Employer Contracted Out Number (ECON) - new information

Sending Employer’s Annual Returns covering more than one Employer

An Employer Contracting Out Number (ECON) is a reference number allocated to an employer who operates, or is part of a group of companies that operate, a contracted out pension scheme for their employees. For employees who are part of the contracted out pension scheme reduced contracted-out rate National Insurance contributions are paid by both the employer and employee. The ECON must be quoted on the P35 to validate the payment of lower contracted-out rate National Insurance contributions and also to track the employees contracted out employments. This is to ensure that each individual receives their correct pension entitlement when they reach State Pension Age.

In most cases employers will only have one ECON and one PAYE reference number. However it has come to our attention that there are a number of employers/submitters who believe that they need to submit National Insurance information using more than one ECON under one PAYE reference number but only one ECON can be quoted on the P35.

The majority of cases that have been brought to our attention are situations where as a result of mergers, acquisitions or TUPE transfers the employer/submitter has ended up with employee under more than one ECON. This has occurred where one employer who has an ECON takes over another. If the other employer also has a contracted-out scheme it too will have an ECON (and SCON). In such instances it is normally the case that the ECON of the company being taken over should be surrendered and the ECON of the parent company/employer should be quoted on the P35.

Where a merger or acquisition has taken place it is important to keep everyone’s records up to date. If the employer which has been taken over is to become a subsidiary of the new parent company, form CA7306 (PDF 55K) should be completed to update the contracting-out certificate of the parent employer accordingly. In addition, the contracting out certificate of the employer taken over should be surrendered.

However, if the employer that has been taken over is not to continue as a subsidiary, but is to become part of the parent company, form CA7313 (PDF 49K) should be submitted to surrender their contracting-out certificate.

In both of these circumstances, form CA1609 (PDF 135K) (change of ECON) should be completed in respect of all current employees who were previously contracted-out with the employer that has been taken over . This will allow HMRC to update each employee’s individual National Insurance account with the parent companies ECON.

There may also be cases where mergers, acquisitions and TUPE transfers have taken place and the employer/submitter has either continued to use or set up separate PAYE references. Employers/submitters in this situation should continue to submit their Employer Annual Return’s as they are doing now. The above advice only relates to employers who consider that they have more than one ECON but only one PAYE reference number.

There may be some rare cases where employer/submitters have employees under more than one ECON and do not fall into the scenario outlined above. If this is the case they should contact our help-line on 0191 22 50264. This help-line is specifically for employer/submitters who believe they have more than one ECON.

The helpline is open 9am – 5pm Monday to Thursday and 9am to 4.30pm on Friday.