Wages & salaries · Level: Exam
Journal entry: Employer's national insurance
On top of gross pay, the employer pays its own contributions: an extra staff expense and a liability until paid.
Worked example
On gross wages of £21,400.00, employer's NIC of 13.8% is due. Book the employer's NIC (paid to HMRC later).
Correct journal entry
Employer's NIC £2,953.20 / PAYE and NIC payable £2,953.20
Debit
Employer's NIC£2,953.20
Credit
PAYE and NIC payable£2,953.20
Why?
- Employer's NIC: expense incurred → debit
- PAYE and NIC payable: liability increases → credit
Calculation
- 13.8% of £21,400.00 = £2,953.20
Typical mistake
Deducting employer's NIC from gross pay instead of adding it.
Your turn
Three problems on exactly this case, with different numbers. Amounts work with or without separators, e.g. 2,400.00 or 2400.
Transaction
On gross wages of £10,100.00, employer's NIC of 13.8% is due. Book the employer's NIC (paid to HMRC later).
Debit
Assets up · expenses · liabilities down
Total debit£0.00
Credit
Liabilities up · income · assets down
Total credit£0.00
Frequently asked questions
What is the journal entry for employer's national insurance?
Example: Employer's NIC £2,953.20 / PAYE and NIC payable £2,953.20.
How do I recognise this case?
On top of gross pay, the employer pays its own contributions: an extra staff expense and a liability until paid.
What is the typical mistake?
Deducting employer's NIC from gross pay instead of adding it.