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# Employer's NI on fluctuating earnings

Employer's NI payments on an employee whose earnings fluctuate around the monthly threshhold

• ### Definition of "employee" for ER purposes

This may be well known but it is a situation I have only just encountered.  Where an employee's earnings fluctuate above and below the monthly primary threshhold over a tax year, it seems that the employer's total secondary contributions for the year are greater when taking the sum of the monthly contributions than if the employee's earnings are the same amount each month. For example, take a part time employee who earns £500 per month for 6 months and then £1,000 per month for the rest of the year. No Ers NI for the first 6 months as earnings are less than the £719 monthly limit. The Ers NI on £1,000 is 0.138 x (£1,000-£719) = £38.79 per month or £232.67 for the tax year. If the same employee earns £750 per month for 12 months the monthly Ers NI is £4.28 per month or £51.36 for the tax year. In each case the annual earnings are £9,000.  As I say, I have not encountered this before so may be making a schoolboy error, but is that correct? I need to know which figure to use for budgeting purposes. Thanks.

### Replies (6)

By Accountant A
21st Feb 2020 14:31

dlapish wrote:

I need to know which figure to use for budgeting purposes.

A budget is a budget. Make a reasonable assumption on the basis of what you know and state the assumption. If it's material to the overall picture then highlight the assumption. If it's very material, prepare alternative budgets and highlight the differences. There is no right or wrong answer.

Thanks (1)
By jcace
21st Feb 2020 14:38

If you expect to pay six months @ £500 and 6 months @ £1,000 then you should budget for the NI arising on that pattern of payments.

Thanks (1)
By tom123
21st Feb 2020 14:53

Unless you have only got one member of staff, I would budget with NI on all the earnings, less the lower limit x FTE staff.

After all, you could have twice as many staff doing half as many hours, or all full time. The same labour output, but differing NI.

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By paul.benny
21st Feb 2020 15:35

If you're worrying about a £180 possible variation for budgeting, you're being over-precise.

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By lionofludesch
21st Feb 2020 16:35

NI's been like that since Graduated Contributions came in in 1958.

Nothing new here.

Directors are slightly different, obviously, with their annual accounting period, introduced because of the cracking wheeze of paying themselves just under the lower threshold (which, if I remember right, was about £50 a week) then zillions in the final week of the tax year. Just one week's NI to pay on that.

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By hje
21st Feb 2020 18:55

Don't forget employment allowance.

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