NIM09510 | Earnings Periods: Notifications issued in accordance with regulation 3(2B), SS(C)R 2001: General

Regulation 3(1), 3(2A) and 3(2B) of the Social Security (Contributions) Regulations 2001 (SSCR 2001) (SI 2001 No 1004)

If an employee is regularly paid at two or more different intervals, regulation 3(1) provides that the earnings period is the shorter or shortest interval. Where an employer pays an employee at different intervals and calculates NICs using the shortest of those intervals they are acting in accordance with Social Security legislation. Whilst the amount of NICs being paid can be less than would be paid if the longer earnings period were used, no suggestion should be made that the employer is deliberately attempting to avoid the payment of NICs.

Regulation 3(1) which provides that the shorter interval should be used is, however, subject to regulation 3(2A) and (2B).

Regulation 3(2B) provides that if it appears to an officer of the Board that the conditions specified in regulation 3(2A) are satisfied, they can decide whether to give notice to the earner and the secondary contributor to change the earnings period to the longer interval.

The conditions specified in regulation 3(2A) are:

• that it is the employer’s practice to pay the employee the greater part of their earnings at the longer or longest interval and

• that practice is likely to continue,

Example

A notification under Regulation 3(2B) can be considered if an employee:

• normally gets a weekly wage and quarterly commission payments; and

• has a weekly earnings period; and

• the total of the quarterly commission payments are more than the total of the weekly wages.

Since regulation 3(2B) provides that an officer of the Board ‘may’ decide to issue a notification, discretion can be applied in determining whether or not a notification should be issued. This means that whilst the conditions in regulation 3(2A) may be satisfied, a change to the earnings period may not secure an increase in liability and a notification would not be appropriate. Equally, the increase in liability may not be sufficient to justify a notification because the increase would be minimal. This discretion is particularly important where any proposed change would not materially assist the employee’s benefit position but could cause a disproportionate amount of administrative inconvenience to the employer.

Although discretion can be applied where HMRC itself is considering the issue of a notification under regulation 3(2B), if either an earner or secondary contributor requests a decision, one must be given. If such a request is made, the decision may, depending upon the facts of the case, provide that a notification to change the earnings period is or is not required.