Employer NIC Calculator
Enter employee details to calculate employer National Insurance costs
Employer National Insurance 2026/27
Rates and Thresholds
- Rate: 15% on earnings above threshold
- Secondary Threshold: £5,000
- No upper earnings limit
Employment Allowance
- Up to £10,500 off annual NI bill
- Available to most employers
- Not available to single-employee companies
Special Rates and Exemptions
Under 21s and Apprentices Under 25
Employers pay no Class 1 NI on earnings up to £50,270 per year for employees under 21 and apprentices under 25. This significantly reduces employment costs for hiring young workers and makes apprenticeships more attractive to businesses.
Veterans
No employer NI for the first 12 months of employment for military veterans in their first civilian job. This relief applies to earnings up to £50,270 per year and helps veterans transition to civilian employment.
Freeport Employees
Employers in designated Freeport tax sites can claim relief from employer NI for new employees. The relief is worth up to £50,270 per employee per year and available for 3 years from the employee's start date.
Strategies to Reduce Employer NI Costs
Employment Allowance
- Claim £10,500 annual reduction automatically
- Available to most businesses
- Excludes single-director companies
- Claimed through payroll software
Salary Sacrifice Schemes
- Pension contributions save employer NI
- Cycle to work schemes reduce NI liability
- Electric vehicle schemes save both parties NI
- Consider childcare vouchers (existing schemes)
Complete Guide to Employer National Insurance
Employer National Insurance is one of the most significant costs for UK businesses beyond salaries themselves. Understanding how it works helps you budget accurately, plan hiring decisions, and identify opportunities to reduce your overall employment costs. This guide covers everything employers need to know about NI contributions for the 2026/27 tax year.
How Employer NI is Calculated
Employer National Insurance is calculated on each employee's earnings above the Secondary Threshold of £5,000 per year. The rate is 15% with no upper limit—unlike employee NI, which drops to 2% above £50,270, employer NI continues at 15% regardless of how much your employees earn. This means high earners cost proportionally more in employer NI.
The calculation is straightforward: (Annual Salary - £5,000) × 15%. For monthly calculations, divide the annual threshold by 12 (£416.67 per month) and apply the same formula to monthly earnings.
Step-by-Step Employer NI Calculation Examples
Example 1: Employee earning £35,000 per year
Step 1: Calculate earnings above threshold
£35,000 - £5,000 = £30,000
Step 2: Apply 15% rate
£30,000 × 15% = £4,500 per year
Monthly employer NI: £375.00
Total employment cost: £35,000 + £4,500 = £39,500
Example 2: Employee earning £75,000 per year
Step 1: Calculate earnings above threshold
£75,000 - £5,000 = £70,000
Step 2: Apply 15% rate
£70,000 × 15% = £10,500 per year
Monthly employer NI: £875.00
Total employment cost: £75,000 + £10,500 = £85,500
Example 3: Team of 5 employees each earning £40,000
Per employee: (£40,000 - £5,000) × 15% = £5,250
Total employer NI: £5,250 × 5 = £26,250
With Employment Allowance: £26,250 - £10,500 = £15,750
Total employment cost: (£40,000 × 5) + £15,750 = £215,750
Employment Allowance: A Complete Guide
Employment Allowance is a valuable relief that can save eligible employers up to £10,500 per year on their employer NI bill for 2026/27. It's often overlooked by small businesses, but claiming it is straightforward and can make a significant difference to your bottom line.
Who Can Claim Employment Allowance?
Most employers can claim Employment Allowance, but there are some exclusions:
- Eligible: Businesses, charities, and amateur sports clubs with employer NI under £100,000 in the previous tax year
- Excluded: Companies where the director is the only employee paid above the Secondary Threshold
- Excluded: Public sector bodies and those doing more than 50% public sector work
- Excluded: Domestic employers (employing nannies, au pairs, care workers in your home)
- Eligible: Companies with directors where at least one other employee is paid above £5,000
How to Claim Employment Allowance
Claiming is simple and done through your payroll software. At the start of the tax year (or when you first employ someone), your software will ask if you want to claim Employment Allowance. Select "yes" and confirm you're eligible. The allowance is then automatically applied to reduce your monthly PAYE payments until you've used the full £10,500.
Example: Using Employment Allowance
Monthly employer NI: £1,500
Month 1-7: Pay £0 (£10,500 of allowance fully used)
Month 8: Pay £0 (allowance exhausted)
Month 8-12: Pay full £1,500 per month
Salary Sacrifice: Save Employer NI While Benefiting Employees
Salary sacrifice schemes are one of the most effective ways to reduce employer NI costs while simultaneously providing valuable benefits to employees. The basic principle is simple: the employee agrees to reduce their gross salary in exchange for a non-cash benefit, and both parties save NI on the sacrificed amount.
Popular Salary Sacrifice Schemes
Pension Contributions
Employee sacrifices salary for additional pension contributions. Both parties save NI, and the employee avoids income tax too. The employer saves 15% on every pound sacrificed.
Electric Vehicles
Employees lease an EV through salary sacrifice. Very tax-efficient due to low BIK rates (2-5%). Employer saves 15% NI, employee saves income tax and NI.
Cycle to Work
Employees get a bike and safety equipment up to £1,000 (or more with newer schemes). Both parties save NI on the monthly sacrifice amount.
Additional Annual Leave
Some employers let staff "buy" extra holiday. The salary reduction saves NI for both parties, and employees get better work-life balance.
Salary Sacrifice Savings Example
Employee earning £50,000 sacrifices £5,000 for pension
Employer NI saved: £5,000 × 15% = £750 per year
Employee NI saved: £5,000 × 8% = £400 per year
Employee income tax saved: £5,000 × 40% = £2,000 per year (higher rate taxpayer)
Combined annual savings: £3,150 (in addition to the pension benefit)
Understanding the True Cost of Employment
When budgeting for new hires, salary is just the starting point. Employer NI adds 15% to most of the salary cost, and there are often other costs to consider. Understanding the full picture helps you make informed hiring decisions and set appropriate salary budgets.
Complete Employment Cost Breakdown
For an employee earning £45,000 per year:
| Gross Salary | £45,000 |
| Employer NI (15% on £40,000) | £6,000 |
| Employer Pension (5% minimum) | £2,250 |
| Recruitment costs (one-time, amortised) | £500 |
| Training and development | £500 |
| Equipment and software | £500 |
| Total employment cost | £54,750 |
This represents a 19.3% overhead on top of salary (excluding one-time costs).
Planning for Growth
When planning to expand your team, use this rough guide: budget approximately 20% above salary for employer NI and minimum pension contributions. Add any additional benefits you offer (private health insurance, enhanced pension, etc.). This gives you a realistic view of the investment required.
Common Employer NI Mistakes to Avoid
Not Claiming Employment Allowance
Many small businesses don't realise they're eligible for up to £10,500 off their employer NI bill in 2026/27. If you have any employees besides a sole director, check your eligibility and claim through your payroll software.
Forgetting Under-21 and Apprentice Reliefs
Employees under 21 and apprentices under 25 have a higher Secondary Threshold of £50,270. Ensure your payroll correctly applies these categories—the savings can be substantial.
Missing the Monthly Payment Deadline
PAYE (including employer NI) is due by the 22nd of the following month (19th for postal payments). Late payments incur interest and can lead to penalties. Set up a direct debit to avoid missing deadlines.
Not Considering Salary Sacrifice
Many employers pay full NI on salary that could be sacrificed for pension contributions. Implementing salary sacrifice for pensions alone can save 15% of every pound employees contribute.
Incorrect Status for Workers
Misclassifying employees as self-employed to avoid employer NI is illegal and can result in significant penalties. Use HMRC's CEST tool if you're unsure about employment status.
Director's Salary: Optimising for Employer NI
Company directors have flexibility in how they're remunerated, allowing for strategic planning around employer NI. The most common approach is taking a small salary combined with dividends, but finding the optimal salary level requires considering multiple factors.
Common Salary Strategies
Option 1: £5,000 Salary
Salary at Secondary Threshold avoids all employer NI.
Employer NI: £0
Employee NI: £0
Downside: No qualifying year for State Pension unless above Lower Earnings Limit (£6,396)
Option 2: £12,570 Salary
Salary at Primary Threshold maximises corporation tax relief while minimising NI.
Employer NI: £479 (tax deductible)
Employee NI: £0
Benefit: Full qualifying year for State Pension, uses personal allowance
For most director-shareholders, a salary of £12,570 combined with dividends is optimal. The small employer NI cost (£479) is offset by corporation tax relief, and you secure a qualifying year for State Pension. Use our income tax calculator to model different scenarios.