Employer's National Insurance Explained (2026/27): Rate, Allowance & Exemptions

Employer’s National Insurance is a real cost of employing staff that sits on top of gross wages, separate from what comes out of the employee’s own pay. Here’s how it works for 2026/27.

What is employer’s National Insurance?

When you employ staff, you don’t just pay their gross wages, you also pay employer’s National Insurance (technically Class 1 secondary National Insurance contributions, often shortened to employer NICs) to HMRC, calculated on top of what the employee earns. This is entirely separate from the employee’s own National Insurance, which is deducted from their pay and calculated against a different starting point, the primary threshold, rather than the employer’s secondary threshold. National Insurance contributions from both employer and employee ultimately fund the State Pension and other contributory benefits, which is part of why HMRC treats employer NI as a compulsory cost of employment rather than an optional deduction.

For budgeting purposes, the true cost of an employee is their gross salary plus employer’s National Insurance (plus pension contributions, and any other employer costs), not just the headline salary figure. Getting this wrong is a common reason employers under-price a new hire when working out what a role actually costs the business, since employer NICs and pension contributions together can add a meaningful percentage on top of the advertised salary.

National Insurance more broadly, across both employer and employee contributions, is what funds the State Pension, the National Health Service, and contributory benefits such as certain unemployment benefits and statutory payments. Employer NI isn’t a separate, standalone charge invented for businesses, it’s the employer side of the same National Insurance system that also deducts contributions from employees’ pay.

How employer NI is reported and paid

Employer’s National Insurance is calculated and reported through PAYE, alongside income tax and the employee’s own National Insurance, using Real Time Information (RTI) submitted to HMRC every pay period. Payroll software works out the employer NI due for each employee based on their earnings and NI category letter, then reports the total to HMRC and collects payment on the normal PAYE schedule, monthly or quarterly depending on the size of the payroll. An employee’s NI category letter affects the rate and thresholds that apply, standard categories differ from those used for under-21s, apprentices, or certain other groups, so getting the category right on the payroll system is part of applying the correct exemptions described below.

The rate and threshold for 2026/27

For 2026/27, employers pay National Insurance at 15% on each employee’s earnings above the secondary threshold of £5,000 a year (roughly £417 a month or £96 a week), rates published on GOV.UK’s National Insurance rates and categories page. Earnings below this threshold aren’t subject to employer NI at all.

Because these thresholds are reviewed and can be frozen or adjusted at each Budget, it’s worth checking the current year’s figures rather than assuming they carry over unchanged, though for 2026/27 the rate and threshold are unchanged from the previous year. The National Insurance tax year runs from 6 April to the following 5 April, in line with the wider tax year, so any rate or threshold change usually takes effect at that point rather than partway through the year.

The Employment Allowance

Many smaller and medium employers can reduce their employer National Insurance bill through the Employment Allowance, which allows up to £10,500 to be offset against the employer NI liability for 2026/27. This is a genuinely useful reduction for smaller payrolls, in many cases wiping out the employer NI bill for a small number of staff entirely.

A few points worth checking:

• Not every employer qualifies. Companies where the only employee is also a director generally cannot claim.
• The exact allowance and eligibility rules are set each tax year and have changed materially in recent years, so it’s worth confirming the current figure rather than relying on an old number.
• It has to be actively claimed through payroll software, it isn’t applied automatically. Most payroll software has a simple setting to switch the claim on for the tax year, but it still needs to be checked each year rather than assumed to carry forward.

Exemptions for under-21s and apprentices

Reduced employer National Insurance applies for two specific groups, up to the upper secondary threshold:

• Employees under 21
• Apprentices under 25 on an approved apprenticeship

Above the upper secondary threshold, the standard rate applies as normal even for these groups. This exemption is worth factoring in when costing up hires in these categories, since it genuinely reduces the employer NI cost compared with an equivalent older employee. Employer NI is due on ordinary pay and most contractual benefits in the normal way, and this also extends to statutory payments made through payroll, including sick pay, so the employer NI cost doesn’t simply disappear when an employee is off work and being paid statutory sick pay.

Class 1A and Class 1B: NI on benefits in kind

Employer’s National Insurance on cash wages, paid as Class 1 National Insurance, is only part of the picture. Where an employer provides benefits in kind, a company car, private medical insurance, and similar perks, Class 1A National Insurance is also due, calculated on the value of the benefit and reported through the annual P11D process. Class 1B applies to certain items settled through a PAYE Settlement Agreement. See our benefits in kind and P11D guide for how this works.

The different classes of employer NI at a glance

Employers can end up liable for more than one class of National Insurance, depending on what’s actually being paid to or provided for an employee:

Each class has its own reporting route and, in the case of Class 1A and Class 1B, its own annual deadline separate from the regular payroll cycle, so a business providing both cash wages and employee benefits is usually managing more than one type of employer NI liability per tax year, not just the headline rate on salary.

Working out your employer NI cost

Because the Employment Allowance, age-related exemptions, and Class 1A liabilities all affect the final employer NI bill differently, it’s easy to either under-claim relief you’re entitled to, or under-budget the true cost of hiring. Employment status also matters at the outset, employer NI only applies to genuine employees paid through PAYE, not to a self-employed contractor invoicing the business, so getting employment status right is itself part of getting the National Insurance compliance picture correct. Our National Insurance calculator gives a quick estimate, and our payroll service handles the calculation, Employment Allowance claim, and reporting as part of running your payroll.