Employer National Insurance contributions

Employer National Insurance contributions are an employer-side payroll tax. For 2026–27, the standard rate is 15% of earnings above the secondary threshold. For a small business hiring its first employees, employer NIC can quickly become the biggest payroll cost outside gross wages, which is why the Employment Allowance matters. Understanding how it is calculated, when reliefs apply and how to claim the allowance is an important part of managing UK payroll and HR.

How employer NIC works

Employers pay secondary Class 1 NIC on each employee’s earnings above a weekly or annual secondary threshold. Unlike income tax and employee NIC deducted from a worker’s pay, employer NIC is a business cost on top of the wage.

The employee separately pays primary Class 1 (currently 8% above the primary threshold) — see our PAYE Real Time Information guide. Employer NIC is reported to HMRC alongside everything else through your full payment submission each pay period, so it is calculated automatically by compliant payroll software rather than worked out separately.

What employer NIC applies to

Secondary Class 1 NIC is charged on earnings, which is broader than basic salary. The main components are:

• Basic pay, overtime, bonuses and commission above the secondary threshold
• Cash allowances such as car or travel allowances paid through payroll
• Notional pay where share schemes are settled in readily convertible assets

Most benefits in kind — company cars, private medical cover and similar — instead attract Class 1A NIC at the same 15% rate, declared annually rather than each pay period. If you provide benefits, our P11D guide explains the reporting that drives the Class 1A charge.

Reduced rates for specific groups

Employer NIC is reduced to 0% up to a higher upper threshold for some categories of worker, designed to encourage hiring.

These savings can shape recruitment decisions, especially for fast-growing SMEs. To claim a reduced rate you must record the correct NIC category letter for each affected employee in payroll, and keep evidence — such as a veteran’s discharge documents — to support it.

Employment Allowance in practice

A qualifying employer can reduce its employer Class 1 NIC bill by up to £10,500 a year. The previous £100,000 employer-NIC eligibility cap was removed from 6 April 2025. Companies with only one employee paid above the secondary threshold, where that employee is also a director, do not qualify, which is a common trap for owner-managers planning their director’s salary.

• Tick the Employment Allowance box in your payroll software EPS
• Track the running balance — the reduction stops at £10,500 in-year
• Carry no unused balance forward; the allowance resets each tax year
• Connected employers can only claim one allowance between them
• Re-claim each tax year; it is not automatic

Larger employers and the levy

Once your annual pay bill passes £3m you also pay the Apprenticeship Levy at 0.5% of earnings, offset by a £15,000 annual allowance. It is collected through PAYE in the same way as employer NIC, so larger payrolls effectively manage two employer-side charges at once — our Apprenticeship Levy guide sets out how the funds can be recovered for training.

Planning the bill

Build employer NIC into salary modelling from day one. Pair this with our pension auto-enrolment guide, the PAYE RTI article, and our year-end checklist to keep pay-day surprises off the table. Verify current rates on the HMRC National Insurance rates page . See pricing for payroll that calculates employer NIC and Employment Allowance automatically.