i. MLC, 2006
The International Labour Organisation Maritime Labour Convention (2006) (MLC, 2006) was ratified in August 2012 and has been enforced since August 2013 for Passenger Ships but commercial yachts have been given a further 12 months in order to comply. MLC, 2006 requires several key areas for audit (see question 5 below) but the specific item that will affect yachts and the crew employers is that all crew employers must be able to demonstrate that they are able to deduct and pay social security contributions on behalf of the crewmember.
ii. Complying with social security requirements
Traditionally yacht crew were paid a gross salary and left to make any necessary social security or tax deductions themselves. Due to the complexities of collecting social security charges the yachting industry was, in the past, largely ignored by the authorities. Today the situation has changed and countries particularly within Europe, have made it clear that they now intend to collect charges from yacht crew where applicable.
Laws related to EEA social security payments changed from 1 May 2010 to allow social security governing bodies easier access to expatriate (including seafarer) employment structures. Establishing a proper offshore payroll and crew employment service ensures that the employer's liabilities for social security payments are minimised and that the required mechanism is in place to make deductions from crew members pay where these are required.
iii. Benefits of social security arrangements
A large number of yacht crew have made no or inadequate provision for their future or for long term health care in the case of injury or serious illness. Most yacht Owners will be pleased to honour all of their contractual obligations to a crewmember in such a situation, however payments are unlikely to continue for longer than specified in the terms of the applicable insurance policy (usually a maximum of two years).
By establishing a formalised crew employment structure, crewmembers are encouraged to either make regular National Insurance contributions if required or on a voluntary basis or to make their own alternative social security arrangements.
Employment arrangements for the crew have become an important issue in many countries due to the attention the authorities are paying towards employee and employer social security contribution liabilities. Burgess and yacht owning companies are receiving an increasing number of requests from authorities for social security information for crew on Burgess managed yachts. In the UK HMRC (Her Majesty's Revenue and Customs, the authority responsible for collection of national Insurance and taxes) are focusing on areas of previously untapped income, they are investing more time and resources into investigating this particular area. In May 2010 the rules applying to social security for expatriate workers (this includes seafarers) were tightened up to allow HMRC and other social security authorities easier access to payrolls and areas of previous ambiguity were clarified.
There are three key factors which determine whether or not a yacht crew employer is required to pay social security:
i. The location of the yacht crew employer - if it or any part of the business has a place of business in the EU/EEA.
ii. The flag of the vessel – if the yacht is flagged in the EU, UK or Isle of Man
iii. The residence of the crewmembers – if any of the crewmembers are resident in the EU or EEA.
It has been designed to become a global legal instrument that will be the fourth pillar of the international regulatory regime for quality shipping, complementing the key Conventions of the International Maritime Organization (IMO) such as the International Convention for the Safety of Life at Sea (SOLAS), the International Convention on Standards of Training, Certification and Watchkeeping (STCW) and the International Convention for the Prevention of Pollution from Ships, 73/78 (MARPOL).
All commercially registered yachts above 500gt require a Maritime Labour Certificate and a Declaration of Maritime Labour Compliance for the yacht and Owning company (also known as a DMLC part I and part II) to ensure compliance with the MLC, 2006.
All commercially registered yachts under 500gt require only the DMLC part I and part II.
MARITIME LABOUR CERTIFICATE
Issuance of this document is evidence that the ship has been found to meet the requirements of the Convention and that the seafarer’s working and living conditions meet national requirements. It is issued by the flag State following the necessary inspections to verify the vessel is in compliance with the applicable national laws and regulations implementing the Convention requirements.
In most instances it can be expected that the assessments will be carried out by an organization recognized by the flag State which will usually be a classification society (ABS, Lloyds, DNV).
The Certificate is subject to periodic validation based on intermediate, renewal or additional inspections as determined by the Flag State. It has an initial validity of five years.
DECLARATION OF MARITIME LABOUR COMPLIANCE
The DMLC is a unique form that must be completed by both the competent authority in the Flag State and the shipowner as Parts I and II respectively.
Part I is completed by the Flag State and it provides the requirements for the ship type, details of any substantially equivalent provisions under the national law and indicates any exemptions granted by the Flag State. It also contains a list of the areas to be inspected together with national provisions and requirements.
Part II is completed by the shipowner and must be reviewed and approved by the Flag State. It consists of the proposed measures that will be taken for initial and on-going compliance with the national requirements contained in DMLC Part I and the MLC, 2006.
The DMLC is in two parts. DMLC-Part I is to be completed by an attending surveyor and will identify the topics for inspection, and list the relevant legislation implementing the MLC, 2006 together with any substantial equivalents and exemptions that have been granted.
The DMLC-Part II is to be completed by the shipowner (this will be undertaken by BURGESS and Burgess Crew Services) and verified by the attending surveyor when the first inspection is completed. The Part II declaration details the measures adopted by the shipowner to ensure on-going compliance of the MLC, 2006. The areas covered are:-
1. Minimum age regulations
2. Medical certification regulations
3. Qualification of seafarers regulations
4. Seafarers’ employment agreement regulations
5. Use of any licensed or certified regulated private recruitment and placement service regulations
6. Hours of work or rest regulations
7. Manning levels for the ship regulations
8. Accommodation requirements
9. On-board recreational facilities
10. Food and catering regulations
11. Health and safety and accident prevention regulations
12. On-board medical care regulations
13. On-board complaint procedures regulations
14. Payment of wages regulations
Crewmembers that are resident in the EU or EEA working on an EU, UK or Isle of Man flagged vessel are required to pay social security. Currently non EU and EEA resident crew are not required to pay social security and crew working on yachts flagged outside of the EU, UK and Isle of Man are not required to pay social security.
All crewmembers employed by Burgess Crew Services (Guernsey) will be required to complete a HMRC Questionnaire (link below) so that it can be determined whether social security needs to be deducted. The form is then sent to HMRC so that they are able to determine at what rate NI the crewmember will be required to pay.