Now the dust has settled on the announcement of the Free Trade Agreement between the UK and India, we look at the concurrent announcement that both governments have agreed to negotiate a Double Contributions Convention (DCC).

This convention will ensure that employees temporarily assigned between the two countries will not be subject to double social security charges on their earnings.

Overview of social security agreements

The UK has established several social security agreements with countries such as EU member states, the US and Canada. These agreements allow employees assigned to another country to continue paying into their home country’s social security system for a specified duration. That means they do not need to pay social security in the host country, preventing gaps in their home country social security record, such as entitlement to the UK state pension.

Current situation for UK-India assignments

Where there is no social security agreement in place, employees assigned to the UK are exempt from paying UK national insurance contributions (NIC) for the first 52 weeks of their assignment. Similarly, UK employees assigned to a country without a social security agreement continue to pay UK NIC for the first 52 weeks but may also be liable for social security in the host country. Currently, employees assigned between the UK and India are subject to this 52-week rule.

Proposed social security changes

Under the proposed DCC between the UK and India, employees assigned to the other country would remain liable to their home country’s social security for up to three years.

UK employees assigned to work in India would continue to pay UK NIC and contribute to their UK state pension without needing to pay towards the Indian Employee’s Provident Fund (EPF) at the same time. Similarly, Indian employees assigned to the UK would continue contributing towards the EPF while working in the UK. This would be the case for up to the first three years of an assignment. On a related note, the DCC does not alter the taxation position of employees.

An employer’s liability to pay social security is determined by where the employee pays social security. So, employers of UK employees assigned to India would not pay into the Indian EPF, and employers of Indian employees assigned to the UK would not be liable to pay UK employer NIC.

Getting authority to apply the DCC

As with other social security agreements, employees will need a certificate of coverage from their home country’s social security authority, confirming their entitlement to remain within the scheme. If an employee doesn’t have a valid certificate, UK employers must still deduct UK NIC from employees.

Complying with overseas social security

Assigning employees to work overseas is an exciting possibility, both for your business and for the individuals. We can help you make sure any posting is beneficial and compliant with changing regulations and agreements.

To discuss this further, please contact Ian Jones or your usual RSM contact.

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