National Insurance for Employers

As an employer in the UK, you are responsible for paying employer National Insurance contributions (NICs) on your employees' earnings above a certain threshold. Unlike employee NIC (which is deducted from the employee's pay), employer NIC is an additional cost to the business on top of the gross salary. Understanding the thresholds, available reliefs such as the Employment Allowance, and the different classes of NIC is essential for accurate payroll budgeting and compliance.

Employer NIC Rate and Thresholds

For the 2025/26 tax year, employer Class 1 NIC is charged at 15% on earnings above the secondary threshold. The secondary threshold (the level at which employer NIC starts) is £9,100 per year (£175 per week, £758 per month). This means that if you pay an employee £30,000 per year, employer NIC is calculated as 15% of (£30,000 − £9,100) = £3,135 per year. This is a significant employment cost that must be factored into hiring decisions and budget forecasts. The secondary threshold applies to all employees aged 21 and over. Employees under 21 are subject to a zero-rate of employer NIC on earnings up to £50,270 (see below).

Employment Allowance

Eligible employers can claim the Employment Allowance of up to £5,000 per year (2025/26), which reduces the amount of employer Class 1 NIC payable. The allowance is available if your employer Class 1 NIC liability in the previous tax year was less than £100,000. It is claimed through your payroll software by including the allowance on your Employer Payment Summary (EPS). The allowance cannot be claimed if you are a limited company where the sole employee is also the sole director, or if you employ someone for domestic/personal care (with some exceptions). For small businesses, the Employment Allowance can effectively eliminate the employer NIC bill for up to several employees, making hiring more affordable.

Class 1A NIC on Benefits in Kind

When you provide benefits in kind to employees — such as a company car, private medical insurance, or low-interest loans — you must pay Class 1A National Insurance at 15% on the taxable value of the benefits. Class 1A is reported on form P11D(b) and is due by 19 July (or 22 July for electronic payment) after the end of the tax year. Unlike employee NIC, there is no employee contribution on benefits in kind — the employee pays Income Tax on the benefit, and the employer pays the NIC. For a company car with a taxable benefit of £8,000, the employer NIC cost would be 15% × £8,000 = £1,200 per year. See our Company Car and Benefits guide for more detail on calculating benefit values.

Class 1B NIC on PAYE Settlement Agreements

A PAYE Settlement Agreement (PSA) allows employers to settle the tax and NIC on minor, irregular, or impracticable benefits in one annual payment. The employer pays the tax and Class 1B NIC at 15% on the grossed-up value of the benefits included in the PSA. Class 1B is charged on the total value of the PSA payments plus the tax paid. The PSA is submitted by 6 July following the tax year. This is useful for trivial benefits, staff entertainment, and expenses where it is not practical to include them in each employee's payroll.

Zero-Rate for Employees Under 21

Employers do not pay Class 1 secondary NIC on the earnings of employees under the age of 21, up to the upper secondary threshold of £50,270 per year (£967 per week). This relief is designed to encourage employers to hire younger workers and reduce youth unemployment. The employee still pays their own employee NIC on earnings above the primary threshold. A similar zero-rate applies to apprentices under 25 on earnings up to the same threshold. To apply the zero-rate, your payroll software must know the employee's date of birth and, where relevant, that they are on an approved apprenticeship scheme.

Freeports and Investment Zones

Employers in designated Freeport and Investment Zone areas can claim zero-rate employer NIC on the earnings of eligible employees up to £25,000 per year for up to three years per employee (until 2029/30 or later). The relief applies to new employees who spend at least 60% of their working time in the Freeport or Investment Zone. Your payroll software must use the relevant NIC category letter ('F' for Freeport employees, 'I' for Investment Zone employees) to apply the relief.

Explore more UK business and employer guides or try our calculators.