Employer National Insurance is the secondary Class 1 contribution a UK employer pays on top of an employee’s salary. From 6 April 2025, the rate is 15% on earnings above the secondary threshold of £5,000 per year. The Employment Allowance offsets up to £10,500 of this employer NI bill per company per year, and the previous £100,000 prior-year liability cap on eligibility has been removed. This calculator runs the employer NI cost on a single employee or on a payroll, applies the Employment Allowance correctly, and shows the true cost of employment for 2026/27.
How employer NI works in 2026/27
The structure is simple in shape but the numbers have shifted significantly compared to a few years ago. Two changes happened from April 2025 that still drive the 2026/27 picture: the rate went from 13.8% to 15%, and the secondary threshold (the earnings level above which employer NI starts) was cut from £9,100 to £5,000. Both increased the cost of employment.
For 2026/27:
- Secondary threshold: £5,000 per year (£416.67 per month, £96.15 per week)
- Standard employer NI rate: 15% on earnings above the threshold
- Reduced rates apply for under-21s, apprentices under 25 and armed forces veterans on earnings up to the Upper Secondary Threshold of £50,270
- Employment Allowance: £10,500 per company per year for eligible employers
A salary of £30,000 produces (£30,000 − £5,000) Ã, 15% = £3,750 of employer NI. A salary of £50,000 produces £6,750. A salary of £100,000 produces £14,250.
The Employment Allowance: who can claim, and how much it saves
The Employment Allowance is a per-company annual offset against employer NI. For 2026/27 it is £10,500. To be eligible, the company must be a business or charity with employer NI liabilities of any size (the previous £100,000 cap was removed) and must have at least one employee whose earnings exceed the secondary threshold. There is one big exclusion: a company is not eligible if its only employee paid above the secondary threshold is a director. This excludes most one-person limited companies.
For a small employer with three full-time employees on salaries of £30,000 each, the gross employer NI bill is £11,250. The Employment Allowance reduces this to £750. For an employer at the £10,500 cap (in practice, around £75,000 of total salary above the secondary threshold), the entire allowance is used and any further hires above the threshold add full-rate employer NI to the bill.
Sole director companies and the EA exclusion
The single biggest gotcha is the sole-director rule. If the only person on the payroll above the secondary threshold is a director, the company cannot claim. The standard workaround for a one-director company that wants the allowance is to bring a second person on to the payroll above the threshold — typically a working spouse or a partner. The second person needs to be doing real work for real wages; HMRC scrutinises arrangements that look set up purely to claim the allowance.
For a sole director with no Employment Allowance, the optimal salary calculation changes (see Director Optimal Salary). The employer NI on a £12,570 salary becomes £1,135.50 of real cost rather than zero, narrowing the gap with a £6,708 salary that produces only £255.30.
The cost of employment: what the calculator shows
Beyond the headline employer NI, the calculator can roll up the full cost of employment, which includes:
- Gross salary
- Employer NI at 15% above £5,000
- Employment Allowance offset (where applicable)
- Auto-enrolment pension contribution (employer minimum 3% on qualifying earnings, often 5% or higher)
- Apprenticeship Levy (0.5% above £3 million annual pay bill, so usually nil for small employers)
A £40,000 employee in a small company with a 3% pension contribution costs the employer roughly £40,000 + (£40,000 − £5,000) Ã, 15% + 3% Ã, £33,924 (qualifying earnings) = £40,000 + £5,250 + £1,018 = £46,268, before the Employment Allowance offset.
Key takeaways
- Employer NI is 15% on earnings above £5,000 per year for 2026/27.
- The Employment Allowance is £10,500 per company and the £100,000 prior-year liability cap has been removed.
- Sole director companies (where the only person above the secondary threshold is a director) cannot claim the Employment Allowance.
- The £5,000 secondary threshold is the main reason the optimal director salary moved away from £9,100 in 2025 and now sits at £12,570 for EA-eligible companies.
- Total cost of employment is roughly 1.16Ã, the gross salary once employer NI and minimum pension are added; over the Employment Allowance threshold, this rises to about 1.20Ã, .
Frequently asked questions
Can a single-director limited company claim the Employment Allowance? Generally not, if the director is the only person on the payroll paid above the secondary threshold. Adding a second employee paid above £5,000 — typically a working spouse — restores eligibility, provided the role is genuine.
Has the £100,000 cap really been removed? Yes. From 6 April 2025, the £100,000 prior-year secondary Class 1 NIC liability cap was removed. Any qualifying employer can claim the Employment Allowance regardless of size, subject to the sole-director exclusion and the de minimis state aid rules for businesses in certain sectors.
Do I pay employer NI on bonuses, dividends and benefits? Bonuses paid through PAYE are subject to employer NI in the same way as salary. Dividends are not. Most benefits in kind are subject to Class 1A NICs, charged at 15% on the cash equivalent of the benefit reported on form P11D. The calculator on this page covers Class 1 (salary and bonus) employer NI; Class 1A is a separate calculation.
Is the Employment Allowance pro-rated for part-year employers? No. The £10,500 is an annual allowance available in full to any eligible employer for any tax year in which they have employer NI liability, regardless of how many months they have been an employer. New employers from any month of the year get the full £10,500.