Use

When administering Flexible Benefits for Great Britain (GB FlexBens), you may wish to avoid incurring additional/reduced employer National Insurance Contributions (NICs) resulting from your employees’ Flexible Benefits selections. To achieve this, you apply the National Insurance Cost Neutrality principle to each of the benefit areas defined in your GB FlexBens system where you do not wish to incur these additional/reduced NICs.

Prerequisites

To apply National Insurance Cost Neutrality within a given benefit area, and to determine how any given benefits plan is handled during NI Cost Neutrality processing, you must ensure that two customising activities are performed:

1. Set NI Neutrality Indicator for Benefit Area

In the Implementation Guide (IMG) under: Benefits Administration → Basic Settings → Define Flexible Benefits NI Neutrality/Pension Sell Parameters (FLEX ).

Set the indicator NI neutrality to apply NI Cost Neutrality to your selected benefits areas.

2. Set NI Neutrality Attribute for Benefits Plans

In the Implementation Guide (IMG) under: Benefits Administration → Plans -> <plan name> → Define Flexible Benefits Plan General Attributes for <plan name> Plan (FLEX)

Using the field NI cost neu. , maintain the NI neutrality attribute for each benefits plan where you have applied NI Cost Neutrality. This attribute controls how any given benefits plan NI Neutrality is processed. There are three possible options for this indicator:

NI Cost neutrality required for both over and under-spending (buy and sell)

NI Cost neutrality required for over-spending only (buy only)

NI Cost neutrality required for under-spending only (sell only)

Do not maintain the field NI cost neu if NI Cost Neutrality does not apply to the benefits plan you are defining.

An employee over-spends when he or she chooses a benefits plan option that is more expensive than the standard benefits option provided by your organisation for that particular plan.

Conversely, under-spending occurs when an employee selectsa benefits plan optionthat is less expensive than the standard benefits option provided by yourorganisationfor that particular plan.

As an organisation, you may decide not to apply NI Cost Neutrality to any surplus generated in an employee’s Flex Fund. If this is the case, you do not need to carry out the IMG step Set NI Neutrality Attribute for Benefits Plans .

Features

When you apply the NI Cost Neutrality Principle within a No Additional Funding Scheme, your employer NIC costs or savings that result from an employee’s changes to the standard benefits package are taken into account when calculating the cost of individual employee’s benefits choices.

Once NI Cost Neutrality is applied to any given benefit area, (and to the specific benefits plans within that area), specific data is generated by the system showing the employer NI Cost/Credit amount, and the net cost for the employee of his or her benefit selections after NI Cost Neutrality has been applied. This data is available to administrators and employees from the plan maintenance screen.

By choosing the option Costs , a cost summary window for all selected benefit plans, including all NI Cost Neutrality data, is displayed.

The payroll constant NICLY [Class 1A NI contributions (%)] operates in the following formula, which is used within GB FlexBens to calculate the value of the employee deduction or refund after NI Cost Neutrality has been applied: