Contributions

Known as "National Insurance", it is funded by mandatory contributions (National Insurance Contributions or NICs) paid for by employees and employers on earnings. The self-employed contribute based upon net earnings.

NICs are divided into different classes.
Class 1, 2 and 3 NICs paid are credited to an individual's NI account, which determines eligibility for certain benefits.
Class 1A, 1B and 4 NIC do not count towards benefit entitlements, but must still be paid.

Class 1

Class 1 contributions are paid by employers and their employees. The employee contribution is referred to as the "primary" contribution and the employer contribution as the "secondary". The employee contribution is deducted from gross wages by the employer, with no action required by the employee. The employer then adds in their own contribution and remits the total to HMRC along with income tax.

Class 2

Class 2 contributions are fixed weekly amounts paid by the self-employed. They are due regardless of trading profits or losses, but people with low earnings can apply for exception from paying. Those on high earnings with liability to either Class 1 or 4 can apply for deferment from paying. While the amount is calculated to a weekly figure, they are typically paid monthly or quarterly. For the most part, unlike Class 1, they do not form part of a qualifying contribution record for contributions-based Jobseekers Allowance.

Class 3

Class 3 contributions are voluntary NICs paid by people that wish to fill a gap in their contributions record. This may have been cause by not working or by their earnings being too low. The main reason for paying Class 3 NICs is to ensure that a person's contribution record is preserved to provide entitlement to the state pension.

Class 4

Class 4 contributions are paid by self-employed people as a portion of their profits, calculated with income tax at the end of the year. Below an earnings threshold, no class 4 NICs are due. Above the earnings threshold and below the upper earnings limit class, 4 NICs are paid at a rate of 8 percent of trading profits. Above the upper earnings limit class 4 NICs are paid at a rate of 1 percent of trading profits. They do not form part of a qualifying contribution record for any benefits, including the state retirement pension.

Benefits

NIC credits (or "credited earnings") can be claimed by people in need, including: retirement, unemployment, maternity and disability.

They are granted either to maintain a contributions record, or to those applying for benefits whose contribution record is only slightly short of the requirements for those benefits. In the latter case, they are unavailable to fill "gaps" in past years in contribution records for some benefits.

Statutory Sick Pay

If you are ill and unable to work for a period more than four consecutive days and less than 28 weeks, your employer is required to pay Statutory Sick Pay. To receive the benefit, you must tell your employer that you are sick and if asked by your employer, provide some form of medical evidence, from the eighth day of your illness
The standard rate is 79.15 GBP a week. The benefit will be paid like your regular pay on payday.

Maternity Leave and Maternity Pay

Maternity pay is designed to allow the mother to take time off work to have a child. All female employees are entitled to 52 weeks of maternity leave. Additional, unpaid leave may also be requested. The partner of the pregnant woman is also entitled to two weeks leave.

Six weeks of pay is at 90 percent of salary is available. Remaining weeks are paid at either 90 percent of your salary or 123.06 GBP- whichever is lower. This is a weekly payment from your employer.

National Insurance Number

A national insurance number is your own personal account number and is necessary for living in the UK. It acts as a reference number when communicating with the Department of Work and Pensions and HM Revenue & Customs (HMRC), and is used to record your national insurance contributions.

People born in the UK are assigned an NI number and receive a plastic number card shortly before their 16th birthday. This must be kept in a safe place.
People from abroad who wish to work in the UK, or those to whom a number was not initially allocated as children, may apply for a number through the Department for Work and Pensions.