When an employee is paid after leaving the organization, the calculation for National Insurance (NI) payments depends on if the earning being paid is regular or irregular, following HMRC rules.
Instead of calculating NI payments after leaving as regular earnings and then using the 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’s considered as an irregular earning payment.
In Dayforce, you can mark earnings as irregular for payments made after the employee leaves to ensure correct UK taxation for NI payments. 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 and select the earning.
- In the United Kingdom subtab, select the Irregular Earnings checkbox. When the checkbox is selected, you mark the earning as irregular for payments after the employee leaves.
- Click Save.
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.