When an employee is paid after leaving the organization, the correct National Insurance (NI) payment must be calculated depending on whether the earning that is being paid is regular or irregular, in accordance with HMRC rules.
Rather than having to calculate employee NI on payments after leaving as regular earnings and then using weekly NI calculation, Dayforce can calculate NI contributions on irregular earning payments, such as bonuses, on a weekly basis. For example, holiday pay is treated as a regular payment, under normal calculations. However, if holiday pay is paid after an employee leaves the organization, it is considered an irregular earning payment.
By selecting the Irregular Earnings checkbox in the United Kingdom subtab of the Tax and Compliance tab, in the Earnings tab of Payroll Set-up > Earnings and Deductions, you mark the earning as irregular for any payments after the employee leaves to ensure correct UK taxation for NI payments.
If all earnings are regular, Dayforce calculates NI for employees on the normal pay frequency. If there is a mix of both regular and irregular pay frequencies, Dayforce treats the full payment as a regular earning and calculates NI as the employees' normal pay frequency. If all of the earnings are irregular, Dayforce calculates NI using the weekly NI calculation.
To configure an NI payment as an irregular earning:
- Go to Payroll Set-up > Earnings and Deductions.
- Click the Earnings tab.
- Click the Tax and Compliance subtab.
- Select the earning that you want to mark as irregular for any payments after taking leave.
- In the United Kingdom subtab, select the Irregular Earnings checkbox.
- Click Save.