Employers NI Explained: Rates, Thresholds and Costs

If you employ anyone in the UK, National Insurance shows up twice on your payroll: once as a deduction from the employee’s pay, and once as a separate cost your business pays on top. That second charge is employers NI, formally secondary Class 1 National Insurance contributions. It is easy to overlook when you agree a salary, because the employee never sees it on their payslip — but it is real money leaving your business every pay period, and since April 2025 it has been larger than most employers were used to.

This guide explains the current rate and threshold, shows the maths on three typical salaries, and covers the reliefs that can shrink the bill. All figures are for the 2026/27 tax year, which runs from 6 April 2026 to 5 April 2027, and they are unchanged from 2025/26.

What employers NI actually is

National Insurance is split into classes. Employees pay primary Class 1 contributions, deducted from their wages through PAYE. Employers pay secondary Class 1 contributions on the same wages, calculated separately and paid to HMRC alongside the employee’s tax and NI. The two charges sit side by side but follow different thresholds: employees start paying at £12,570 a year, while employers start much earlier, at £5,000.

That gap matters. An employee earning £10,000 pays no employee NI at all, yet their employer still owes 15% on the £5,000 above the Secondary Threshold — £750 a year. Employers NI is therefore a cost of having staff, not just of paying high salaries, and it applies from the first part-time role upwards.

The 2026/27 rate and threshold

The headline figures are simple. The employer rate is 15% on all earnings above the Secondary Threshold of £5,000 a year, which works out at £417 a month or £96 a week. There is no upper earnings limit for employers, so the 15% applies to the whole slice of pay above £5,000, whether the salary is £20,000 or £200,000.

Both figures changed sharply in April 2025 and have stayed put since. Before that date the rate was 13.8% and the threshold was £9,100, so the April 2025 change both raised the rate and pulled far more of each salary into the charge. The April 2025 change still catches some businesses by surprise.

Worked examples: what it costs at three salaries

The calculation is always the same: subtract £5,000 from the salary, then take 15% of what remains. On a £25,000 salary, the chargeable slice is £20,000 and employers NI is £3,000 a year, or £250 a month. On a £30,000 salary it is £3,750 a year. On a £50,000 salary it is £6,750 a year. Add that to the salary itself and the true annual cost of a £30,000 hire is £33,750 before pension contributions, benefits and any other on-costs.

That last point is the one to carry into salary negotiations. A £2,000 pay rise does not cost your business £2,000: it costs £2,300 once employers NI is added, plus any pension uplift.

The Employment Allowance: up to £10,500 off the bill

The Employment Allowance lets eligible employers reduce their annual employers NI bill by up to £10,500. For a small business with one or two employees it can wipe the bill out entirely: a single employee on £30,000 generates a £3,750 bill, which the allowance covers in full. Since 6 April 2025 there is no longer a £100,000 cap on the previous year’s NI bill, so businesses of any size can now claim, provided they meet the other eligibility rules.

There are exceptions. Single-director companies with no other employees cannot claim, and public-sector employers are generally excluded. You claim through your payroll software or HMRC’s Basic PAYE Tools, and the allowance is set against the bill as it arises rather than refunded at year end.

Zero rates for younger workers and apprentices

Not every employee attracts 15% from the first pound above £5,000. For employees under 21, and for apprentices under 25, the employer rate is 0% on earnings up to the Upper Secondary Threshold of £50,270 a year, with 15% applying only above that level. Hiring a 19-year-old apprentice on £25,000 therefore costs no employers NI at all, while the same salary for a 30-year-old costs £3,000.

These zero rates are claimed through the employee’s NI category letter in payroll — M for under-21s, H for apprentices under 25 — so make sure the category is set correctly.

Benefits, Class 1A, and common mistakes

Employers NI does not stop at salaries. Class 1A NI, also charged at 15%, applies to most benefits in kind such as company cars and private medical insurance, and is paid once a year through the P11D(b) process. Class 1B covers benefits provided under a PAYE Settlement Agreement.

The mistakes payroll teams see most often are using the employee threshold of £12,570 for the employer calculation, forgetting that there is no upper limit, and missing the Employment Allowance or a zero-rate category. If you want to see the employee side of the same payslip, our UK salary calculator breaks down take-home pay after income tax and employee NI.

This article is general information only, not financial advice.