NIM02620 | Class 1 NICs: Earnings of employees and office holders: Payments made on termination of employment: 'Golden handshakes'

The term ‘golden handshakes’ is used to describe some payments to departing employees. It does not have a precise legal meaning and describes payments falling within a variety of categories.

If an employer describes a payment as a ‘golden handshake’ in the context of:

• compensation for loss of office, see NIM02510

• a payment to an employee which is not compensatory, then it is likely to be earnings for the purposes of NICs.

In dealing with ‘golden handshakes’ it is important to consider what the payment is, why it is paid and how the amount paid is made up. If an employer tries to pay or hide contractual items such as accumulated overtime, backdated pay, fees, bonuses or holiday pay, etc. as payments in compensation for loss of office they will attract a liability for NICs.