Employed and self-employed individuals are liable for different types (or classes) of NI contributions (NICs), which qualify them for different types of state benefits such as the state pension and Universal Credit.

Subject to certain exceptions, most employees are liable for deduction of Class 1 Primary NICs from their earnings. Employers with employees who are liable for Class 1 Primary NICs are required to pay Class 1 Secondary NICs. Employers’ contributions are calculated and charged on the amount of their employees’ pay and on any benefits in kind employees receive, such as company cars.

Some individuals (whether employed or self-employed) also choose to pay voluntary Class 3 NICs, for example to protect their state pension if they have not otherwise made sufficient contributions.

This factsheet provides a guide to employers’ and employees’ NI. It explains the NI process, how employees’ NICs are calculated and which employees are exempt from paying. It also covers how directors’ NICs are calculated, and explains employers’ NICs, voluntary NICs, the process for reclaiming over-payments, and the NI Employment Allowance that employers can claim.