Hiring a new employee who lives outside the UK can present a series of legal and tax complications. This can be a particularly intricate situation when the employee lives in a country such as France, which has its own strict employment laws and tax system.
A law firm is looking to hire a solicitor who, although a UK citizen, currently lives in France. This solicitor expressed interest in joining the firm on a permanent basis while splitting her working hours between France and the UK. She would work in France 75% of the time and work in the UK for the remaining 25%, with a pro-rata salary of £50,000 a year. The following obligations must be followed by the partnership and any other firms considering hiring someone from France.
1. Social Security in France
Since the potential employee is a full-time resident in France and intends to spend the majority of her working hours there, French social security laws will apply. This means that the firm must register with the French URSSAF (the organisation which collects social security contributions).
Employer contributions to social security in France can be steep, with rates reaching up to 35% of the employee’s salaries – among the highest in Europe. So, employers must consider potential financial implications involved in hiring an employee based in France. Also, the firm should hire an accountant in France to prepare payslips and carry out other reporting duties.
2. French Income Tax
Being a French resident, the employee would also be subject to French income tax, which would need to be withheld at source. Although this UK-based firm, does not have a taxable presence in France, the employee herself will become responsible for French tax withholding. In such cases, the UK employer usually provides administrative support to ensure the tax reporting and withholding process is handled smoothly.
3. UK Income Tax and PAYE
Despite being based mostly in France, the employee’s occasional presence in the UK (working a full week in the office every five weeks) will trigger UK Pay As You Earn obligations. The firm would therefore need to apply PAYE withholding based on her total earnings.
The firm may be able to apply to HMRC for a reduction in PAYE liability. This would ensure that only the portion of income related to her UK workdays is taxed in the UK.
We can advise on the PAYE reduction application if this becomes necessary.
4. UK National Insurance
France and the UK belong to an international EU social security agreement which, in this case, we would plan to use to claim an exemption from UK National Insurance. There are certain routes that the firm and its new employee could take to apply to pay social security in France only. This would save costs by avoiding double social taxes. Please note that it is not possible to do this the other way round (i.e. apply to pay in the UK only).
Hiring a UK citizen who resides abroad, particularly in a country with as strict and complex a system as France, requires careful planning and consideration. This firm, like many other UK firms, may find that the financial burden of French social security contributions, coupled with the need for compliance with both UK and French tax laws, could make this hire significantly more costly than hiring someone based solely in the UK. As a result, firms should weigh the benefits of such an international hire against the costs that come with it.
