Employer NICs on termination awards over £30,000

Employer NICs on termination awards over £30,000

After being delayed twice, new rules on employer NICs on termination payments which exceed £30,000 will come into force in April 2020.

Termination awards, being non-contractual, genuine compensation for loss of employment, can be paid tax-free up to £30,000. In the event that a termination award exceeds £30,000 it is treated as income and should be taxed accordingly. However, it is not currently treated as earnings, from which NICs need to be deducted.

As of April 2020, this will change. Employers will have to pay employer NICs on the value of the termination award which exceeds £30,000. Employer NICs are currently 13.8%. In the case of high value termination awards, this could mean a significant bill for the employer (on top of what they are already paying out).

If you are considering entering into exit/settlement negotiations with an employee and would like advice on strategy, please contact our employment team.

Claire Knowles - Partner

Mark Alaszewski - Associate

Rebecca Mahon - Solicitor

Amelia Wheatstone - Solicitor 

Adam McGlynn - Trainee Solicitor