Hierarchy
EA-HRCGB (Software Component) Sub component EA-HRCGB of EA-HR⤷
PA-BN-FB-XX (Application Component) General Parts⤷
PAOC_BEN_FBN (Package) Flexible Benefits System
Basic Data
| Data Element | FBN_ERNIC |
| Short Description | NI Cost Neutrality Amount |
Data Type
| Category of Dictionary Type | D | Domain |
| Type of Object Referenced | No Information | |
| Domain / Name of Reference Type | P_AMT07V | |
| Data Type | CURR | Currency field, stored as DEC |
| Length | 13 | |
| Decimal Places | 2 | |
| Output Length | 18 | |
| Value Table |
Further Characteristics
| Search Help: Name | ||
| Search Help: Parameters | ||
| Parameter ID | ||
| Default Component name | ||
| Change document | ||
| No Input History | ||
| Basic direction is set to LTR | ||
| No BIDI Filtering |
Field Label
| Length | Field Label | |
| Short | 8 | NIC Neu. |
| Medium | 14 | NIC neutrality |
| Long | 21 | NIC neutrality amount |
| Heading | 8 | NIC Neu. |
Documentation
National Insurance Cost Neutrality Amount
Definition
The National Insurance Cost Neutrality Principle (PA-BN-FB-GB) can be applied in Flexible Benefits for Great Britain (GB FlexsBens)
If you apply this principle, any differences in employer National Insurance Contributions (NICs) produced as a result of an employee's flexible benefit choices are passed to the employee. Two scenarios are generally applicable when maintaining National Insurance (NI) neutrality for an employer:
- An employee's flexible benefit choices result in increased employer NICs. When the NI cost neutrality principle is applied in this case, the value of these additional NICs are deducted from the employee's salary.
- An employee's flexible benefit choices result in decreased employer NICs. When the NI cost neutrality principle is applied in this case, the value of these NICs savings are added to the employee's salary as a cash refund.
The National Insurance Cost Neutrality Amount is the actual amount deducted or added to an employee's salary as a result of applying the NI Cost Neutrality principle to any give flexible benefits plan.
Use
Therefore, if you apply the NI cost neutrality principle, the employer NICs difference (ER NIC Cost/Saving) will be taken into account when calculating the cost of the benefits selected for the employee. In this way, employers avoid incurring additional/reduced NI costs resulting from an employee's flexible benefits selections.
Examples
Your organisation administers a No Additional Funding flexible benefits scheme and has implemented NI cost neutrality with a Class 1A NI contribution rate of 12.8% for the current benefits year. To calculate the cost of holiday buying/selling for participating employees, in days, one day holiday cost is calculated by dividing the pre-flex salary by the number of annual working days. The following examples illustrate how NI neutrality processing is handled in Flexible Benefits for Great Britain, in two separate employee scenarios within this organisation.
Scenario 1: Employee overspending
A male employee receives a basic pre-flex salary of GBP 60,000 and is entitled to 20 days annual holiday under the standard benefits option provided during the pre-enrollment period. He buys five extra days holiday, resulting in GBP 85.24 per month being deducted from his pre-flex salary.
The following calculations are made in the system to produce this deduction of GBP 85.24 per month:
Pre-Flex Salary GBP 60,000
Standard Option 20 days entitlement
Pre-enrollment holiday value for 20 days 60,000 / 260 * 20 / 12 = GBP 384.62 per month
Post-enrollment holiday value for 25 days 60,000 / 260 * 25 / 12 = GBP 480.77 per month
Value of adjustment before NI Cost Neutrality is applied GBP = - 96.15
Value of NI Cost Neutrality 96.15 - [96.15 / (1 + 12.8%)] = GBP 10.91
Cost to employee of buying five days - 96.15 + 10.91 = GBP - 85.24
In this first scenario, the employee selected five more days holiday than offered in the standard benefits package. Normally, GBP 96.15 would be deducted from his pre-flex salary to pay for these extra days. However, your organisation has implemented NI cost neutrality for this plan. Because the employee's salary has been reduced in this scenario, your organisation pays less employer NICs, to the value of GBP 10.91. Therefore, an extra GBP 10.91 is refunded to the employee, and only GBP 85.24 is deducted from his pre-flex salary.
Scenario 2: Employee underspending
An female employee receives a basic pre-flex salary of GBP 70,000 and is entitled to 25 days annual holiday under the standard benefits option provided during the pre-enrollment period. The employee sells five days holiday, resulting in GBP 99.45 per month being added to her pre-flex salary.
The following calculations are made in the system to produce this addition of GBP 99.45 per month:
Pre-Flex Salary GBP 70,000
Standard Option 25 days entitlement
Pre-enrollment holiday value for 25 days 70,000 / 260 * 25 / 12 = GBP 560.90 per month
Post-enrollment holiday value for 20 days 70,000 / 260 * 20 / 12 = GBP 448.72 per month
Value of adjustment before NI Cost Neutrality is applied GBP 112.18
Value of NI Cost Neutrality 112.18 - [112.18 / (1 + 12.8%)] = GBP 12.73
Refund to employee for selling five days 112.18 - 12.73 = GBP 99.45
In this second scenario, the employee decided to sell five of her 25 days holiday allocated to her in the standard benefits package. Normally, GBP 112.18 would be added to her pre-flex salary in return for these "sold" days. However, your organisation has implemented NI cost neutrality for this plan. Because the employee's salary has been increased in this scenario, your organisation pays more employer NICs, to the value of GBP 12.73. Therefore, GBP 12.73 is deducted from the employee to maintain NI neutrality in this scenario, and only GBP 99.45 is added to her pre-flex salary.
History
| Last changed by/on | SAP | 20030603 |
| SAP Release Created in | 200 |
