NIM01206 - Class 1 structural overview from April 2009: calculating earnings limits & thresholds for pay intervals of other than a week
Regulation 11 of the Social Security Contributions Regulations 2001 (SSCR 2001) (SI 2001 No 1004)
Section 8 of the National Insurance Contributions Act 2022 (NICA 2022)
The method of calculating the prescribed equivalents is dependant on which threshold is being considered.
Lower Earnings Limit (LEL) and Upper Earnings Limits (UEL)
If an employee’s earnings period (see NIM01003) is for a period other than a week, the weekly LEL, UEL and, from 6 April 2009, the Upper Accural Point (UAP) are to be replaced by a prescribed equivalent. The UAP was removed from 5 April 2016.
The prescribed equivalent of the LEL and UAP (weekly limits) are calculated as follows:
Earnings Period | How to calculate the prescribed equivalents of the LEL and UAP |
---|---|
Multiple of a week | Multiply the weekly limits by the corresponding number of weeks in the period. |
A month | multiply each of the weekly limits by 4 1/3 |
Multiple of a month | multiply the amount calculated for one month as above (by multiplying each of the weekly limits by 4 1/3) and multiply this result by the corresponding number of months. Round this answer up to the next whole pound. |
A year | multiply the weekly limits by 4 1/3 and then by 12. Round this answer up to the next whole pound |
Not a multiple of a week or month | divide the weekly limits by 7. Multiply the answers by the number of days in the period. Calculate to the nearest penny, with a halfpenny or less being disregarded. |
With effect from 6 April 2009, the prescribed equivalent of the upper earnings limit is calculated with reference to a fixed prescribed equivalent where the earnings period is a year (provided at Regulation 11(2A)(b) SS(C)R 2001) which is then used in calculating prescribed equivalent for periods which are other than a week.
The upper secondary threshold for under 21’s was introduced from 6 April 2015 and the upper secondary threshold for apprentices under 25’s was introduced from 6 April 2016.
The National Insurance Contributions Act 2022 (NICA 2022) introduced a Veterans Upper Secondary Threshold and Freeports Upper Secondary Threshold. Section 8 of the NICA 2022 provides for prescribed equivalents.
The prescibed equivalents are calculated as follows:
Earnings Period | How to calculate the prescribed equivalent of the UEL and the Upper Secondary Thresholds for under 21’s, apprentices under 25, Veterans and Freeports |
---|---|
Multiple of a week | Divide the prescribed yearly equivalent by 52 and multiply the result by the number of weeks in the period. Round this answer up to the next whole pound. |
Multiple of a month | Divide the prescribed yearly equivalent by 12 and multiply the result by the number of months in the period. Round this answer up to the next whole pound. |
Not a multiple of a week or month | Divide the prescribed yearly equivalent by 365 and multiply the result by the number of days in the period. Calculate to the nearest penny, with a halfpenny or less being disregarded. |
Primary and secondary thresholds
If an employee’s earnings period (see NIM01003) is for a period of other than a week, the appropriate threshold is calculated using the prescribed yearly threshold (set out at Regulation 11(3) for the primary threshold and Regulation 11(3A) for the secondary threshold).
Earnings Period | How to calculate the prescribed equivalents of the Primary and Secondary Thresholds |
---|---|
Multiple of a week | Divide the prescribed yearly threshold by 52 and multiply the result by the number of weeks in the period. Round this answer up to the next whole pound. |
Multiple of a month | Divide the prescribed yearly threshold by 12 and multiply the result by the number of months in the period. Round this answer up to the next whole pound. |
Not a multiple of a week or month | Divide the prescribed yearly threshold by 365 and multiply the result by the number of days in the period. Calculate to the nearest penny, with a halfpenny or less being disregarded. |