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HMRC internal manual

National Insurance Manual

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HM Revenue & Customs
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Earnings Periods: Notifications issued in accordance with regulation 3(2B), SS(C)R 2001: General

Regulation 3(1), 3(2A) and 3(2B)

If an employee is regularly paid at two or more different intervals, regulation 3(1) ofthe Social Security (Contributions) Regulations 2001 provides that the earnings period isthe shorter or shortest interval. Where an employer pays an employee at differentintervals and calculates NICs using the shortest of those intervals he is acting inaccordance with Social Security legislation and, whilst the amount of NICs being paid canbe less than would be paid if the longer earnings period were used, no suggestion shouldbe made that the employer is deliberately attempting to avoid the payment of NICs.

Regulation 3(1) which provides that the shorter interval should be used is, however,subject to regulation 3(2A) and (2B).

Regulation 3(2B) provides that if it appears to an officer of the Board that theconditions specified in regulation 3(2A) are satisfied, he can decide whether to givenotice to the earner and the secondary contributor to change the earnings period to thelonger interval.

The conditions specified in regulation 3(2A) are:

  • that it is the employer’s practice to pay the employee the greater part of their earnings at the longer or longest interval and
  • that practice is likely to continue,

Example

A notification under Regulation 3(2B) can be considered if an employee:

  • normally gets a weekly wage and quarterly commission payments; and
  • has a weekly earnings period; and
  • the total of the quarterly commission payments are more than the total of the weekly wages.

Since regulation 3(2B) provides that an officer of the Board ‘may’ decide toissue a notification, discretion can be applied in determining whether or not anotification should be issued. This means that whilst the conditions in regulation 3(2A)may be satisfied, a change to the earnings period may not secure an increase in liabilityand a notification would not be appropriate. Equally, the increase in liability may not besufficient to justify a notification because the increase would be minimal. Thisdiscretion is particularly important where any proposed change would not materially assistthe employee’s benefit position but could cause a disproportionate amount ofadministrative inconvenience to the employer.

Although discretion can be applied where the Department itself is considering the issue ofa notification under regulation 3(2B), if either an earner or secondary contributorrequests a decision, one must be given. If such a request is made, the decision may,depending upon the facts of the case, provide that a notification to change the earningsperiod is or is not required.