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HMRC internal manual

National Insurance Manual

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HM Revenue & Customs
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Earnings Periods: Employee starts work part way through an earnings period but is not paid until the end of the next earnings period: Earnings period in same tax year

Regulation 7(1)(a) & (2)(a), SS(C)R 2001

If, for example, an employee starts work on a monthly earnings period basis part-waythrough the first earnings period (June) but receives their first earnings payment, for apart-month and a full month, at the end of the next earnings period (July) NICs arecalculated on the earnings due for each earnings period separately.

Example calculation:

  • an employee starts work on 20 June 2001
  • the employee will have a monthly earnings period (earnings will be paid on the last day of each calendar month)
  • the employment is not contracted-out
  • it is too late for the employer to put the employee on to the payroll for June so the employee receives their first earnings payment, for the period 20 June to 31 July, on 31 July 2001. The employee’s gross pay is £1,000 which represents:

    £180 for the period 20 to 30 June
    £820 for the period 1 to 31 July

Calculate NICs separately on each of these amounts as follows:
2001/02 tax year
monthly LEL = £312
monthly ET = £378
monthly UEL = £2,492
Earnings payment for June = £180
As this is less than the LEL and ET, NICs are not due.
Earnings payment for July = £820
Employee NICs = £442 x 10% = £44.20
Employer NICs = £442 x 11.9% = £52.60
Total NICs = £96.80
Total NICs of £96.80 are, therefore, due on the earnings payment of £1,000.

The principle also applies to weekly paid employees.