UK Social Security Agreement With India

The Background

As people may know, India has wanted a social security agreement with the UK for many years, and it is good to see that the details of the proposed Agreement – which was initially announced as part of the UK/India Free Trade Agreement announced last year – have now been published. Whilst there isn’t a definitive date as to when the Agreement will be fully ratified and in force, initial estimates suggest that it should be ‘live’ by Summer 2026.

The Agreement – Core Points

Whilst any social security agreement is a ‘good thing’ – and this Agreement will help both internationally mobile employees and their companies avoid the scourge of double social security charges – it’s worth noting that the UK/India Agreement differs from many of the UK’s other social security agreements in some key ways. For example:

1. Certificate of coverage is only valid for a maximum period of three years (other agreements often allow for five years); and

2. People can still benefit from the three-year period, even if, for example, their assignment is extended to four years after an initial two-year period (i.e. the Agreement’s protection from social security doesn’t simply cease as soon as there is an assignment extension);

3. The Agreement specifically allows the social security relief to be available for temporary, global teleworking-type arrangements (subject to these being agreed by the employer); but

4. The Agreement doesn’t provide any relief for self-employment cases (though how many self-employment cases would there actually be?); and

5. Unlike many other UK agreements in this area, there are no ‘transition options’ within this Agreement. That is, if an employee started their assignment before the Agreement is finalised, they could still be liable to the double social security charges, for example, as they wouldn’t be entitled to obtain the protection of the treaty for the remainder of that ongoing secondment.

Other points to note

It is positive that the proposed Agreement formalises that there should be six months between assignments for the three-year maximum certificate period to be ‘re-started’ for a subsequent assignment. In practice, social security authorities have often used this six-month period from a practical perspective historically, but it is useful that it is clearly stated in the Agreement as the core position in this case.

Whilst there is a ‘best interests’ clause to the Agreement – which is good – it is also not clear how commuter-type cases (that is, where someone works one month in the UK, for example, and the following month in India on a long-term basis) will be handled from a social security perspective under the Agreement. Given the growth of such long-term commuting work patterns, it would have been helpful if there had been more specific clarity as to where social security would be chargeable in such situations. This means that it might come down to discussions between the relevant authorities in such cases, and experience suggests that these discussions can be ‘problematic’ and take a number of months (if not longer), to resolve, which will create uncertainty for employers.

People should also note that this is just a ‘contributions agreement’ rather than a full totalisation agreement – i.e. this means that whilst double social security contributions should be avoided, there is no allowance for pension benefits or whatever to be accrued across the two systems (unlike the arrangements which exist between the UK and USA, for example).

What does this mean for businesses?

Whilst the Agreement will be welcomed by businesses and should make it easier (cheaper) to utilise UK labour in India and Indian labour in the UK in many cases, businesses still need to consider the ‘traps’ arising from the proposed Agreement and consider their next steps closely. Particular issues will arise, for example, in the following areas:

a) Where India/UK cross-border assignments are due to start before the Agreement is fully ratified, is it possible to delay the start of assignments, to ensure that double social security contributions can be avoided?

b) Those employers employing staff on a project-by-project, long-term, ongoing basis (e.g. many consultancies and IT firms), may need to closely consider which employees they second to the UK (or India as appropriate), over time, if they wish to avoid being caught by the ‘three-year’ restrictions within the Agreement; and

c) As the Agreement only covers contributions and not any benefit provisions – whilst voluntary contributions, which could have helped protect employees’ rights to a home-country state pension, for example, are specifically not allowed under the arrangements – employers will need to closely consider how they protect their employees long-term state pension rights.

Would you like to know more?

If you have employees moving between the UK and India, contact us to discuss what this Agreement means for you. Please contact Robert Salter using the form below.