Clarity on French Social Security Obligations

Now that the furore surrounding the implementation of the French Decree on social security for seafarers who are resident in France and working on a foreign flagged vessel has died down, I am providing a summary of dealing with the practicalities of this legislation.

Firstly, a couple of reminders:

1. Employees (seafarers) pay primary contributions and they are the starting point for all social security.

2. Employers pay secondary contributions and there can be no secondary contribution is there is no primary contribution. Many countries, including France, put the responsibility of paying both primary and secondary contributions on the employer.

In May 2018 ENIM provided clarification on the implementation of the Decree and the options open to those affected. These options are:

1. ENIM Option

Employers of French Resident seafarers can register with ENIM to pay employee and employer social security contributions. If the employer is not resident in France the employer can appoint an agent who will provide ENIM with all the information needed.

This information is quite detailed, and the net result is that ENIM will calculate the amount of employee and employer social security to pay and the employer will need to make provision to settle six months contributions. The agent will obviously charge a fee for the work which will be in addition to the contributions to ENIM.

2. Bi-lateral Option

Where the yacht is flagged in a territory that has a Bi-lateral agreement with France, there may be an opportunity for contributions to be made to the authorities in the flag state, but only where the seafarer has a connection to the flag state under that country’s regulations.

Where the flag state country is a European Union (EU) or European Economic Area (EEA) member state the seafarer will have primary contributions to pay. This is because they are either an EU/EEA resident and working on a yacht flagged in another EU/EEA member state. The employer may have secondary contributions to pay depending on where their principal place or place of business is located. For example, there are different regulations in place in the UK than there are in Malta.

The important thing to bear in mind is that if social security contributions are due to a country that has a bi-lateral agreement in place with France, the employee and employer are exempted from making contributions to ENIM.

3. Private Social Protection Option

The Decree was finally amended, and an option was added for contributions made to private social protection schemes, where the benefits are “equivalent” to those provided by ENIM. The implementation letter issued by the Department of Legal Studies at ENIM on 2nd May 2018 stated what branches of social benefits had to be guaranteed when using private social protection schemes.

The protection must guarantee the payment of:

• Health expenses for the seafarer and their beneficiaries.

• Salary compensation in the event of illness and accident, (occupational or otherwise).

• Permanent disability compensation.

• Old-age benefits, including reversionary pensions and family benefits for the upbringing of children.

Of the three options, the choice of private social protection provides the best value for money. Once the private social protection is in place the employer can issue the “Déclaration sur l’Honneur”, ENIM form AF03. This form, once signed and dated by the employer, attests that the seafarer has equivalent social protection and is therefore exempt from registering and contributing to the ENIM scheme.

Within this option there are two main solutions that will satisfy the equivalence requirement:

• A group scheme taken out by the employer.

• A combination of schemes taken out by the employer and seafarer.
   

A. A group scheme taken out by the employer

There are companies that will provide an all encompassing private social protection solution in accordance with the requirements laid down by ENIM and these are aimed at employers only. One such company is WYCC, based in Luxembourg, who have been at the forefront of this type of solution. WYCC will provide the employer with a quote based on the profile of the employed crew.

B. A combination of schemes taken out by the employer the seafarer

The second solution is similar to A, however it takes into consideration the existing yacht owner insurances, P&I that will already be in place as well as the crew medical benefits policy, where one exists. In most cases these two policies will provide most of the equivalence benefits that are required.

If there are any gaps these can usually be filled by adding further benefits at minimal additional cost - with the exception of the old-age benefit, which is not provided within either of these two types of policy. The pld-age benefit shortfall can be met one of two options:

• The seafarer can take out a French personal pension, which is called a Plan d’Epargne de Retraite Populaire, (PERP). There are different opinions on whether the employer also needs to contribute to this type of pension, however if they do, it is not difficult to arrange this.
  
  The slight advantage this approach has is that the PERP is the personal property of the seafarer and can move with them from job to job. Furthermore, the contributions are tax deductible within the terms laid down for this type of policy. Seafarers should seek professional advice before entering in to any agreement.

• The employer taking out a group personal pension plan for the seafarers living in France, which would mean both employer and seafarer making contributions.

Once the P&I and crew medical benefits policies have been assessed and adjusted to meet the ENIM equivalence requirements and the seafarer has taken out a PERP, and passed the information to the employer, or the employer has created a group personal pension plan, the employer can issue AF03.

The important message here is that those affected by the Decree need to act on one of the above options as soon as possible to avoid any unnecessary penalties for non-compliance.

*All of the above is a guide only and its contents do not constitute legal or tax advice.