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HMRC internal manual

National Insurance Manual

From
HM Revenue & Customs
Updated
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NIM02620 - Class 1 NICs : Earnings of employees and office holders : Payments made on termination of employment : 'Golden handshakes'

The term ‘golden handshakes’ has evolved in recent years to describe somepayments to departing employees. It does not have a precise legal meaning and describespayments falling within a variety of categories.

If an employer describes a payment as a ‘golden handshake’ in the context of :

  • compensation for loss of office, see NIM02510
  • a payment to an employee which is not compensatory, then it is likely to be earnings for the purposes of NICs.

In dealing with ‘golden handshakes’ it is important to consider what thepayment is, why it is paid and how the amount paid is made up. If an employer tries to payor hide contractual items such as accumulated overtime, backdated pay, fees, bonuses orholiday pay, etc. as payments in compensation for loss of office they will attract aliability for NICs.