National Insurance Calculations and Deductions

National Insurance (NI) is paid by most employees in the UK up to state pension age.

The deduction is based on the person’s earnings for National Insurance purposes. This is calculated and held in the balance NIable Pay.

Non Self-employed employees pay Class 1 National Insurance Contributions. The deduction is calculated in bands using Lower Earnings Limit (LEL).

No contribution due on earnings below this limit

• Primary Threshold (PT)

Currently no contribution is due on earnings between the LEL and the PT:

• Upper Earnings Limit (UEL)

Currently employee’s earnings between the PT and the UEL are subject to deductions:

• Above Upper Earnings Limit

Currently these earnings are subject to deductions, depending upon the NI category:

• Employers also pay NI contributions, and these are in similar bands:
  • Lower Earnings Limit (LEL): No contribution due on earnings below this limit
  • Secondary Threshold (ST): No contribution due on earnings below this limit
  • Above Upper Earnings Limit
    • Currently these earnings are subject to deductions.

Additionally, NI contribution rebates are given, depending upon the NI category and earnings bands.

There are variances in the deduction rate for different NI categories, and rebates of contributions for some categories.

The application will calculate the earnings in each band, for both employer and employee, and the deduction due from each component band. All these values are recorded in run results and balances against the employee.

There are many component formulas that constitute the NI and PAYE calculation. The primary formula that initiates the calculation is NI AutoIndirect.

If necessary, these formulas and the associated NI band values are updated by the UK localization team in response to the statutory or budgetary changes.

For more information, see the UK Payroll Data on My Oracle Support (MOS) for all the predefined balances in the application.

NI Deductions

The National Insurance contribution is calculated through the deduction group National Insurance that is part of deduction group Social Insurance (National Insurance). Calculations are done through the element Tax and NI.

To view details on deduction groups, deductions, and elements:

1. Navigate to Setup and Maintenance.
2. Search for and open the Payroll Calculation Information task:
   1. Search for the short name : GB_NI
   2. Search for the short name: GB_PAYE to see similar PAYE information.