- Employers pay Class 1 secondary National Insurance at 15% on each employee’s earnings above £5,000 a year, with no upper limit.
- The Employment Allowance can wipe out up to £10,500 of that bill, but single-director companies with no other employee above the threshold cannot claim it.
- Employer NI sits on top of gross salary, so a £30,000 hire actually costs your business roughly £3,750 more before pension and other extras.
Employers’ National Insurance contributions are charged at 15% on each employee’s earnings above £5,000 a year, and your business pays this on top of the salary, not out of it. There’s no upper limit, so the 15% keeps applying however high the wage goes.
That makes it one of the biggest hidden costs of hiring. On a £30,000 salary you’re looking at roughly £3,750 in employer NI before you’ve added a penny of pension, which is why many business owners hand the whole thing to a managed payroll service.
The good news is the Employment Allowance can knock up to £10,500 off the bill if you qualify. Last reviewed August 2026 against current HMRC rates.
What is employer National Insurance?
Employer National Insurance is a tax your business pays on the wages of everyone you employ, separate from the National Insurance your staff pay themselves. HMRC calls it secondary Class 1 National Insurance, and it’s an unavoidable cost of having people on the payroll.
You pay it through PAYE every time you run payroll, alongside the income tax and employee NI you deduct from wages. If you run a limited company, our guide to payroll in a limited company covers how the whole run fits together.
The key thing to grasp early: this money never touches your employee’s payslip as a deduction. It’s a straight cost to the business, sitting on top of what you’ve agreed to pay them.
Employer NI vs employee NI: two separate bills on the same pay
Employer NI and employee NI are two completely different liabilities that both land on the same wage, and confusing them is the most common mistake business owners make. Your employee pays their own National Insurance out of gross salary; you pay yours on top.
Here’s how the two compare for a standard employee in 2026/27.
Who pays | Rate | Threshold it starts at | Comes out of |
Employee | 8%, then 2% above £50,270 | £12,570 a year | The employee’s gross pay |
Employer (you) | 15%, no upper limit | £5,000 a year | Your business, on top of pay |
Notice your threshold is far lower. You start paying at £5,000 while your employee doesn’t pay a thing until £12,570. If you want the mechanics of the employee side, our guide to how National Insurance is calculated walks through it in full.
Current employer NI rates and thresholds for 2026/27
The employer NI rate is 15% on all earnings above the Secondary Threshold of £5,000 a year, and both figures are unchanged from 2025/26. There’s no upper earnings limit, so unlike your employees, you keep paying 15% no matter how large the salary.
The threshold works out to the same amount however you slice the pay period:
- £5,000 a year
- £417 a month
- £96 a week
These rates took effect on 6 April 2025 and carry forward into the current tax year. For context, the rate was 13.8% and the threshold £9,100 as recently as 2024/25, so the cost of employing people has climbed sharply. That jump is exactly why modelling a hire properly matters now.
Always calculate employer NI on the gross salary, not the take-home figure. It's an easy slip when you're sketching numbers on the back of an envelope, and it understates your real cost every time.
What an employee really costs: worked examples
The true cost of an employee is their gross salary plus employer NI plus your pension contribution, and the NI alone adds up fast. Below are three common salary levels showing the employer NI figure specifically, so you can drop the number straight into a spreadsheet.
Gross salary | Earnings above £5,000 | Employer NI at 15% | Minimum pension (3%) |
£25,000 | £20,000 | £3,000 | £562 |
£30,000 | £25,000 | £3,750 | £712 |
£45,000 | £40,000 | £6,000 | £1,162 |
The pension figures use the 3% employer minimum on qualifying earnings and are indicative. What the table shows plainly is that a £30,000 hire isn’t a £30,000 decision. It’s closer to £34,000 once NI and pension land.
For the fuller picture, including recruitment, equipment and other on-costs, see our breakdown of the true cost of employing someone. This page is deliberately focused on the NI figure.
The employment allowance: up to £10,500 off your bill
The Employment Allowance lets eligible businesses reduce their annual employer Class 1 NI bill by up to £10,500, and for many small employers it wipes the bill out entirely. It’s claimed through your payroll software by ticking the Employment Allowance indicator on your next Employer Payment Summary to HMRC.
Since 6 April 2025 there’s no longer a £100,000 cap on the previous year’s NI bill, so businesses of any size can now claim.
The catch that stings single-director companies
One rule catches a huge number of owner-managed companies. A limited company with just one director and no other employee paid above the £5,000 threshold cannot claim the allowance. HMRC’s single-director eligibility guidance confirms this, and when the exclusion was introduced HMRC estimated it affected around 150,000 companies.
It doesn’t apply to sole traders or partnerships, only limited companies. And if you take on even one other employee paid above the threshold, you become eligible for the whole tax year. Our guide to the employment allowance covers the eligibility tests in detail.
NI category letters on a payslip
Every employee sits in a National Insurance category, shown as a letter on their payslip, and that letter tells payroll which employer NI treatment applies. Most standard employees are category A, which means the ordinary 15% above £5,000.
The letters that change your bill are worth knowing:
- A: the standard category, 15% above the threshold
- M: employees under 21, employer NI at 0% up to £50,270
- H: apprentices under 25, employer NI at 0% up to £50,270
- V: qualifying veterans in their first year, employer NI at 0% up to £50,270
Get the category wrong and you either overpay HMRC or underpay and face a correction later. Payroll software applies these automatically, which is one less thing to track by hand.
Reliefs and exemptions worth checking
Several reliefs let you pay 0% employer NI on certain staff, and each can save thousands, so they’re worth checking before you assume the full 15%. All apply only up to the Upper Secondary Threshold of £50,270, above which the normal 15% kicks in.
The confirmed reliefs for 2026/27 are:
- Employees under 21. No employer NI up to £50,270, on category M.
- Apprentices under 25. No employer NI up to £50,270 while on a government-approved scheme, on category H.
- Veterans in their first civilian year. No employer NI up to £50,270 during the first 12 months of civilian employment, on category V.
- Freeport and Investment Zone employees. A 0% rate up to a £25,000 upper threshold for qualifying new hires in designated sites, subject to specific conditions.
Each has its own qualifying rules, and the Freeport relief in particular has conditions on where the work is done. Check the detail before you rely on it rather than guessing.
Directors are treated differently
Directors have their National Insurance worked out on an annual earnings period, not pay period by pay period, which is a genuine quirk most guides skip. Instead of applying the £96 weekly or £417 monthly threshold each run, payroll assesses a director’s NI against the full £5,000 annual threshold across the year.
In practice this means a director can be paid unevenly through the year without triggering NI early, because it’s the cumulative annual figure that counts. Payroll software has a directors’ NI setting for exactly this.
It matters most when a director takes a lump sum or varies their salary, since the annual basis smooths the calculation rather than spiking it in one month.
If you’re a sole director paying yourself
For a sole director drawing a salary, employer NI applies to your own pay above £5,000 just as it would for any employee, and you usually can’t use the Employment Allowance to soften it. That’s the single-director exclusion above, and it shapes how most owner-managers structure their pay.
It’s why the common setup is a modest salary topped up with dividends. You pay no employer NI on dividends at all, because dividends aren’t earnings and sit outside National Insurance entirely.
Getting the salary-versus-dividend split right is its own decision with income tax, corporation tax and pension knock-ons. Our guide to sole trader tax covers the structuring question from the unincorporated side if you’re still weighing up how to trade.
National Insurance on benefits in kind
Employers pay Class 1A National Insurance at 15% on the taxable value of most benefits in kind, such as company cars and private medical insurance. It’s a separate charge from the NI on salary, reported after the tax year rather than each payday.
You report the benefits on form P11D and pay the Class 1A by 22 July (or 19 July if you pay by cheque) following the end of the tax year. The Employment Allowance can’t be used against Class 1A, so it’s a real additional cost on top of your salary NI.
If you provide benefits, our walkthrough on submitting a P11D covers the reporting side end to end.
When and how you pay employer NI
You pay employer NI to HMRC through PAYE, either monthly or quarterly, along with the income tax and employee NI you’ve deducted. Monthly payment is the default; you can pay quarterly only if your average monthly PAYE bill is under £1,500.
The deadlines are firm:
- Electronic payment: reaches HMRC by the 22nd of the month following the pay period
- Cheque or postal payment: reaches HMRC by the 19th
The P32 is the summary that reconciles what you owe each month, and our P32 explained guide breaks it down. Miss a deadline and HMRC charges interest, with penalties escalating for repeated late payments across a tax year.
How Sleek helps with employer National Insurance
Employer NI is unavoidable on any salary above £5,000, and no clever structuring changes that underlying liability. What you can change is whether the calculation, the allowance claim and the RTI filing eat your time or cause errors that cost you later.
Sleek’s real, in-house accountants run your payroll with the NI, category letters, Employment Allowance and pension all handled correctly, so the cost you budget is the cost you actually pay. You get someone accountable for the numbers, not a calculator you have to double-check.
See our accounting and payroll service, or dig into our payroll and pensions FAQs if you’ve got specifics to nail down first.
Disclaimer: The preceding information is not legal advice. This content is aimed to provide general guidance. For more formal or legal advice, contact Sleek directly.
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FAQs on employers national insurance contributions
How much employer National Insurance do I pay?
You pay 15% on each employee’s earnings above £5,000 a year, with no upper limit. So on a salary of £30,000 you’d pay 15% of £25,000, which is £3,750 for the year. The rate applies to every employee, though reliefs can reduce it to 0% for certain groups like under-21s and apprentices.
Is employer NI on top of the salary?
Yes. Employer NI is a cost to your business paid in addition to the gross salary, not a deduction from your employee’s pay. If you agree a £30,000 salary, the employee receives their pay after their own deductions, and you separately owe HMRC around £3,750 in employer NI on top. Always budget the two together.
Can a single-director company claim the employment allowance?
No, not if the director is the only employee paid above the £5,000 threshold. HMRC specifically excludes limited companies with one director and no other qualifying employee. Take on one more employee paid above the threshold, though, and you become eligible for the entire tax year. The rule doesn’t affect sole traders or partnerships.
Do I pay employer NI on dividends?
No. Dividends aren’t classed as earnings, so they fall entirely outside National Insurance for both you and the recipient. This is why many owner-managers pay themselves a small salary plus dividends. Bear in mind dividends carry their own dividend tax, and the salary-versus-dividend split has wider income tax and corporation tax effects worth planning properly.
Do I pay National Insurance on benefits in kind?
Yes. Employers pay Class 1A National Insurance at 15% on the taxable value of most benefits, such as company cars and private medical cover. You report these on a P11D and pay the Class 1A by 22 July after the tax year ends. The Employment Allowance can’t be set against Class 1A, so it’s a genuine extra cost.
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Does employer NI apply to part-time staff?
Yes, but only on earnings above the £5,000 threshold, which works out to £96 a week. A part-timer earning below that in your employment triggers no employer NI at all. The threshold applies per employment, so someone with a second job elsewhere gets a separate threshold there. Category and pension rules still apply as normal.
What happens if I pay employer NI late?
HMRC charges interest on late PAYE payments, including employer NI, from the day after the deadline. Repeated late payments within a tax year trigger escalating penalties, rising with the number of defaults. Electronic payments must clear by the 22nd of the following month, cheques by the 19th. Setting up a payment routine or outsourcing payroll is the simplest way to avoid it.
