The National Insurance (NI) category letter is used to work out what contributions the employer and employee need to make when running payroll.
Most employees fall into category A.
Category Letter X
This is only for employees that do not have to pay national insurance, for example they are under 16. If you are getting X as the only NI category option, you need to check you have entered the employees correct date of birth.
Apprentices - Category H
If you have an employee that is an apprentice following an approved UK government statutory apprenticeship framework (frameworks can differ depending on the UK country) and is under 25 - you should select Category H, even if this employee is also under 21. Further HMRC guidance is linked below.
Once they turn 25, Shape will move them to category A for you.
Under 21 - Category M
If your employee is under 21, they should be category M, unless they are an apprentice. When they turn 21, they need to be moved to Category A for the next pay period. Shape automatically does this and a flag will show on the pay run screen that the employee has been moved to Category A.
Defer National Insurance - Category J and Z
Some employees already pay national insurance in their other jobs, however, to be able to defer, they need to paying:
They can do this if any of the following apply:
they pay Class 1 National Insurance with more than one employer
they earn £967 or more per week from one job over the tax year
they earn £1,151 or more per week from 2 jobs over the tax year
They’ll usually pay a reduced rate of 2% on your weekly earnings between £184 and £967 in one of your jobs (instead of the standard rate of 12%).
Employers should not be applying this unless the employee can supply evidence from HMRC they are entitled to defer.