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HMRC internal manual

National Insurance Manual

NIM02030 - Class 1 NICs : Earnings of employees and office holders : Important principles

Earnings in section 3(1) of the Social Security Contributions and Benefits Act 1992 is not restricted to payments such as salaries, wages and tips paid in return for the performance of services. It also includes other types of payment related to the employment. It therefore covers such things as :

  • payments to employees in return for changes to their conditions of service. These payments are made because the employee is an employee and for no other reason. They are therefore related to the employment and are accordingly “remuneration or profit derived from an employment”.
  • payments made to induce an individual to enter into a contract of employment.
  • payments made by someone other than the employer. To satisfy section 3(1) it is necessary to show that the payment is a reward for services or is made because the recipient is an employee rather than for some other reason. It does not matter who is responsible for making the payment. But the payment must be made because of the employment.