Definition
A mandatory contribution paid by employers to HMRC on top of employee wages. It is calculated as a percentage of the employee's earnings above the Secondary Threshold and funds the state pension, NHS, and other benefits.
UK Context
From April 2025, employers pay Class 1 Secondary NICs at 15% on earnings above the Secondary Threshold of 5,000 pounds per year. The Employment Allowance allows eligible employers to reduce their annual NIC bill by up to 10,500 pounds. Employer NICs are a significant cost of employment that must be budgeted alongside salary costs.
Best Practices
- Factor employer NIC costs into total employment cost budgets, not just salary figures
- Check eligibility for Employment Allowance annually, as the rules and thresholds can change
- Consider salary sacrifice arrangements where appropriate to reduce employer NIC liability
Frequently Asked Questions
How much is employer's National Insurance?
From April 2025, employer's NIC is 15% on earnings above the Secondary Threshold of 5,000 pounds per year. This rate applies to all earnings above the threshold with no upper cap.
What is the Employment Allowance?
The Employment Allowance is a reduction of up to 10,500 pounds per year on an employer's total Class 1 NIC bill. Not all employers are eligible; for example, companies where the sole employee is also a director cannot claim it.