What is GMP based upon?
For contracted-out National Insurance contributions paid up to, and including April 5, 1987, you need to undertake the following:
Obtain the earnings factors from the employee’s contracted-out NICs paid on earnings between the Lower and Upper Earnings Limits
Round up the contracted-out part of contributions paid before April 6, 1985, round up to the next multiple of 10 pence, unless it is already a multiple of 10 pence – any contributions paid in the 1985 to 1986 and 1986 to 1987 tax years are not rounded
Calculate the earnings factor by dividing the contribution by the contracted-out percentage for that year – since October 6, 1985, NICs are payable at differing percentage rates, depending on earnings, for 1985 to 1986 and 1986 to 1987 tax years, earnings factors are calculated as if contributions had all been paid at the maximum rate.
Round up the result to the nearest penny, with 0.5 pence rounded up
Round up the total earnings factor for each year to the nearest pound, with 50 pence rounded up.
For contractor-out earnings from April 6, 1987, to April 5, 1997, you also need to obtain the earnings factors from the earnings on the employees contracted-out NICs which have been paid between the lower and upper earnings limits.