Payroll Advice - Student Loan Deductions

Student Loan Deductions

Do you know if student loan deductions are calculated on weekly earnings if a payment after leaving is made more than six weeks after the leave date as per NICs?

Firstly may I correct you on the claim that National Insurance Contributions (NICs) are calculated on a weekly basis if paid six weeks after leaving - there is no such rule - although increasingly it appears to be an assumed practice.

The normal payment frequency is to be used for any regular periodic payment being made after leaving, no matter when it is paid. The weekly rule implied only applies to an "irregular payment" after leaving (such as back pay).

The six week rule, which is regularly mixed up, relates to the NICs category letter application only. For example, if the employee was in contracted out employment (category letter D) and the additional payment (whether irregular or regular) is made within six weeks, the correct NICs category letter is the same, i.e. D. However, if the payment is made after six weeks of leaving then the correct NICs category letter to use is contribution letter A (not contracted-out).

With regard to the operation of Collection of Student Loans (CSL) on such payments after leaving, CSL deductions are to follow the same earnings period as used for the calculations of NICs on the payment. There is no tie to when the payment is made but the tie is against the type of payment being made whether regular or irregular.

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