National insurance: what employers with globally mobile employees need to know
Background and recent HMRC guidance
HMRC has released long-awaited guidance on how they believe national insurance contributions (NIC) should be applied to bonuses and other deferred pay received by globally mobile employees after they have left the UK.
This guidance clarifies that the liability to NIC is determined by the legislation in effect during the relevant earnings period – and not at the time the payment is made. This is a significant shift for employers who have historically used an ‘all or nothing’ approach, where the entire payment was typically only subjected to social security in the country where the individual was liable at the date of payment.
Key change: Employers may now need to revisit and potentially amend payrolls for the previous six tax years, creating a substantial administrative burden.
How the national insurance rules apply to deferred pay
Earnings period principle: NIC is due based on where the employee was liable to social security during the period the earnings relate to, not when the payment is made. For example, if an employee worked in the UK and paid UK NIC for all of 2024 but moved to the US in January 2025, a bonus for 2024 paid in April 2025 would still be fully subject to UK NIC. If the move was partway through 2024, only the UK portion of the bonus is subject to UK NIC.
Historical practice: Many employers have used the all or nothing approach, sometimes with HMRC’s agreement during PAYE audits. In most cases, employers should review and correct past years.
Which employees and payments are affected?
Who is affected?
- Employees permanently transferring from or to the UK.
- Employees whose Certificate of Coverage under a social security agreement has expired.
- Individuals assigned to or from non-social security agreement countries.
What earnings are covered?
The rules apply to all forms of remuneration, including bonuses, deferred compensation, and even regular salary if the employee transferred partway through a pay period.
Double social security charges
A major risk for clients is the potential for double social security charges. If the destination country applies an all or nothing approach, both the UK and the other country may claim social security on the same earnings. Even where there is a social security agreement in place, HMRC’s position is that the other country should give credit for UK NIC. But in practice, this can be difficult to achieve, leaving employers exposed to double charges.
Practical payroll issues for employers
Historic payroll review: Employers should review how they treated internationally mobile employees who received payments after arriving in or leaving the UK. This may require amending payrolls for up to six years. Employees who came to the UK and who paid UK NIC on their trailing income (eg bonus) may be due a refund of NIC.
RTI corrections: HMRC expects employers to make Real Time Information (RTI) corrections for any underpayments. Employees seeking refunds for overpayments must first ask their employer to amend payroll. If the employer refuses, the employee must state this in their refund request to HMRC.
Payroll software limitations: Many payroll systems only allow one social security code per pay period, complicating the process of making historic amendments. There may be additional issues where the employer has changed payroll providers.
Wider tax implications: Changes may also affect gross-ups (where applicable), personal tax returns, the apprenticeship levy, student loan deductions, auto-enrolment deductions and corporate tax filings.
Areas of contention
HMRC has not provided a detailed technical justification for the apportionment requirement, despite requests from stakeholders. When the employment-related securities legislation was updated in 2015, it was specifically amended to require apportionment, as the existing law was considered insufficient for NIC charges to apply after a move abroad. HMRC has not clarified why the law is now considered sufficient. The lack of a clear technical basis means the new guidance may be open to challenge.
What should employers do now?
- Review past practices and seek advice.
- Be prepared to make RTI corrections for the past six years.
- Evaluate the risk of double social security charges and seek to mitigate where possible.
- Update tracking of employees and policies.
For more information please get in touch with Ian Jones, Jo Webber, Chris Gore or your usual RSM contact.