What is Employer National Insurance?
Employer National Insurance Contributions (NICs) are a payroll tax that UK employers must pay on top of each employee's salary. Unlike employee NICs (which are deducted from the employee's pay), employer NICs are an additional cost to the business and do not appear on the employee's payslip.
For the 2025/26 tax year (April 2025 to April 2026), the key rates are:
- Rate: 15% on earnings above the Secondary Threshold
- Secondary Threshold: £5,000 per year (£417 per month, £96 per week)
- Employment Allowance: £10,500 (eligible employers can reduce their NI bill by this amount)
The Calculation
Basic Formula
Employer NIC = (Employee's gross pay - Secondary Threshold) x 15%
Worked Example
An employee earns £30,000 per year:
- Earnings above Secondary Threshold: £30,000 - £5,000 = £25,000
- Employer NIC: £25,000 x 15% = £3,750 per year
- Monthly cost: £3,750 / 12 = £312.50 per month
Multiple Salary Examples
| Annual Salary | Earnings Above Threshold | Annual Employer NIC | Monthly NIC |
|---|---|---|---|
| £20,000 | £15,000 | £2,250 | £187.50 |
| £30,000 | £25,000 | £3,750 | £312.50 |
| £40,000 | £35,000 | £5,250 | £437.50 |
| £50,000 | £45,000 | £6,750 | £562.50 |
| £75,000 | £70,000 | £10,500 | £875.00 |
Employment Allowance
The Employment Allowance allows eligible employers to reduce their annual NI liability by up to £10,500. This means:
- A business with a total NI bill of £10,500 or less pays no employer NI at all
- A business with a £15,000 NI bill pays only £4,500 after the allowance
Who Qualifies?
- Most businesses and charities are eligible
- The company's employer NIC liability in the previous tax year must have been below £100,000
- Companies where the director is the sole employee are not eligible
- Public bodies and companies performing more than half their work for public bodies are not eligible
NI Categories and Special Rates
Most employees fall under NI category A (standard rate). Special categories include:
- Category H: Apprentices under 25 -- no employer NIC on earnings up to the Upper Secondary Threshold (£50,270 for 2025/26)
- Category M: Employees under 21 -- no employer NIC on earnings up to the Upper Secondary Threshold
- Category V: Veterans in first 12 months of civilian employment -- no employer NIC on earnings up to the Upper Secondary Threshold
- Category F/S/L: Freeport employees -- reduced employer NIC on qualifying earnings
Salary Sacrifice and Employer NIC Savings
When employees sacrifice salary for benefits like pension contributions or cycle-to-work schemes, the sacrificed amount is not subject to employer NICs. This creates a genuine saving:
Example: An employee earning £40,000 sacrifices £5,000 into a pension:
- Without sacrifice: Employer NIC on £35,000 (above threshold) = £5,250
- With sacrifice: Employer NIC on £30,000 (above threshold) = £4,500
- Employer saving: £750 per year
Paying Employer NICs to HMRC
Employer NICs are paid alongside employee NICs and PAYE income tax through the PAYE system:
- Monthly payments: Due by the 22nd of the following month (electronic) or 19th (cheque)
- Quarterly payments: Available for small employers whose total PAYE/NIC liability averages less than £1,500 per month
- Reporting: Submit through Real Time Information (RTI) via your payroll software
Planning for Employer NIC Costs
When budgeting for a new hire, always factor in employer NICs:
True cost of employment = Salary + Employer NIC + Pension contributions + other benefits
For a £35,000 employee:
- Salary: £35,000
- Employer NIC: £4,500
- Pension (3% employer minimum): £1,050
- Total cost: £40,550 (16% above the headline salary)
How Grove HR Helps
Grove HR includes an employer cost calculator that shows the true cost of each employee including NI contributions, pension costs, and benefits. This helps with budgeting for new hires and understanding total workforce costs across the organisation.
Frequently Asked Questions
Do all employers pay the same rate of NI?
The standard rate is 15% for 2025/26, but some employer categories benefit from reduced or zero rates on earnings up to the Upper Secondary Threshold. These include employers of apprentices under 25, employees under 21, and qualifying veterans. The Employment Allowance also reduces the overall bill for eligible employers.
Is employer NI charged on bonuses?
Yes. Employer NICs apply to all earnings including bonuses, overtime, commissions, and most benefits in kind. The full 15% rate applies on any amount above the Secondary Threshold in the pay period the bonus is paid.
Can I reduce my employer NI bill?
Yes. Common strategies include claiming the Employment Allowance (£10,500 for 2025/26), using salary sacrifice schemes for pensions and qualifying benefits, hiring apprentices under 25 or employees under 21 (reduced NIC on earnings up to the Upper Secondary Threshold), and hiring qualifying veterans.