
Also, the two current forms (E101: used for the first 12 months; E102: used when an extension is applied for) will be replaced by a single form (A1).
Employees working in two or more Member States
Currently, complex rules apply to determine which social security contributions should be paid. Broadly, and with the exception of transport workers, such employees pay social security contributions in the Member State in which they reside if they also work there.
If the Member State they work and reside in is different, then they pay social security contributions in the Member State where their employer is registered or has a place of business.
From 1 May 2010, new rules apply. The general position is that social security contributions must be paid in the Member State in which the employee resides if he pursues a substantial part of his activity in that Member State or if he is employed by various employers or undertakings whose registered office or place of business is in different Member States.
Only if the employee does not pursue a substantial part of his activity in the Member State of residence and he is employed by a single employer will he have to pay social security contributions in the Member State in which the registered office or place of business of his employer is situated.
These new rules should mean that most affected employees pay social security contributions in the Member State in which they reside. The current different rules that apply to transport workers will no longer apply.
HMRC has said that in determining whether a
