If you pay wages or other remuneration for someone's work, you must pay employer's National Insurance contributions unless the person in question is self-employed. Certain work operations may also be exempt when calculating employer's National Insurance contributions (employers in private sector). Be particularly aware of remuneration in the form of commissions, overtime pay, inconvenience supplements, tips and similar.
The basis for calculating employer's National Insurance contributions is in principle gross salary to the employees. The rate for calculating employer’s National Insurance contributions is differentiated and varies between 0 and 14.1 %. The rate for employer's National Insurance contributions normally follows the municipality where the business has its head office.
The system of regionally differentiated employer's National insurance contributions is in principle state aid. According to the EEA agreement, state aid is illegal, but is accepted as long as the schemes are in compliance with the EU's guidelines for regional aid. As of 1 July 2014, these guidelines were revised and as a result numerous changes were introduced. Some municipalities were included in the scheme while others were assigned to a different zone.
The changes also led to more sectors being left out of the scheme. For instance, differentiated employer's National insurance contributions can no longer be given in certain areas of the transport, energy, finance and insurance sectors. In these sectors, a tax-free amount scheme has therefore been introduced. The employer will then be able to use a reduced rate within the limit of an assigned tax-free amount. If you are in doubt as to whether your business is classified as not being eligible for aid under the scheme, please contact your local tax office.
All remuneration liable for tax deduction, are normally liable for paying employer's National Insurance contributions. An important addition to this is that you must pay employer's National Insurance contributions for pension contributions and holiday pay.
You are not obliged to deposit calculated employer's National Insurance contributions in a separate bank account, the way you are with tax withholdings deducted from employee’s pay.