tel: 0845 3082288
e: enquiries@payrollsolutions.org.uk
e: enquiries@payrollsolutions.org.uk
Retirement: a life of easy living, fulfilling life ambitions and finally being able to draw down on the cash that you’ve spent years slaving away at the coal face to save.
It’s what many people look forward to and can’t wait for the day they can finally say goodbye to their professional career to access their state pension as well as what they may have supplemented personally.
But there is still a sizeable section of the work force, 1.2 million in fact, that are working beyond the state pension age.
There remains some confusion amongst companies about how this effects an individual’s contributions. Put simply, when an employee reaches retirement age they stop paying Class 1 contributions. However, the same does not apply to the employer; that continues to pay Class 1 secondary contributions.
The NIC exemption is based on when an employee is paid. Earnings that are due to be paid, and actually are paid, after reaching state pension age are not eligible. But earnings paid before the age is reached, or payments that should have been made (such as late salary payments) are subject to deductions.
It’s up to employers to update their payroll systems to reflect the changes in an employee’s status and therefore stop NICs. Simply changing the National Insurance category to ‘C’ will resolve this.
Additionally, employers should note that meeting state pension age criteria is no longer calculated by reaching set birthday but it is dependent on their day of birth. Gender should also be taken in to consideration, as that can affect eligibility too.
So, whilst there are simple steps that employers can take to ensure they keep their payroll in ship shape, there are more advanced considerations to be taken in to account to.
For competitively priced comprehensive management of your payroll, why not book a free meting now?
Tags: national insurance, NIC, pension, retirement, state pension