This legislation was designed to help the lowest-paid employees in the economy build a free state pension and have access to state benefits. By a quirk of the system, it benefits company directors and sectaries who pay themselves a low salary.
If you earn an average of more than £520 per month or £6,240 per year (the lower earnings limit LEL for 2021/2022) you have the full benefit of employment Class 1 National Insurance without paying National Insurance. Meaning you will have access to the following free National Insurance Benefits:-
- State Pension*
- Contribution-based Jobseeker’s Allowance
- Contribution-based Employment and Support Allowance
- Maternity Allowance
- Bereavement Payment
- Bereavement Allowance
- Widowed Parent’s Allowance
- Bereavement Support Payment
*There is further protection for parents who fall under the LEL who received Child Benefit for a child under 12. They get a National Insurance credit against their pension record even if they earn below the LEL. Note it is only for the parent who receives the child benefit payments and this is usually the mother as the main caregiver.