UK NI explained

Employer NI in the UK: Rates, Thresholds, and Calculations

Every UK employer pays National Insurance on their employees' earnings. This is called Class 1 Secondary Contributions, and it is separate from the employee's own National Insurance (Class 1 Primary). The employer pays it on top of the employee's salary. It does not come out of the employee's pay.

For the 2026/27 tax year, the employer NI rate is 15% on all earnings above the Secondary Threshold of £96 per week (£5,000 per year). There is no upper limit, unlike employee NI which caps at the Upper Earnings Limit.

If you are hiring in the UK through an Employer of Record, the EOR handles employer NI calculations, payments, and reporting. But you still need to understand the cost because employer NI adds to your total employment cost.

This guide covers the current rates, how to calculate employer NI, the Employment Allowance, and recent changes.

What Is Employer National Insurance?

Employer National Insurance (often called employer NI or employer NICs) is a payroll tax that employers pay on top of their employees' earnings. It is sometimes referred to as a "jobs tax" because it increases the cost of employing someone.

The technical name is Class 1 Secondary National Insurance Contributions. It is paid entirely by the employer. The employee does not see it on their payslip and it does not reduce their take-home pay.

Employer NI applies to:

• Salary and wages
• Bonuses and commission
• Overtime pay
• Statutory payments (SMP, SSP, etc.)
• Benefits in kind (Class 1A)
• PAYE settlement agreement items (Class 1B)

The money goes to HMRC alongside the employee's Income Tax and Class 1 Primary NI, reported through Real Time Information (RTI) each pay period.

Key points:

The 15% rate applies to all earnings above the Secondary Threshold with no upper limit.
The Secondary Threshold is the point at which employer NI kicks in. You pay nothing on earnings below it.

• Employee NI (Class 1 Primary) has different thresholds and rates, including a cap at the
• Upper Earnings Limit. Employer NI does not.

The rate increased from 13.8% to 15% in April 2025, adding significantly to employer costs. The Secondary Threshold was also reduced, meaning employers start paying NI on a larger portion of earnings.

How Do You Calculate Employer NI?

The calculation is straightforward:

1. Take the employee's gross pay for the pay period
2. Subtract the Secondary Threshold for that period
3. Multiply the result by 15%

Worked example (monthly pay):

An employee earns £3,500 per month.

• Gross pay: £3,500
• Secondary Threshold (monthly): £417
• Earnings above threshold: £3,500 - £417 = £3,083
• Employer NI: £3,083 × 15% = £462.45

The employer pays £462.45 in employer NI for this employee that month. This is on top of the £3,500 salary.

Worked example (weekly pay):

An employee earns £600 per week.

• Gross pay: £600
• Secondary Threshold (weekly): £96
• Earnings above threshold: £600 - £96 = £504
• Employer NI: £504 × 15% = £75.60

For benefits in kind (company car, private medical insurance), the employer pays Class 1A NI at 15% on the taxable value. This is calculated separately and paid annually after the P11D is submitted.

What Is the Employment Allowance?

The Employment Allowance is a relief that reduces your employer NI bill by up to £10,500 per tax year. It is designed to help smaller businesses with the cost of employer NI.

Eligibility:

• Your total employer NI liability must be under £100,000 in the previous tax year
• You must be a business or charity (not a public sector organisation doing more than half its work for the public sector)
• You cannot claim if you are a single-director company where the director is the only employee

How to claim:

You claim through your payroll software (via the Employer Payment Summary, or EPS). Most payroll systems, including those used by EORs, apply the Employment Allowance automatically if you are eligible.

The allowance reduces your employer NI liability until it is used up. If your annual employer NI bill is £8,000, the Employment Allowance wipes it out entirely. If your bill is £15,000, you pay £4,500 after the allowance.

For companies hiring through an EOR, the Employment Allowance eligibility depends on the EOR's total NI liability, not yours. Since the EOR is the legal employer and may have many clients, the EOR may or may not qualify. Discuss this with your EOR provider.

How Has Employer NI Changed Recently?

Employer NI has seen significant changes:

April 2025: The rate increased from 13.8% to 15%. The Secondary Threshold was reduced from £9,100 per year to £5,000 per year in April 2025. These changes increased employer costs by approximately 2 to 3 percentage points on total payroll.

April 2022: The rate increased from 13.8% to 15% was first announced (originally planned for April 2023 but delayed).

Historical context: Employer NI was 12.8% until 2011, then 13.8% from 2011 to 2025. From April 2025 it rose to 15%, and the Secondary Threshold fell from £9,100 to £5,000 per year.

The combined effect of the rate increase and threshold reduction means employers pay more NI on more of their employees' earnings. For a typical employee earning £35,000 per year, the 2025 changes added approximately £900 to the annual employer NI bill.

How Does an EOR Handle Employer NI?

When you hire through an Employer of Record, the EOR is responsible for:

Calculating employer NI: The EOR's payroll system calculates the correct amount each pay period, using the current rates and thresholds.

Paying HMRC: The EOR pays employer NI to HMRC alongside employee tax and NI, typically monthly (or quarterly for smaller employers).

RTI reporting: The EOR submits Full Payment Submissions (FPS) and Employer Payment Summary (EPS) to HMRC each pay period, reporting all deductions including employer NI.

Class 1A and 1B: If the employee receives benefits in kind, the EOR calculates and pays Class 1A NI. If there is a PAYE Settlement Agreement, the EOR handles Class 1B.

Employment Allowance: The EOR applies the Employment Allowance if eligible. The allowance sits with the EOR as the legal employer.

Cost pass-through: Employer NI is typically passed through to you as the client, either as part of the EOR's total employment cost or as a separate line item. You should understand how your EOR structures this cost.

The EOR also stays on top of rate changes. When HMRC changes NI rates or thresholds, the EOR updates their payroll system immediately. You do not need to monitor legislative changes yourself.

What Other Employer NI Obligations Exist?

Beyond the standard Class 1 Secondary Contributions on salary, employers have additional NI obligations:

Class 1A on benefits in kind

If you provide taxable benefits to employees (company car, private medical insurance, gym memberships, etc.), you pay Class 1A NI at 15% on the taxable value. This is calculated after the tax year ends and reported on form P11D. The payment deadline is 22 July (or 19 July if paying by cheque).

Class 1B on PAYE Settlement Agreements

If you have a PAYE Settlement Agreement (PSA) with HMRC to cover certain expenses or benefits on behalf of employees, you pay Class 1B NI at 15% on the grossed-up value. This is also paid after the tax year ends.

Reporting and payment deadlines

• FPS: Submitted on or before each payday
• EPS: Submitted by the 19th of the following month (to report adjustments, Employment Allowance, etc.)
• Monthly NI payment: Due by the 22nd of the following month (or 19th by cheque)
• P11D: Submitted by 6 July after the tax year end
• Class 1A payment: Due by 22 July

Missing these deadlines results in penalties and interest charges from HMRC.