How is Social Security calculated?

How is Social Security calculated?

For employees working fixed hours or on a casual part-time basis (irregular, non-fixed hours), Social Security Contribution (SSC) or National insurance (NI) is calculated as follows:

• For employees working on a fixed schedule (Full time or Part-time), the calculation is as follows (in the case of monthly payrolls): 

  Calculation

  Gross (Basic Amount) x 12 months / 52 weeks = Weekly salary (this figure is rounded at 2 decimal places) x 10% (or SSC bracket applicable) (and this figure is also rounded at 2 decimal places) x number of Mondays in the payroll period = Social Security amount for the period.

  In the case of non-monthly payrolls, the Gross is first multiplied by the number of payrolls in a year (for example, this would be 13 periods in the case of a four-weekly payroll). 

  For example: Anna Anastasi's basic annual salary is €28,166. The employee was born on the 1st of August 1989.
  

  Her January 2024 payroll NI workings would be the following:

  €28,166/12 months = €2347.17 (monthly basic wage) x 12 months /52 weeks = €541.65 (basic weekly wage) (rounded to 2dp).

  This places the employee under Category D2 (see below screenshot). Therefore, NI is calculated at €53.23 per contribution:

  

  Number of Mondays in January 2024: 5

  NI calculation for January 2024: €53.23 x 5 = €266.15

  The figure is rounded up/down to the nearest two decimal places and is reported as such in the FS3. 

  You will be able to see the employee's NI workings on the payslip by clicking on the tooltip icon near SSC: 

  

• For employees working on a non-fixed/casual/irregular schedule, the calculation is as follows: 

  For example: Cristina Cassar's basic hourly rate is €8.5/hour. The employee was born on the 1st of January 2000.
  

  Her January 2024 payroll NI workings would be the following:

  Hours worked in January: 60. Gross wage for January = 60 hours x €8.5 = €510.

  €510 x 12 months/52 weeks = €117.69 (basic weekly wage).

  This places the employee under Category B (see below screenshot).

  

  

  Category B is calculated using one of two methods. Either:

  • B1: Number of SSC Mondays x the €21.35; or
  • B2: If the employee chooses, Number of SSC Mondays x 10% of the basic weekly wage

  In Cristina Camilleri's case, her profile is set up to calculate NI on the 10% rate if she falls under category B:

  

  Therefore, NI is calculated at 10% of the weekly wage:

  NI = €117.69 x 10% = €11.77

  Number of Mondays in January 2024: 5

  NI calculation for January 2024: €11.77 x 5 = €58.85

  The figure is rounded up/down to the nearest two decimal places and is reported as such in the FS3. 

  Please note that Category B2 applies only to the employee NI. The employer/company NI is always calculated on the full €21.35 for weekly wages falling under Category B. Therefore, the employer NI in this case would be €21.35 x 5 = €106.75.

  You will be able to see the employee's NI workings on the payslip by clicking on the tooltip icon near SSC: 

  
  
  

Basis of NI Calculations

By default, fixed employees' NI is calculated on the basis of their annual salary.

However, if necessary, Talexio users can choose from the following options:

• Based on salary and any Special rates & Extra basic hours;
• Based on payslip basic;
• Based on salary, excluding Special rates & Extra basic hours. 

These options can be found in each employee's position under Other Payroll Information. 

• Based on salary and any Special rates & Extra basic hours - this is the default setting for fixed employees. This means that an employee's NI will be calculated based on their Annual Salary + any additional hours worked; 
  
  
• Based on payslip basic - this is the default setting for non-fixed (casual/irregular) employees. This means that the weekly wage is calculated each month. Since such employee is unlikely to receive the same salary each month, the employee will likely have multiple rows of NI in their FS3;
  
  
• Based on salary, excluding Special rates & Extra basic hours - this option can be selected to limit NI workings to the basic salary only. 
  
  

Other NI FAQs

• An employee may not have to pay NI contributions because of the below scenarios:

  • The employee pays NI at another place of work (for example, the employee has a full time job elsewhere and works on a part time basis with you). In such a case the user needs to select 'Don't pay NI' in the employee's employment position (under 'other payroll information');
    
    
    
    
  • The employee is on an irregular hour job schedule (casual worker), and the employee did not work any hours within a particular month. Here, both the employee and the employer do not pay SSC contributions during that month;
  • The employee does not earn more than the minimum weekly required amount. This is calculated as Minimum weekly wage (this is the upper limit of the SSC CAT A bracket) /40 hours x 8 hours. In such case, if the employee still wishes to pay NI, 'Pay NI if min. wage' needs to be ticked in the employee's employment position (under 'other payroll information');

  
  
  
  

  • The employee is younger than 16 or older than 65. Here, the employee does not pay NI and MLF and do not receive Sickness Benefit Deduction. In such a case, Talexio will automatically disable NI payments without the need to switch on any switches in the employee's profiles. 
    
    

• Social security is not deducted if employees are on unpaid leave for a whole week. In order for social security contributions to be deducted from an employee's payslip, the employee must work a minimum of 8 hours in a given week.

  Using the below example, Ann Mizzi is on unpaid leave during the first week of July:

  

  There are 5 Mondays in July 2024. Her July payslip, therefore, reflects 4 contributions, as she does not need to pay NI in the week of unpaid leave:

  

  Had she been on unpaid leave for the whole month, 0 contributions are deducted:

  

  You might notice that there are negative basic hours in the above payslip. This is because in this example, the employee took 184 hours of unpaid leave in July. A monthly payroll has 173.33 hours (which is an average of monthly hours over the whole year). Therefore, if a month has more unpaid leave hours than 173.33, the system will automatically remove the portion of the hours greater than 173.33 to ensure that the employee's payslip is still based on 173.33 hours.

• You might come across an instance where an employee has one more contribution than the rest of the employees. For example, let's take the February 2024 payroll. An employee has begun employment on the 1st of February. There are 4 Mondays in February, so the employees should pay 4 contributions. But you might have an instance when a new employee pays an extra contribution.

  The reason for this is that while NI contributions are considered as 'Mondays', NI needs to be paid for each week where an employee works at least 8 hours. So in the case where an employee started employment on the 1st of February, the week Monday 29th January - Sunday 4th February also needs to be included in the NI calculation. 

  For employees who were already employed with the company, this contribution is paid in the January payroll (as the 5th contribution for January for the week starting Monday 29th January). 

   And if the new employee was employed with another company prior to joining your company (and has previous payroll data saved on Talexio), then this employee will also pay 4 contributions. But in the case where this is the employee's first employment of the year (and obviously there is no previous payroll data for such employee), then the employee will need to pay 5 contributions to make up for the week starting 29th January. 

  There might be cases where a new employee has not yet provided an FS3, so the previous income is not yet recorded on Talexio. In that case, you may choose not to add the extra contribution. When adding an employee to payroll, if such employee does not have previous employment and started employment in the middle of the week, you will see a message:

  

  Selecting 'Pay NI for first week of employment' will add the extra contribution to the employee's payslip. Leaving this option unticked, will deduct the same amount of contributions as other employees. 

• An employee's remuneration package may include GWU contributions (deductions). For such employees, the deduction can be added automatically without the need to add a negative adjustment to their list of allowances.

  To set this up, locate the employee's employment tab, click on the edit icon of their latest/applicable position and go to the "Other payroll information" tab. Here, you will see an option called 'Pay GWU Contrib. 
  When this is enabled, an automatic negative adjustment of €1.00 for every Friday worked will be deducted in the employee's payslips. 

  

Official Sources

• Regulations
• Class 1 Social Security Contributions