Quick Answer:
Employers pay Class 1 National Insurance at 15% on every pound an employee earns above the secondary threshold of £5,000 a year (£417 a month, £96 a week). There is no upper limit, so the charge continues on the whole of a high earner’s salary. Eligible employers can offset up to £10,500 of that bill with the Employment Allowance. In practice, employer NIC adds between 10% and 14% to a salary before pension costs.
Employer National Insurance rates and thresholds
Class 1 secondary contributions are what an employer owes on an employee’s earnings. Class 1A and Class 1B cover benefits in kind and PAYE Settlement Agreements. All three currently sit at the same 15% rate.
| Threshold or rate | Weekly | Monthly | Annual | Rate applied |
|---|---|---|---|---|
| Employer Class 1 (secondary) | — | — | — | 15% above the secondary threshold |
| Secondary threshold | £96 | £417 | £5,000 | Employer NIC starts here |
| Lower earnings limit | £129 | £559 | £6,708 | Qualifying earnings for statutory benefits |
| Primary threshold (employee) | £242 | £1,048 | £12,570 | 8% employee Class 1 |
| Upper earnings limit | £967 | £4,189 | £50,270 | 2% employee Class 1 above this |
| Upper secondary threshold | £967 | £4,189 | £50,270 | 0% employer NIC for under-21s, apprentices under 25 and veterans |
| Employment Allowance | — | — | £10,500 | Offset against the annual Class 1 bill |
| Class 1A and Class 1B | — | — | — | 15% on benefits in kind and PSAs |
| Apprenticeship levy | — | — | £15,000 allowance | 0.5% of payroll above £3m |
There is no employer equivalent of the employee’s upper earnings limit — the 15% charge continues on all earnings above the secondary threshold.
How to calculate employer Class 1 NICs
The Employer NIC is calculated per employee, per pay period, based on gross pay exceeding the secondary threshold. It is not pooled across your workforce.
Annual employer NIC = (annual gross pay − £5,000) × 15%
Monthly employer NIC = (monthly gross pay − £417) × 15%
An employee on £3,000 a month: (£3,000 − £417) × 15% = £387.45 for that month.
Worked example: a five-employee payroll
| Employee | Annual pay | Category | Employer NIC | Why |
|---|---|---|---|---|
| Operations manager | £35,000 | A | £4,500 | (35,000 − 5,000) × 15% |
| Account manager | £28,000 | A | £3,450 | (28,000 − 5,000) × 15% |
| Sales lead | £52,000 | A | £7,050 | No upper cap — 15% on the full excess |
| Apprentice, age 19 | £22,000 | M | £0 | Under 21, pay below £50,270 |
| Weekend assistant | £4,800 | A | £0 | Below the £5,000 secondary threshold |
| Total | £141,800 | — | £15,000 | £4,500 after the £10,500 Employment Allowance |
Employer NIC is calculated per employee on pay above the £5,000 secondary threshold. Two of the five generate no employer NIC at all — one because of their age, one because of their earnings.
The Employment Allowance changes the answer
Gross employer NIC for the five people above is £15,000. After the £10,500 Employment Allowance, the company actually pays £4,500 across the year — a 70% reduction. Two of the five generate no employer NIC at all: one because of their age, one because of their earnings. Category letters and thresholds are not administrative detail; they are most of the bill.
Employer NIC rates by category letter
The category letter you set in payroll decides the rate. The wrong letter either overpays HMRC or creates an underpayment you will be asked to correct.
| Letter | Who it covers | Employer rate | Upper secondary threshold |
|---|---|---|---|
| A | Most employees | 15% | None — 15% on all pay above £5,000 |
| B | Married women and widows with a valid reduced-rate election | 15% | None |
| C | Employees over State Pension age | 15% | None — employer still pays; employee does not |
| H | Apprentices under 25 on an approved scheme | 0% | £50,270 |
| M | Employees under 21 | 0% | £50,270 |
| V | Armed forces veterans, first 12 months of civilian employment | 0% | £50,270 |
| F, I, S, L | Freeport and Investment Zone employees | 0% | £25,000 |
| J, Z | Employees deferring NIC because of a second job | 15% | None |
Category C is the one employers miss most often: past State Pension age the employee stops contributing, the employer does not.
Category C catches employers out most often. Keeping an employee on the payroll past State Pension age removes their contribution, not yours.
Setting up or auditing category letters across a UK payroll is exactly the kind of check that pays for itself. TopSource’s UK payroll services include a category-letter and threshold audit at onboarding.
What employer NIC costs you, by salary
The flat 15% rate above a low threshold means the employer charge lands as a near-constant percentage of salary. Modelling it as a rule of thumb “add roughly an eighth” is close enough for headcount planning and wrong enough to matter at the margins.
| Annual salary | Employer NIC | As % of salary | After a full £10,500 allowance |
|---|---|---|---|
| £15,000 | £1,500 | 10.0% | £0 |
| £20,000 | £2,250 | 11.3% | £0 |
| £24,785 (full-time National Living Wage, 37.5 hrs) | £2,968 | 12.0% | £0 |
| £30,000 | £3,750 | 12.5% | £0 |
| £36,036 (UK average earnings) | £4,655 | 12.9% | £0 |
| £45,000 | £6,000 | 13.3% | £0 |
| £50,000 | £6,750 | 13.5% | £0 |
| £70,000 | £9,750 | 13.9% | £0 |
| £100,000 | £14,250 | 14.3% | £3,750 |
The final column assumes one employee absorbing the whole allowance. Across a larger payroll it is exhausted quickly.
The final column assumes a single employee absorbing the whole allowance, which is the small-employer case. Across a larger payroll the allowance is exhausted quickly – in the five-person example above it covered 70% of the bill; at twenty employees it covers under a fifth.
National Living Wage uprating also pushes low-paid staff further above the secondary threshold each April, so the employer NIC line rises faster than the headline wage increase.
The true cost of a hire
Employer NIC is one of three statutory add-ons. For a £30,000 salary:
| Cost line | Amount | Basis |
|---|---|---|
| Gross salary | £30,000 | Contractual |
| Employer Class 1 NIC | £3,750 | (30,000 − 5,000) × 15% |
| Employer pension contribution | £713 | 3% of qualifying earnings, auto-enrolment minimum |
| Total employment cost | £34,463 | 14.9% above salary |
Add the apprenticeship levy at 0.5% if your total pay bill exceeds £3 million, and any employer contribution above the auto-enrolment minimum.
Employment Allowance: who can claim and how
The Employment Allowance reduces your Class 1 employer NIC bill by up to £10,500 a year. It is a reduction in liability, not a cash payment, and it is used up as your monthly liability accrues rather than spread evenly.
You can claim if
- You are a business or charity with Class 1 employer NIC liability. The former £100,000 total-liability cap has been removed, so size is no longer a barrier.
- You are a group or set of connected companies — but only one company in the group may claim, and you choose which.
You cannot claim if
- You are a single-director company with no other employee paid above the secondary threshold. This is the most common disqualification and it catches a large number of contractor companies.
- You are a public body, or more than half your work is in the public sector — unless you are a charity.
- You employ someone for personal, household or domestic work, unless they are a care or support worker.
Businesses carrying out economic activity should also check that the claim sits within the relevant subsidy limits for their sector.
How to claim
- Submit an Employer Payment Summary through your payroll software, selecting “yes” for Employment Allowance.
- Your PAYE liability then reduces month by month until the £10,500 is exhausted.
- Reclaim it each tax year — many payroll systems do not carry the election forward automatically. A missed claim can be backdated up to four tax years.
Directors, second jobs and multiple employments
- Directors: statutory directors use a cumulative annual earnings period, so the £5,000 secondary threshold is applied across the tax year rather than pay period by pay period. Irregularly paid directors will therefore see NIC land unevenly.
- Two jobs, two employers: each employer applies its own £5,000 secondary threshold. Thresholds are not aggregated, and neither employer needs to know about the other.
- Two jobs, connected employers: where employments are with the same or associated employers, earnings may need to be aggregated for NIC. This is a genuine compliance risk in group structures and is easy to miss.
When employer National Insurance is due:
| What | Deadline | Note |
|---|---|---|
| Monthly PAYE and NIC | 22nd of the following month | 19th if paying by post |
| Quarterly PAYE and NIC | 22nd after the quarter end | Available if average monthly liability is under £1,500 |
| P11D and P11D(b) | 6 July | Reports benefits in kind for the tax year just ended |
| Class 1A on benefits | 22 July | 19 July by post |
| Class 1B on a PSA | 22 October | 19 October by post |
Late payment triggers interest and, for repeated defaults, penalties on a rising scale.
Statutory sick pay: what changed and what it costs you
Reforms under the Employment Rights Act 2025 took effect on 6 April 2026 and materially change absence cost. Three changes matter for budgeting:
- Sick pay from day one. The three unpaid waiting days are gone. SSP is payable from the first day of sickness absence, which raises the cost of short absences that previously cost nothing.
- No earnings floor. Employees earning below the lower earnings limit now qualify. The Government estimates this brings around 1.3 million additional workers into scope — disproportionately part-time and shift-based teams.
- A percentage floor on the rate. SSP is the lower of £123.25 a week or 80% of the employee’s normal weekly earnings, averaged over the eight weeks before the absence.
Small employers’ relief offsets part of this. Employers whose total annual Class 1 NIC liability is £45,000 or less can recover 109% of statutory parental payments; larger employers recover 92%. Note this applies to parental payments, not SSP, which employers cannot reclaim.
Absence policies, occupational sick pay schemes and contracts written around the old waiting-day rules now need review. TopSource’s HR advisory team can pressure-test yours against the new entitlement.
Not sure what these rates cost you per hire?
Employer NICs, Class 1A and the frozen thresholds all feed into your real cost per employee. TopSource models your full UK employment cost and runs accurate, RTI-ready payroll — so nothing on the payslip is left to guesswork.
Benefits, expenses and salary sacrifice
Class 1A applies at 15% to most taxable benefits in kind reported on a P11D. Class 1B applies at the same rate to items settled through a PAYE Settlement Agreement. Termination payments above £30,000 also attract Class 1A, reported through RTI rather than the P11D.
Exempt if handled correctly
- Homeworking equipment reimbursed for business use, eye tests where display-screen work requires them, and annual flu vaccinations are free of tax and NIC when processed through payroll.
- Employees can no longer easily claim homeworking relief through their tax code, which puts the burden — and the opportunity — on employer-provided schemes.
Salary sacrifice is still the largest single lever
Every £1 an employee exchanges for an employer pension contribution saves 15p of employer NIC, on top of the employee’s own saving. On a 50-person payroll sacrificing 5% of a £35,000 average salary, that is roughly £13,000 a year.
Plan for the cap. From April 2029, salary-sacrificed pension contributions above £2,000 per employee per year will attract NIC. Multi-year workforce cost models built now should reflect that ceiling, and schemes designed around sacrificing large amounts will need revisiting well before then.
Legitimate ways to reduce your employer NIC bill
- Claim the Employment Allowance, and check every tax year that the claim was actually filed.
- Audit category letters. Under-21s, apprentices under 25 and first-year veterans carry a 0% employer rate up to £50,270.
- Use pension salary sacrifice while the relief is uncapped, and model the April 2029 ceiling.
- Process exempt benefits through payroll rather than reimbursing them informally.
- Review the timing of bonuses and one-off payments against pay-period thresholds for directors.
- Check whether freeport or Investment Zone relief applies to any site you operate.
Employees working outside the UK
UK employer NIC does not stop at the border. Whether you owe UK NIC, contributions in the host country, or both depends on the social security agreement in place and on whether a certificate of coverage or A1-equivalent has been obtained. Getting this wrong typically produces double contributions rather than none — an overpayment that is difficult to recover.
For teams spread across several countries, running each payroll locally while keeping one view of employer social security cost is the practical problem. TopSource’s global payroll services consolidate that reporting, and an employer of record arrangement removes the need for a local entity where you have only a handful of people.
