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HMRC internal manual

National Insurance Manual

Earnings Periods: Holiday pay paid in advance: employee stays at work

If an employer pays an employee in advance for a holiday but the employee stays at workwith the same employer during the holiday and does not take it later, the position is asfollows.

`Regular Interval’ Rules (Method A) Used

If the employer used these rules, they should:

  • add together the pay now due and the holiday pay already paid for that week;
  • work out NICs on the total amount; and
  • subtract from that amount the NICs already paid on the holiday pay for that week to arrive at the NICs due.

‘Holiday Earnings Period’ Rules (Method B) Used

If the employer used these rules, they should treat the pay for the work done in theholiday weeks separately and calculate NICs on it in the normal way, even though thisresults, for example, in the equivalent of five weeks NICs being paid over a period ofthree weeks.