How to calculate and pay employer national insurance

Published Friday 30 October 2026

Table of contents

• Employer national insurance calculation: The basics
• Current employer NI rates and thresholds for 2026/27
• How to calculate employer national insurance step by step
• National insurance category letters and how they change the calculation
• Class 1A and Class 1B: National insurance on benefits and expenses
• What changed with employer NI in April 2025
• How to claim the employment allowance
• Other ways to reduce your employer NI costs
• How to pay employer national insurance to HMRC
• Simplify employer national insurance with Xero
• FAQs on employer national insurance

Key takeaways

• Employers pay Class 1 secondary national insurance at 15% on each employee's earnings above the £5,000 secondary threshold in the 2026/27 tax year.
• The employer national insurance calculation is straightforward, just take the pay above the threshold and multiply it by 15%.
• Many small employers can claim the employment allowance, worth up to £10,500 a year off their national insurance bill.
• You report and pay employer national insurance through PAYE, with payment due by the 22nd of the following month.

Employer national insurance calculation: The basics

Employer national insurance is the contribution you pay on top of an employee's wages once you hire staff. It's your business's own cost, separate from the national insurance your employees pay out of their own pay, and both go towards funding state benefits and the NHS.

The contribution employers pay is called Class 1 secondary national insurance. Employees pay Class 1 primary national insurance, which comes out of their gross wages before they see it, and you handle both amounts through payroll.

You collect and report these amounts through PAYE, the system HM Revenue and Customs (HMRC) uses to gather income tax and national insurance from wages. If you're new to running a payroll, it helps to understand how the PAYE system works before you dig into the numbers.

Current employer NI rates and thresholds for 2026/27

For the 2026/27 tax year, employers pay secondary Class 1 national insurance at 15% on each employee's earnings above the secondary threshold. The secondary threshold is the point where your liability starts, so earnings below it are free of employer national insurance.

Here are the figures that feed the 2026/27 calculation:

• employer national insurance rate: 15% on earnings above the secondary threshold
• secondary threshold: £5,000 a year, which works out at £417 a month or £96 a week
• Class 1A and Class 1B contributions on benefits and expenses: also 15%

These figures are unchanged from 2025/26, so the same rate and threshold still apply if you set up payroll last year. You can confirm the current amounts on the GOV.UK page for the 2026 to 2027 employer rates and thresholds.

How to calculate employer national insurance step by step

Working out employer national insurance takes three short steps once you know an employee's pay and their category letter. The formula stays the same whether you run payroll weekly or monthly:

• Employer NI = 15% × (an employee's earnings above the secondary threshold)

Follow these steps for each employee in each pay run:

1. Check the employee's national insurance category letter, which sets the rate and thresholds that apply to them.
2. Subtract the secondary threshold from their earnings for the pay period.
3. Multiply the remaining amount by 15% to get the employer national insurance you owe.

Worked examples of employer national insurance calculations

Take an employee on £30,000 a year on category A. Over a full year, £30,000 minus £5,000 leaves £25,000, and 15% of that is £3,750 a year in employer national insurance.

Many payroll runs happen monthly, so it helps to see the same maths on a monthly pay basis. An employee paid £2,500 a month gives you £2,500 minus the £417 monthly threshold, which leaves £2,083, and 15% of that is £312.45 a month. Over 12 months that comes to the same £3,750, because £2,500 a month is £30,000 a year.

Lower earnings show how much the £5,000 threshold protects smaller wage bills. For a part-time employee on £16,500 a year, you take £16,500 minus £5,000 to get £11,500, and 15% of that is £1,725 a year. The threshold shelters the first slice of every wage, so part-time and lower-paid roles carry proportionally less employer national insurance.

One point catches new employers out: national insurance is worked out per pay period, not cumulatively across the year like income tax. Each week or month stands on its own, so a one-off bonus only affects the contribution for the period it's paid in.

National insurance category letters and how they change the calculation

A national insurance category letter tells your payroll which rates and thresholds apply to an employee. Category A is the default and covers the majority of employees, so unless someone fits a special group you'll use A with the £5,000 threshold.

Some letters give you a 0% employer rate on earnings up to a much higher point called the upper earnings limit, which is £967 a week or £50,270 a year for 2026/27. The main groups that qualify are:

• employees under 21 using category M
• apprentices under 25 using category H
• armed forces veterans in their first year of civilian employment using category V

A category letter can change as an employee's circumstances change. If a worker on category M turns 21, for example, you move them onto category A from that point and start paying employer national insurance above the £5,000 threshold. The letter is separate from the employee's national insurance number, which stays the same throughout their working life and plays no part in setting the category. You can check which letter fits each employee on the GOV.UK guide to national insurance rates.

Class 1A and Class 1B: National insurance on benefits and expenses

Employer national insurance reaches beyond wages too. If you give staff certain benefits or expenses, such as a company car or private medical cover, you pay Class 1A national insurance on their value at 15% for 2026/27.

You report most taxable benefits on a P11D form after the tax year ends. Class 1B applies instead when you settle tax and national insurance on minor or irregular benefits through a PAYE settlement agreement (PSA), again at 15%. The key deadlines are:

• report P11D expenses and benefits to HMRC by 6 July
• pay any Class 1A national insurance by 22 July
• pay Class 1B under a PSA by 22 October

Missing these dates can lead to penalties, so add them to your payroll calendar. For the full list of what counts as a reportable benefit, see the GOV.UK guidance on reporting expenses and benefits.

What changed with employer NI in April 2025

The current figures make more sense once you know what shifted in April 2025. Two changes landed at once: the employer rate rose from 13.8% to 15%, and the secondary threshold was cut from £9,100 to £5,000 a year.

The lower threshold matters as much as the rate. Because employer national insurance now starts at £5,000 rather than £9,100, more of each wage is caught, and the effect is felt most on lower-paid and part-time roles that previously fell below the old threshold.

The two changes stack up quickly for a single role. Based on the 2024 to 2025 employer rates, an employee on £30,000 generated about £2,884 in employer national insurance; at the current rate that's £3,750, an increase of around £865 a year for that one person. These figures have carried through unchanged into 2026/27, so the amounts you're working with now reflect the April 2025 position.

How to claim the employment allowance

The employment allowance is the single biggest way many small employers cut their national insurance bill. It lets eligible businesses reduce their employer Class 1 national insurance by up to £10,500 a year for 2026/27.

Most businesses with employer national insurance liabilities can claim, though there are exclusions. A common one is a limited company where the only employee paid above the secondary threshold is a sole director, as that setup generally can't claim. The £100,000 employer national insurance eligibility cap that used to restrict larger employers was removed from April 2025, so more businesses now qualify.

The saving scales with the size of your payroll. A business with five employees who each generate a few thousand pounds of employer national insurance can see most or all of that bill wiped out by the £10,500 allowance. A business with a very large payroll still gets the same £10,500, so the allowance can cover a smaller proportion of the total, but it's still worth claiming.

You claim through your payroll software by ticking the employment allowance option on your Full Payment Submission (FPS), and you need to make the claim each tax year. There's a plain-English walkthrough in this overview of the employment allowance for small businesses, and you can get started on the GOV.UK employment allowance page.

Other ways to reduce your employer NI costs

Beyond the employment allowance, a few everyday choices can help keep your employer national insurance in check. Each can help rather than promise a set saving, so they're worth reviewing as your team grows.

Options that can help include:

• Consider salary sacrifice schemes, such as pension contributions or cycle-to-work, which reduce the earnings that employer national insurance is charged on.
• Review how your workforce is structured, so hours and roles reflect what the business actually needs.
• Check that each employee is on the correct category letter, in case a younger worker or veteran qualifies for the 0% band.

Getting the basics of payroll right underpins all of this, and this guide to payroll for small businesses is a useful starting point.

How to pay employer national insurance to HMRC

You pay employer national insurance to HMRC through PAYE, alongside income tax and employee national insurance. The process is the same each pay period once you're set up, and it starts with registering as an employer.

Here's how the payment cycle works:

1. Register as an employer with HMRC and set up PAYE before your first payday.
2. Run your payroll and send a Full Payment Submission on or before each payday, which is the real time information (RTI) report HMRC expects.
3. Pay what you owe electronically by the 22nd of the following tax month, or by the 19th if you pay by post.
4. Switch to quarterly payments if your average monthly PAYE and national insurance bill is less than £1,500.
5. Keep your payroll and national insurance records for at least three years, as HMRC's record-keeping rules require.

How you run payroll is up to you. Many employers use payroll software that files the FPS and calculates national insurance automatically, while employers with fewer than 10 employees can use HMRC's free Basic PAYE Tools. Others hand the whole job to an accountant or a payroll bureau, which can suit a busy owner who'd rather not run pay runs at all.

To get started, use the GOV.UK service to register as an employer, and check the accepted methods and timings on the guidance for paying employers' PAYE. For a wider view of getting people onto your payroll, this guide to paying employees correctly covers the surrounding steps.

Simplify employer national insurance with Xero

Working out national insurance by hand every pay run eats into time you'd rather spend on the business. Xero payroll works out employer and employee national insurance using the right category letters and thresholds, then files your Full Payment Submission to HMRC in real time, so the numbers and the deadlines are handled together.

Want to see how it fits your payroll? Get one month free

FAQs on employer national insurance

Here are quick answers to questions small employers may ask about national insurance.

Do you pay employer NI on yourself as a director?

Yes, if you take a salary above the secondary threshold, your company pays employer national insurance on it as it would for any employee. A sole director with no other staff paid above the threshold generally can't use the employment allowance to offset it.

Is employer NI worked out per pay period or over the year?

For employees it's worked out separately in each pay period, so a one-off bonus only affects that period. Directors are the exception and are calculated on an annual, cumulative basis.

Do employers pay national insurance on benefits?

Yes, taxable benefits such as company cars and private medical cover attract Class 1A national insurance at 15%, reported on a P11D after the tax year ends.

Can you pay PAYE and national insurance quarterly?

Yes, if your average monthly PAYE and national insurance bill is less than £1,500, you can pay HMRC quarterly rather than monthly.