What is employer's National Insurance?

Full answer

Employer's National Insurance (Class 1 secondary contributions) is paid by employers on top of their employees' wages. It is a direct business cost — employees never see it deducted from their take-home pay. **2026/27 rates:** - **Rate:** 15% (increased from 13.8% in April 2025) - **Secondary Threshold:** £5,000/year (£96.15/week) — employer NI is payable on earnings above this level - This threshold was reduced from £9,100 in the April 2025 Budget change **Example for an employee earning £35,000:** (£35,000 − £5,000) × 15% = £30,000 × 15% = **£4,500/year** employer NI **Employment Allowance:** Eligible employers can offset up to **£10,500** of employer NI per tax year via the Employment Allowance. Eligibility requires the employer's total NI bill to have been below £100,000 in the prior year, and single-director companies where the director is the only employee cannot claim. **Class 1A NI on benefits in kind:** Employers also pay **Class 1A NI** at 15% on the taxable value of benefits in kind (company cars, private medical insurance etc.) — reported on form P11D and paid by 22 July. **Class 1B NI on PSAs:** Class 1B NI at 15% applies to benefits covered by a PAYE Settlement Agreement (PSA). **Impact on hiring decisions:** The April 2025 rise (13.8% → 15%) and reduction of the secondary threshold (£9,100 → £5,000) increased employment costs significantly. A full-time employee on £25,000 now costs the employer ~£3,000 in NI, up from ~£2,193 previously — a material factor for small business hiring plans.

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