with Franc Jansen, Head of YPI Management
I came to YPI, and luxury yachting, direct from the world of commercial shipping, an industry highly regulated and acutely disciplined in all aspects of safety, maintenance, budgeting and expenditure. One of the many things that astounded me about luxury yachting was the numerous ways in which crew were being paid – processes that could have opened up the yacht owners and their crew to a raft of actionable legal liability - some of it very serious indeed.
Now, many years later, employment companies are as commonplace in this industry as any other, but true experts on Social Security are few and far between. Ex-Inland Revenue and now one of the yachting industry’s first certified trainers for MLC inspectors, John Cook is a regular speaker on the subject of Social Security, chairing panels all over the world. I took the chance to pick his brain and find out a little more about who really is liable today.
Legislation for Social Security has been in place across the EU for mariners, their owners and employers for a long time now, both at a national and international level. Most people in the yacht industry, however, have either not been aware of the legislation or, in some cases, turned a blind eye to it. Not being aware of the legislation or any liability you may have to pay Social Security is not a defence and recent cases have seen authorities levy heavy fines on owners and crew as well as additional demands for payments relating to outstanding contributions going back many years.
In one particular case within the EU, a yacht owner/employer was ordered to pay over 150,000 Euros of back-contributions plus penalties and interest. In another case, a crew member was found to be liable for the payment of over 18,000 Euros in un-declared employee liability plus penalties and interest.
How do these liabilities arise?
In the case of the owner/employer, the company that owned the yacht was unaware that the legislation applied to them and had stated in the contract of employment that the crew were responsible for their own tax and Social Security contributions. What they did not know was that all the crew had a connection to the Flag State either by nationality or residence - that in itself set up a “primary” liability. The owning company/employer was based in an EU country covered by EU legislation and paying the wages from the same country, which in turn resulted in them having a “secondary” liability.
The result: the owner/employer was ordered to pay to the local authority both the employee and employer social security contributions for the two years they had owned the yacht and employed the crew.
One case involved a crew member who had worked on a yacht and was resident in the same country. The crew member fell ill and used the E101 at a hospital in another EU country which recorded all the details and reported them back to the authorities in the crew member’s country of residence. The local authorities researched the situation in more depth and found the crew member had been working on the yacht for four years and demanded payment.
The regulations are fairly straightforward at first glance, however, they are complex in their application. There are many permutations to consider when establishing whether or not an owner/employer or crew member has any liability for paying Social Security including the existence of any bi-lateral, multi-lateral or reciprocal agreements between countries.
Looking to the future, the MLC 2006, which devotes a whole section to Social Security, is the next big weapon in the hands of Social Security offices worldwide. When the convention comes into force, owners/employers and crew members alike will need to identify any liabilities they may have and take the appropriate action.
For more information on Social Security liabilities or any other aspect of crew management or yacht liabilities, please contact Franc Jansen at YPI Management on +377 99 99 97 97 or email: email@example.com