If you run payroll, employer's National Insurance is one of the biggest costs that doesn't show up on a payslip. It's the contribution you pay on top of wages, and since April 2025 it's been bigger and starts sooner than it used to.
This guide explains how employer's National Insurance works for the 2026/27 tax year, what the 15% rate and the £5,000 secondary threshold actually cost you per employee, and how the £10,500 Employment Allowance can wipe it out entirely for many small businesses.
It's written for SMBs, startups and small limited companies that are taking on staff or want to budget payroll properly. We'll keep the jargon to a minimum and show you the maths.
What is employer's National Insurance?
Employer's National Insurance, sometimes called secondary Class 1 NI, is a contribution you pay as an employer on the wages of your employees. It's separate from the National Insurance your staff pay out of their own pay (that's the primary Class 1 contribution).
The key thing to understand is that it's a cost to you, not a deduction from your employee. If you pay someone a salary, you owe employer's NI on the part of that salary above a set threshold, and you pay it to HMRC alongside your PAYE.
For a growing business, it's a real number. Every new hire and every pay rise adds to it, so it pays to know exactly how it's calculated.
What is the employer NI rate for 2026/27?
For 2026/27, the employer (secondary) Class 1 NI rate is 15%. You pay it on each employee's earnings above the secondary threshold of £5,000 a year (£417 a month, £96 a week).
These figures are unchanged from 2025/26. The rate rose from 13.8% to 15% in April 2025, and the secondary threshold was cut at the same time, so 2026/27 simply holds the position.
| Employer NI item | 2026/27 figure |
|---|---|
| Employer (secondary) rate | 15% |
| Secondary threshold (per year) | £5,000 |
| Secondary threshold (per month) | £417 |
| Secondary threshold (per week) | £96 |
| Employment Allowance (per eligible employer) | £10,500 |
Employer's NI is charged on earnings above the secondary threshold with no upper cap, so it keeps applying at 15% no matter how high the salary goes. That's different from the employee's own NI, which drops to 2% above the upper earnings limit (£50,270 for 2026/27).
How do you calculate employer's National Insurance?
The basic calculation per employee is simple:
- Take the employee's earnings for the period.
- Subtract the secondary threshold (£5,000 a year, or £417 a month).
- Multiply what's left by 15%.
So for an employee on £35,000 a year, the sum is (£35,000 − £5,000) × 15% = £4,500 of employer's NI for the year.
In practice your payroll software does this each pay run, usually on a monthly basis, and reports it to HMRC through Full Payment Submissions. But knowing the formula lets you sanity-check the figures and budget for a new hire before you make the offer.
What is the Employment Allowance for 2026/27?
The Employment Allowance lets eligible employers reduce their annual employer's NI bill by up to £10,500 for 2026/27. It's not a payment you receive; it's a reduction applied to the secondary Class 1 NI you'd otherwise pay.
In effect, the first £10,500 of your employer's NI for the year is cancelled out. Once you've used it up, you pay the normal 15% on everything above.
You claim it through your payroll software by ticking the Employment Allowance flag, which sends the claim to HMRC on an Employer Payment Summary. The allowance then offsets your liability as the year goes on, until it's exhausted.
For a lot of small businesses, £10,500 covers their entire employer NI bill, so they pay nothing. That's why it's worth checking whether you qualify rather than assuming you don't.
Who can't claim the Employment Allowance?
Most small businesses and charities with employees can claim, but there are some important exclusions to be aware of:
- Single-director companies with no other qualifying staff. If your company's only employee paid above the secondary threshold is the sole director, you can't claim. You need at least one other employee (or director) whose earnings make them liable for secondary Class 1 NI.
- Public-sector work. If you do more than half your work in the public sector, you generally can't claim (charities are an exception).
- Connected companies and charities. If you're part of a group, only one company or charity in the group can claim the allowance, not each one.
A previous rule that blocked employers with more than £100,000 of employer's NI in the prior tax year was removed from April 2025, so larger employers can now claim too. If you provide goods or services, the allowance counts as de minimis state aid, so there are sector ceilings to be mindful of, which is worth a quick check with your accountant if you're near them.
Worked example: a small company's employer NI bill
Illustrative example. Northgate Studio Ltd is a small design agency with four employees on the following annual salaries. We'll work out its employer's NI for 2026/27 and then apply the Employment Allowance.
The per-employee calculation is (salary − £5,000) × 15%.
| Employee | Annual salary | Earnings above £5,000 | Employer NI at 15% |
|---|---|---|---|
| A | £30,000 | £25,000 | £3,750 |
| B | £28,000 | £23,000 | £3,450 |
| C | £24,000 | £19,000 | £2,850 |
| D | £22,000 | £17,000 | £2,550 |
| Total | £104,000 | £84,000 | £12,600 |
The gross employer NI bill is £12,600 for the year.
Northgate has more than one employee earning above the secondary threshold, so it qualifies for the Employment Allowance. Applying it:
£12,600 − £10,500 = £2,100 of employer's National Insurance to pay for 2026/27.
The allowance has covered most of the bill. A smaller business with, say, three of those four staff would have a gross bill of around £10,050 and would pay nothing, because the allowance would more than cover it.
What about directors, under-21s and apprentices?
A few groups are treated differently, and they matter for small companies in particular.
Single directors
If you run a one-person limited company and you're the only employee, you usually can't claim the Employment Allowance (see the exclusions above). On a typical low director's salary you'll still owe employer's NI on the part above £5,000.
Illustrative example. A sole director paying themselves £12,570 for 2026/27, with no other employees, would owe employer's NI of (£12,570 − £5,000) × 15% = £1,135.50 for the year, with no Employment Allowance to offset it. Many one-person companies factor this into how they set their salary-versus-dividend split, which is worth modelling properly.
Employees under 21 and apprentices under 25
For employees under 21, and for apprentices under 25, you pay 0% employer's NI on earnings up to the upper secondary threshold (£50,270 a year for 2026/27, the same as the upper earnings limit), then 15% above that. Taking on younger staff or apprentices can therefore reduce your employer NI cost.
How do you pay and reduce your employer NI?
Employer's NI is paid to HMRC each period as part of your PAYE bill, usually monthly, by the 22nd of the following month if you pay electronically. Your payroll software calculates it and files the figures through RTI.
There are legitimate ways to keep the cost down. Claiming the Employment Allowance if you're eligible is the obvious one. Pension salary sacrifice can also reduce the earnings that employer's NI is charged on, because the sacrificed amount isn't part of pay. And getting your director salary level right matters for one-person companies.
Getting payroll set up correctly from day one avoids the most common mistake we see, which is missing the Employment Allowance and overpaying HMRC for a year before anyone notices. If you'd rather hand the whole thing over, our bookkeeping and payroll support keeps it accurate and on time, and our corporation tax service makes sure the salary side fits sensibly with the rest of your company's tax.
We work with plenty of limited companies and startups at exactly this stage, when the first hires go on the books and the numbers suddenly matter.
Want to know what a new hire really costs you? Use our employer National Insurance calculator or payslip calculator to see the full cost, then book a free call with a Zmartly accountant to get your payroll and Employment Allowance set up correctly. Talk to Zmartly.
FAQs
What is the employer's National Insurance rate for 2026/27?
The employer (secondary) Class 1 National Insurance rate for 2026/27 is 15%, charged on each employee's earnings above the £5,000-a-year secondary threshold. There's no upper limit, so the 15% applies to all earnings above the threshold.
How much is the Employment Allowance for 2026/27?
The Employment Allowance is £10,500 for 2026/27. Eligible employers can reduce their annual employer's National Insurance bill by up to that amount, which means many small businesses pay no employer's NI at all.
Can a single-director company claim the Employment Allowance?
No. If the only employee paid above the secondary threshold is the sole director, the company can't claim. You need at least one other employee or director whose earnings make them liable for secondary Class 1 National Insurance.
Do I pay employer's National Insurance on a £12,570 salary?
Yes. For 2026/27 the secondary threshold is £5,000, so a £12,570 salary attracts employer's NI of (£12,570 − £5,000) × 15% = £1,135.50 for the year, unless the Employment Allowance is available to offset it.
Is employer's National Insurance tax deductible?
Employer's National Insurance is an allowable business expense, so it reduces your company's taxable profit for corporation tax. It's a genuine cost of employing staff and is treated as such in your accounts.
