Monthly Employees NIC calculation

May 5, 2011
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Hi all!

I'm a Newbie and I have what will be a Dunces question to the Accountants on here but it's something I need to check as I'm writing a Payroll Program for my company

I'm using Sage Payroll to check that my program calculates correctly and the tax is cumulative but I'm not understanding the NIC. E.g....

Month 1 - Employee is paid say £800. NIC is calculated @ £23.76 (or therabouts)

Month 2 - Employee is paid say £100.00. NIC is NIL

However, the average is now only £450 per month so shouldn't month 2 offer a rebate of the £23.76 as £450 is in the Nil rate band? The tax calculates on a cumulative basis but the Sage Payroll NIC seems to isolate the months. Is that the case and if it is then an employee whose average would regularly take them into the nil rate band needs to take care not to 'book' over that band on a 'good' month as they won't get a reduction the months after?

Or am I missing something??

Any help much appreciated, Thanks in advance
Apr 28, 2011
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Yes, unlike PAYE, national insurance isn't calculated on a cumulative basis. It's based on the gross salary received in each earnings period.

The exception is for directors who have an earnings period of a year. National insurance for directors can be calculated on (i) a cumulative basis throughout the year or (ii) like a normal employee until the final pay period, at which point the cumulative position is then taken into account.


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