What's covered in this guide:
Overview of National Insurance
National Insurance (NI) contributions are deducted through payroll and help fund certain state benefits such as the State Pension and statutory payments.
For payroll purposes, the most relevant type is Class 1 National Insurance, which is paid by both employers and employees through PAYE.
The amount of NI due depends on:
The employee’s National Insurance number
Their NI category letter
Their earnings within HMRC thresholds
To calculate NI correctly, Workforce Payroll relies on each employee’s NI number and category letter being recorded accurately.
Category Letters & Employee Groups
NI category letters determine how much National Insurance both the employer and employee must contribute.
Most employees fall under Category A, but different category letters apply to certain groups, such as younger employees, apprentices, veterans, or employees who have reached State Pension age.
To confirm the correct NI category letter for a specific employee group, refer to the guidance on GOV.UK.
When setting up an employee in payroll, select the correct category letter based on the employee’s:
Age
Employment status
Special circumstances (for example apprenticeships or veteran status)
Employees can usually find their NI category letter on their payslip.
Contribution Rates & Thresholds
National Insurance contributions are calculated on earnings within specific bands.
HMRC sets the thresholds and percentages each tax year.
Because these values change annually, this guide does not include specific figures. Always refer to the official GOV.UK guidance for the latest rates and thresholds.
Verifying an Employee’s NI Number
If your payroll software cannot validate an employee’s NI number, you can submit a National Insurance Number Verification Request (NVR).
To verify an employee's NI number, sumbit an EPS:
Payroll > RTI > EPS > + Submit New NINO Verification Request > Select Company File
When to use an NVR
Submit an NVR when your payroll software cannot confirm whether an employee’s NI number is correct.
An NVR checks the number against HMRC records and may return the correct NI number if one exists. It does not create a new NI number.
For full instructions, refer to the relevant HMRC guidance.
Prerequisites
Before submitting an NVR:
You must be registered for PAYE Online
You should wait at least two weeks after submitting your first Full Payment Submission (FPS)
If the employee does not have an NI number
If an employee has never been issued an NI number, they must apply for one themselves.
Employers cannot apply on behalf of employees.
Tip: Employees can often find their NI number on:
A payslip
Their P60
Letters from the Department for Work and Pensions (DWP)
Their Personal Tax Account or the HMRC app
Tip: If you get frequent NI number errors, ask employees to check their NI number on their Personal Tax Account or the HMRC app before submitting an NVR. Most employees can find their NI number on a payslip, P60 or DWP letter.
If an Employee Does Not Have an NI Number
Employees who do not yet have a NI number must apply online. The application process requires proof of identity and typically takes up to four weeks. Visit the GOV.UK service to apply for a NI number.
Important: You, as the employer, cannot apply for an employee’s NI number. The employee must complete the application themselves. They can start work while waiting for the number but you should use category X until the number is confirmed.
NI Category PayCheck & Eligibility Checks
To help ensure that employees are always on the correct NI category, Workforce includes two features that automatically check an employee’s NI category. These tools minimise errors and prevent incorrect payslip calculations.
NI Category Pay Check
The NI Category PayCheck automatically flags when an employee’s NI category may need updating. It is designed to catch issues such as employees ageing out of a category or finishing an apprenticeship but remaining on a reduced rate.
Automatic alerts: the system runs a National Insurance Category PayCheck whenever an employee’s current category may no longer be valid. For example, if an employee is on category M and turns 21 but their category isn’t updated to A, you will see a PayCheck alert.
Where you’ll see it:
1. Individual timesheets – if you are editing a timesheet and the employee’s category is incorrect for that period, a PayCheck warning appears.
2. The Timesheets index page – a column indicates whether any timesheets contain potential NI category issues.
3. The Central Pay Check Report – this report includes a dedicated section summarising employees whose NI categories need attention.
How to fix: each alert includes a link to the employee’s Tax Information page in your payroll software. From there you can update the employee’s NI category. The system keeps a history of any changes you make.
By acting on PayCheck alerts, you ensure mid‑year changes are reflected in employees’ NI categories before you process payroll.
NI Category Eligibility Check on Employee Profiles
This feature catches NI category eligibility errors directly within the employee’s profile so you can resolve issues before exporting timesheets:
Profile‑level check: validates whether the employee’s active NI category is correct as of today’s date. If the employee has turned 21 or reached State Pension age, a warning appears on their Tax Information tab.
Timesheet‑level check: validates whether the employee’s NI category is correct for a specific pay period. This ensures that historic timesheets reflect the appropriate category for those dates.
Visibility in reports: the Central Pay Check Report now includes a column for NI category eligibility. Any profile or timesheet‑level issues appear under Payroll checks.
The eligibility checks complement the PayCheck alerts: profile‑level warnings help you fix an employee’s data before generating timesheets, while timesheet‑level checks ensure historical periods use the correct category.
Where to find it:
Payroll > Central Pay Check Report > Payroll checks.
Important Considerations
Accuracy matters – always record each employee’s NI number and category letter are correct. Incorrect information can cause Real‑Time Information (RTI) submissions to fail and may lead to incorrect contribution payments.
Rates change every tax year – HMRC sets NI thresholds and percentages annually. Always update and check GOV.UK for the latest figures.
Protect personal data – NI numbers are sensitive personal data. Store and transmit them securely and avoid sharing them via email or chat.
FAQs & Troubleshooting
When do employees start paying National Insurance?
When do employees start paying National Insurance?
Employees begin paying NI when their earnings exceed the Primary Threshold. The exact PT figure changes each tax year – see HMRC’s guidance for current amounts. Earnings below this threshold build benefit entitlement but no contributions are deducted.
How much NI do we deduct for standard employees?
How much NI do we deduct for standard employees?
For category A, deduct the standard employee rate on earnings between the Primary Threshold and the Upper Earnings Limit and a lower rate on earnings above the Upper Earnings Limit.
What if an employee doesn’t have a NI number?
What if an employee doesn’t have a NI number?
They must apply online for one (see Applying for a National Insurance Number). While they wait, assign category X (no NI). Once the NI number arrives, update the employee’s record and change the category.
How do I check that a NI number is correct?
How do I check that a NI number is correct?
Submit a National Insurance Number Verification Request (NVR). You must be registered for PAYE Online and wait at least two weeks after your first FPS submission before sending an NVR.
Do employees over State Pension age pay NI?
Do employees over State Pension age pay NI?
Employees who have reached State Pension age pay no employee NI contributions (category C). However, the employer still pays NI at the standard rate.
Why am I seeing a NI Category PayCheck alert in a timesheet?
Why am I seeing a NI Category PayCheck alert in a timesheet?
The alert means the employee’s current NI category may no longer be valid for that timesheet (for example, they turned 21 during the pay period). Follow the link to their Tax Information page and update their category.
How do profile‑level and timesheet‑level eligibility checks differ?
How do profile‑level and timesheet‑level eligibility checks differ?
The profile‑level check validates the NI category against today’s date. If the employee has crossed an age boundary or ended an apprenticeship, you’ll see a warning on their profile. The timesheet‑level check validates the category for the specific pay period, ensuring historic timesheets use the correct category.
I updated an employee’s category; do I need to update their past timesheets?
I updated an employee’s category; do I need to update their past timesheets?
Yes, if the incorrect category affected previously approved timesheets. Review the timesheet and re‑approve it so that the correct category applies for that period.