How Terminations Affect Earnings and NI Calculations

Terminations affect the calculation of Earnings and NI. Before termination, the application calculates based on the Earnings feed to either Regular or Irregular classification balance.

If an earnings element is created as either regular earning or irregular earning, the process calculates it using the weekly or monthly rates. This depends on the frequency defined for the employee.

After termination, these classifications are still valid if:

• There are only irregular earnings, NI is based on weekly calculation.
• There are only regular earnings, NI calculation depends on the frequency defined for the employee.
• There's a mix of regular and irregular earnings, NI calculation on all earnings depends on the frequency defined for the employee.

It could happen that you need to make a bonus payment retrospectively after termination. If you created the bonus as a regular earning, it calculates NI using the monthly rate.

To calculate using the weekly rate, here's what you can do:

• Edit the Regular earning’s Retro Element definition for the retro component of the bonus element.
• Remove the balance feed from the Retro element to the NIable Earnings Regular balance
• Add the balance feed from the Retro element to the NIable Earnings Irregular balance

Using this, the application calculates any retro bonus payments as Irregular, unless there are also regular payments in the period. In such cases, the NI on all the earnings will be calculated as regular (monthly) earnings.