• Meaning of terms and expressions
• Who is regarded as an employer?
• Who is regarded as an employee?
• Employees not liable to pay contributions
• Insurance registration cards
• Insurance schedule
  • Computer media
  • Handwritten schedules
• Returning schedules and payments
• Obligation of employers
• Earnings on which contributions are payable:
• Amounts to be included in the gross earnings figure
  • Wages or salary
  • Additional payments (overtime, bonuses etc.)
  • Benefits in kind
  • Directors' fees
  • Set aside savings
  • Share dividends
• Amounts to be included that require special treatment
  • Holiday pay
  • Pay during sickness
  • Gratuities/tips
  • Payment in lieu of notice
• Amounts not to be included in the gross earnings figure
  • Benefit
  • Expenses
  • Redundancy pay
  • Pensions
• Calculation of contributions
  
  • Fortnightly
  • Monthly
  • Four-weekly
• Employer's right to deduct and time of deduction
• Commencement of liability
• End of liability
• Payments made after termination of employment
• Death of an employee
• Change of contribution liability
  • School leavers
  • Employment after age 65
• Special groups of employed persons
  • Domestic help
  • Employees with more than one employer
  • Au Pairs
  • Home Workers
• Employers with more than 80 employees
• Completing manual schedules
• How we collect and use information
• Complaints 

Meaning of some of the terms and expressions used in this leaflet

"Contribution Week":-

A period of seven days starting on the day of the week on which January 1st falls.

"Lower Earnings Limit":-

The level of earnings at which, in respect of an employed person, employee and employer become liable for the payment of contributions. These contributions may also be used to calculate a person's entitlement to benefit.

"Upper Earnings Limit":-

This is the highest level of earnings on which contributions are payable.  Since 2008 the employer and employee upper earnings limits are different.

"The following contributions cannot be used to calculate benefit entitlement."

Contributions paid by an employer in respect of an employee who is over 65.

(There may however, be entitlement to certain Industrial Injuries benefits if any of the above contributions have been paid.)

"Gross earnings"

Gross earnings are the total wages or salary earned before any deductions are made.

"Due Date"

The date by which schedules must be returned i.e. the 15th of the month following the end of a quarter.

Who is regarded as an employer?

An employer, for the purposes of Social Insurance, is anyone who has employees. An employee is anyone who is gainfully occupied in employment under a contract of service in Guernsey or Alderney.

There are people who, although not under a contract of service, are nevertheless treated as employed persons. They include people who are:

a) Working full-time for the States of Guernsey or States of Alderney.

b) Contracted to work in the horticultural industry.

c) Contracted to work on a 'labour-only' basis within the construction or building industries.

Note: In (b) and (c) above, where the person is supplied by a third party and receives payment from that party, the third party will be treated as the employer. In all other cases the employer will be the person with whom the worker is contracted to do the work.

The above employees are required to pay Class 1 (employed) contributions.

Who is regarded as an employee?

An employed person is a person who is employed in Guernsey or Alderney under a contract of service and whose weekly or monthly earnings exceed the appropriate Lower Earnings Limit.

In general, contributions are required from both employer and employee in respect of any employed person who is over school-leaving age and under age 65. Exceptions to this are listed below.

Employees not liable to pay contributions

People who are NOT to be treated as employed persons are:

a) A person working for an employer, whose earnings in any week (or month) are below the Lower Earnings Limit, that is below the level at which contributions must be paid.

b) A person working for their spouse. If that person assists their spouse in a trade or business for 24 hours or more a week, that person is regarded as self-employed.

c) A person who works for a near relative in a private house in which both reside and the employment is not for the purpose of any trade or business carried out there.

d) Students under school leaving age.

Insurance registration cards

An employer MUST obtain a Social Insurance Registration Card for each employee before the end of the first week of employment. The card type determines the contribution liability. The employee's insurance card must be held by the employer for the duration of the employment.

Orange Card - Over 65

From the week or month following the 65th birthday, employees contributions are no longer payable. The employer is still required to pay the same percentage rate of contribution as he does for any other employee. Orange Cards are NOT issued automatically.

Blue Card

All employed persons working in Guernsey or Alderney who are under 65 will be issued with a Blue Card requiring full rate contributions to be paid by both employer and employee.

Insurance schedule

Each employer is required to keep an official record of the people who work for him, how much they are paid and the amount that has been deducted in respect of Social Insurance contributions. The Department's inspectors do, from time to time, visit employers to check these records.

Schedules on Computer Media

Any employer may, on application make quarterly returns by emailing an encrypted file to the Social Security Department or via CD/diskette. This may be done either using our own Returns Creator Software or via a payroll system approved by the Department.

Returns Creator

Returns Creator is free software, developed jointly by Social Security and Income Tax, which provides an easy alternative to handwriting insurance schedules and Income Tax returns. Contribution totals are calculated automatically, saving time and helping to reduce errors. The file can then be simply and securely e-mailed to this department or saved to CD/diskette. The product is compatible with Microsoft operating systems (Windows 2000 onwards) and can be installed on a personal computer with a CD drive.

Handwritten schedules

There are two types of handwritten schedule

1. Weekly - for employees who are paid weekly (2 employees per page).

2. Monthly - for employees who are paid monthly or at less frequent intervals than weekly ie four weekly or fortnightly (4 employees per page).

Schedules are sent out to employers before the start of the relevant quarter. Each will have a unique Employer's Registration number allocated, which will be detailed on the schedule and should be quoted in any correspondence.

The schedules are printed in two-part stationery. The bottom copy should be retained by the employer at the end of each quarter. Each quarter's stationery is printed in a different colour as follows:

1st Quarter - Orange

2nd Quarter - Red

3rd Quarter - Brown

4th Quarter - Pink

Payroll system

Any employer wishing to return schedules electronically must contact this office to confirm that the system they wish to use has been approved by the Department. If an employer has the responsibility for the quarterly returns of more than one company, it is possible to include several contribution schedules on the one CD/diskette, where this is more convenient.

Which ever system you use, you will be issued with a set of user guidelines and a declaration towards the end of the quarter. The declaration must then be returned along with the CD/diskette (if you have not e-mailed the file) and payment by the due date.

Further details about CD/diskette returns are available from the Social Security Department.

Returning schedules

The completed schedule or CD/diskette returns (if you have not e-mailed the file), together with a remittance for contributions due, MUST be sent to the Social Security Office (or the Alderney States Office) by the fifteenth day following the end of the relevant quarter, EVEN IF YOU HAVE NO EMPLOYEES DURING THE QUARTER. If a schedule is issued for a particular quarter, the Department will pursue its return.

NOTE: A penalty equivalent to 2½% of the schedule value will be applied if payment of contributions is not received by the Department on or before the due date. Interest charges at the rate of 2½% per month will also be incurred.

The Department strongly advises that employers return the schedule in good time to ensure that the return is received by the due date. Posting the schedules on the 15th does not comply with the requirements of the Law as payment will not generally be received by the Department on the day of posting.

Paying for your schedule

Payments can be made by cash or cheque and you can also pay using your Direct Debit and Credit Cards over the phone, in the office or via the internet.

Employers are also able to pay by BACS.  For further details please contact this office.

Obligation of employers (summary)

The employer alone is responsible for ensuring that he:

a) Holds a Registration Card for each employee.

b) Obtains quarterly schedules or relevant computer media.

c) Deducts the necessary contributions when wages or salary are paid.

d) Completes the schedules correctly.

e) Returns the schedules and remittance to the Department by the due date.

f) Maintains the earnings records of each employee together with a record of related contributions paid (or payable) for a period of 3 years after the end of the Calendar Year to which the period relates. The Department's Inspectors have powers to inspect Wage Books, Accounting Records, Schedules and other documents to ensure that the provisions of the Law are observed.

An employer is not relieved of his final responsibility if he delegates any of these tasks to an employee or agent.

Earnings on which contributions are payable:

The period to which any payment belongs is determined by the date on which it is paid (or would normally be paid) regardless of when it was earned, or the period to which it refers.

Amounts to be included in the gross earnings figure

a) Wages or salary

In general, this is the total amount paid (before deductions), to an employee during a contribution week or month.

b) Additional payments (overtime, bonuses etc.)

These include overtime; bonuses; commission and back pay. Any additional payment must be included in the gross earnings for the week or month in which it is actually paid regardless of when the payment was earned, or the period to which it refers.

c) Directors' Fees

Directors' fees received by a person who is also an employee of the company must be added to the earnings for the week or month in which they are paid.

d) Set aside savings

These are amounts set aside by an employer at the request of an employee to be paid out at certain times e.g. Christmas. These amounts should be included in the gross earnings for the week or month in which they were set aside and not in the week or month the savings are returned to the employee.

e) Benefits in Kind

All benefits in kind should be included as part of gross earnings. The value to be included on the schedule is the same value as determined for Income Tax purposes. This is the net weekly or monthly value following the deduction of the Income Tax exemption figure where applicable.

f) Share dividends

Share dividends paid by a private company to one of its employees are regarded as earnings. Where payment of the dividend causes gross earnings to exceed the upper earnings limit the dividend value should be apportioned over the period to which the dividend relates.

Additional amounts to be included in the gross earnings that require special treatment

a) Holiday pay

This is sometimes a payment of earnings made in advance. Holiday pay must be treated as if it were paid at the normal time and entered on the schedule as being the gross earnings for that week or month. For example, a person has a weekly wage of £550.00, and he takes his holiday from 6 August to 19 August (weeks 32-33). Although he is paid £1650.00 during week 31, the earnings must be entered on the schedule for weeks 31-33 at £550.00 per week. Failure to enter the wages correctly may result in deductions being made for an incorrect amount and the subsequent issue of an account to you, the employer, for the difference.

Where wages or salary are received in lieu of holiday the 'holiday pay' should be included in the week or month in which it is paid.

Holiday pay due upon termination of employment must be included with the final payment of wages or salary.

b) Pay during sickness

In general, if an employee receives his usual wages/salary during a period of sickness, contributions are due in the normal way.

If an employee does not receive his wages/salary during any period of sickness, no entry is required on the schedule for that week or month.

If an arrangement exists whereby an employee continues to receive his usual wages/salary but gives to his employer any Social Insurance benefit received by him, then the entry on the schedule should be the amount of the gross earnings less the amount of the benefit cheque. Contributions are payable only on the balance. This adjustment should be made for the week or month in which the benefit cheque is received by the employer.

For example, if an employee is on sick leave for the period 9 - 15 July 2010 (week 28), but receives his usual wage of £550.00, that is the amount to be entered on the schedule. If the employee receives a benefit cheque on 25 July 2010 (week 30) and hands it over the employer the following day, the employer should make the adjustment to the schedule during that week. The amount to enter is calculated as follows:

Wage £550.00

Benefit £128.52

Balance entered on schedule £424.18

c) Gratuities/tips

If a fund has been set up by an employer to collect tips or service charges over a period of time, which is then shared out, the value must be included in the gross earnings of each employee in the week or month in which it is paid.

Tips or gratuities received by an employee directly from a customer should not be included in the gross earnings.

d) Payment in lieu of notice

This should be attributed to the week or month in which the employee would normally have worked.

Amounts not to be included in the gross earnings

a) Value of any Social Insurance Benefit

- See Pay During Sickness

b) Expenses

Specific and distinct payments of expenses incurred by the employee in connection with his employment e.g. a petrol reimbursement.

c) Redundancy pay

There is no contribution liability in respect of a lump sum payment following redundancy.

Not to be confused with payment in lieu of notice.

d) Pensions

Pensions of any kind whether or not the pensioned employee is still working for the employer.

e) Directors' Fees

There is no liability in respect of directors' fees unless the person is also an employee of the company.

Calculation of contributions

The amount of contribution payable by employer and employee is a percentage of the gross earnings.

The first contribution week in any year will always start on the day of the week on which 1 January falls. The last contribution week of the year will contain 8 days (9 days in a leap year) and will cover the period 24 December (23 December in a leap year) to 31 December.

If two pay days fall in the last week of the year, the two payments must be added together to determine the amount of contribution payable. Insurance deducted should not exceed the amount payable on the employer and employee upper earnings limits.

Fortnightly, Four-Weekly on Monthly Paid Employees

Payments made at intervals less frequently than weekly, are treated as follows:

Monthly

Monthly paid employees will usually be paid one twelfth of a predetermined annual salary. Any overtime or bonuses should be included with the salary for the month in which they are paid (normally following the month in which they are earned), and deductions taken up to the monthly upper earnings limit.

Four-weekly

Employees paid once every four weeks are treated in a similar way to monthly. There is however one exception to the rule. Unlike monthly paid employees who receive twelve payments in a year, four-weekly paid employees receive thirteen payments. This means that during one month of every year two payments will change hands. These two payments must be added together for insurance purposes, and contributions deducted up to the monthly upper earnings limit.

For Example

A company pays its employees every fourth Friday commencing 1 January 2010.

During 2010 employees paid every four weeks will receive two payments during January, one on 1 January 2010 and the other on 29 Jnauary 2010. To ensure correct completion of the schedules, it is advisable to deduct the appropriate amount of insurance due on the first payment but do not enter anything on the schedule.

Before calculating the insurance due on the second payment it will be necessary to add together the gross amount of the first and second payments.

If the combined figure does not exceed the monthly upper earnings limit (UEL) for either employer or employee, normal deductions will apply:

The monthly UEL for this example is £9,789.00 (employer) and £6,656.00 (employee), therefore the schedule entry for January will be the amount shown in the "totals" line above. The entry on the schedule should be:

Period

Example 2

The same company pay another employee on the same dates.

Gross wage and contributions due are as follows:

Assuming that a similar salary is due for payment on 29 January 2010, it will become clear at this point that the total will exceed both the employer and employee UEL.  The contributions due on the second payment are then calculated by subtracting the deductions made on 1 January 2010 from the contribution due on the monthly UEL as follows:

The entry on the schedule should be:

It is possible that the salary paid on 1 January 2010 was already in excess of both the employer and employee UEL. This being the case, it will not be necessary to make any deduction for the second payment.

Fortnightly

Fortnightly paid employees are treated in a similar way to four-weekly paid employees, in that the earnings details must be shown on a monthly schedule. When the employer calculates the deductions due on each payment it is again advisable not to make any entry on the schedule until the second payment has been made. The payments made in any one month must be added together and deductions taken up to the employer and employee monthly UEL, using the same principle as shown in the previous example.

Calculating the deductions due on fortnightly payments made in one month are however, slightly more involved because there are always at least two months in every year that will contain three pay days. For example, during 2010 an employee that receives his first payment on Friday 1st January, will receive three payments during both January, July and December.

Employers right to deduct and time of deduction

It is the employer's responsibility to pay both employer and employee contributions to the Social Security Department. The employer is entitled to deduct the employee's contribution from the particular payment on which that contribution has been calculated.

If the contribution is not deducted at the time each payment is made the employer loses the right of deduction.

Commencement of liability

When an employee starts employment, the following actions should be taken:

1) The employer must obtain a registration card from the employee before the expiry of the first week of employment.

2) The 'began' date must be entered on the schedule.

3) Employers should disregard any previous period during which an employee may have worked for any other employer during the same week or month.

If an employee becomes liable for payment of contributions (and was previously not liable to pay) he must give his Registration Card to his employer and be treated as a new employee.

End of liability

When an employee ceases employment, the following actions should be taken:

1) Return the Registration Card to the employee. If this is not possible, the card should be sent to the Social Security Department with a brief note of the reason for its return.

2) The 'ceased' date must be entered on the schedule.

3) An 'X' should be entered in the LEFT ISLAND box if appropriate.

Payments made after termination of employment

Any payment due to an employee who has terminated his employment must be treated as paid to him in the week or month in which employment ceased. These payments include:-

Wages/Salary

Bonuses

Overtime

Holiday Pay

Redundancy pay must not be included in the gross earnings figure.

Payment in Lieu of Notice requires special treatment and must be entered in the week or month in which the employee would normally have worked.

If no previous entry has been made for the employee in the week or month in which the employment ended, an entry should be made on the schedule for the appropriate week or month.

If payment has already been made for the week or month in which the employment terminated then:

a) If the payment was equal to or more than the upper earnings limit, no further contributions are payable.

b) If the payment was below the upper earnings limit, deduct the correct percentage rate so that the total paid does not exceed the maximum.

Death of an employee

All payments due to the employee should be entered in the week or month containing the date of death. The Registration Card should be returned to the Department with an explanatory note.

Change of contribution liability

Young persons who are below school leaving age do not require a Registration Card as they are not yet insurable.

However, as soon as they reach school leaving age, the employer must obtain a Blue Registration Card from the employee.

Employment after age 65

Employed persons are not liable to pay employed persons (Class 1) Social Insurance contributions from the week or month following their 65th birthday. Contributions are still payable by the employer. The employee should exchange his card for an Orange Registration Card.

Note: Orange Registration Cards are not issued automatically.

Special groups of employed persons

Domestic help

An employer who pays a domestic help a wage in excess of the Lower Earnings Limit, is liable for the payment of contributions whether or not the employee has additional employment. Certain individuals may, however, be treated as special cases. Advice should be obtained from the Department.

Employees with more than one Employer

Employees who work for more than one employer must give a registration card to each employer. Additional Registration Cards can be obtained from the Social Security Department.

Au Pairs

There is no contribution liability where an Au Pair comes to Guernsey and is paid pocket money only, ie a sum not related to the work undertaken.

Home Workers

A person working for an employer but carrying out the work in their own home may be liable to pay contributions in the same way as other employees working on the employer's premises (provided that earnings exceed the Lower Earnings Limit). Guidance should be obtained from this office.

Employers with more than 80 employees

Where an employer has more than 80 staff, the employer is required to remit to the Department by the 15th of the month, an amount equivalent to the value of Social Insurance contributions for the previous month.

Remittances should be accompanied by forms EC4D which are issued by the Department at the beginning of each quarter.

Completing manual schedules

Before completing the schedules, employers should ensure that they are using the correct schedule for:

a) The appropriate quarter and year.

b) Weekly or monthly paid employees.

The information handwritten on the schedule is read by an Intelligent Character Recognition machine (ICR machine). It is therefore essential that schedules are completed using the following guidelines to avoid any misreads.

Guide Lines

Use black pen whenever possible.

Form large characters, but within the box edges.

Use simple shapes, avoid loops or curls or flourishes.

Close loops.

Connect lines.

Do not link characters.

Do not overlap characters.

Examples:

Please complete the schedule using a style similar to that shown below.

Employer's Address and Code

These will normally have been printed at the top of the schedule before issue. If the address is incorrect, it should be amended prior to returning the schedule at the end of the quarter.

Sheet Number

Each sheet of the weekly schedule should be numbered consecutively. Each sheet of the monthly schedule should be numbered in the same way.

Insurance Number and Surname

The number and surname should be entered on the schedule EXACTLY AS THEY APPEAR ON THE REGISTRATION CARD. If the card is wrong, it should be returned to the Department with an explanatory note.

Each letter and number should be written separately in the boxes provided, and should be entered as follows: