03: Employees

Employees who are not contracted out of S2P pay NICs at the main rate on earnings between the contributions threshold and the upper earnings limit. In 2008/09, the main rate is 11%, the contributions threshold is £105 a week and the upper earnings limit is £770 a week. Employees who earn more than the upper limit pay 1% NIC on the excess.

Earnings include salary, overtime, commissions, bonuses, readily convertible assets given to employees, employees’ liabilities paid by employers and benefits drawn from funded employer financed retirement benefit schemes (FEFRBS) (unless at least 75% is taken as pension).

If you are contracted out of S2P, you have to pay 9.4% NIC on your earnings between the contributions threshold and upper earnings limit. Only members of certain types of occupational pension scheme are contracted out in this way.

If you are an employee earning £90  to £105 a week, you pay no NICs but you will build up an entitlement to contributory benefits including S2P.