Secondary Class 1 NICs (employer contributions) are paid on employees’ earnings above a certain threshold
These contributions are distinct from Primary Class 1 NICs, also known as employee NICs. Those are deducted from employees’ wages and are covered in a separate article.
Current Rates and Thresholds
Employers begin paying Secondary Class 1 NICs on employee earnings exceeding the Secondary Threshold. Employer NICs are calculated based on an employee’s earnings per-pay period (weekly or monthly).
For the 2025/26 tax year, the standard rate for employer NICs is 15% on earnings above the Secondary Threshold (£96 per week, £417 per month, or £5,000 annually).
The above rules apply to most employees. However, for specific categories of employees, another threshold, the Upper Secondary Threshold (UST), is relevant.
In the 2025/26 tax year, the UST is £967 per week, £4,189 per month, or £50,270 annually.
Employers are exempt from paying Class 1 NICs on earnings up to the UST for these employees. However, any earnings above this threshold are subject to the standard employer National Insurance rate of 15%.
The UST applies to employees such as:
- Apprentices under 25
- Employees under 21
- Employees in their first civilian job after leaving the armed forces (veterans)
Calculation Period
National Insurance is calculated and deducted on a per-pay period basis, whereas income tax is calculated cumulatively over the tax year.
Worked Examples for 2025/26
Let’s look at how NICs are calculated in practice:
Example 1: Employee earning £2,000/month
| Description | Amount (£) | Explanation |
|---|---|---|
| Gross Monthly Earnings | £2,000 | Total monthly pay |
| Secondary Threshold | £417 | Employer pays NI only above this |
| Earnings Subject to Employer NI | £2,000 – £417 = £1,583 | Amount above threshold |
| Employer NI Rate | 15% | Current rate |
| Employer NI Contribution | £1,583 x 15% = £237.45 | Final NI amount |
Example 2: Employee earning £5,000/month
| Description | Amount (£) | Explanation |
|---|---|---|
| Gross Monthly Earnings | £5,000 | Total monthly pay |
| Secondary Threshold | £417 | Employer pays NI only above this |
| Earnings Subject to Employer NI | £5,000 – £417 = £4,583 | Amount above threshold |
| Employer NI Rate | 15% | Current rate |
| Employer NI Contribution | £4,583 x 15% = £687.45 | Final NI amount |
Example 3: Employee under 21 earning £2,000/month
Since earnings are below the Upper Secondary Threshold, no employer NIC is due.
| Description | Amount (£) | Explanation |
|---|---|---|
| Gross Monthly Earnings | £2,000 | Total monthly pay |
| Upper Secondary Threshold (U21) | £4,189 | No NI due below this amount |
| Earnings Subject to Employer NI | £0 | Earnings are below threshold |
| Employer NI Rate | 15% | Not applied here |
| Employer NI Contribution | 0 × 15% = 0.00 | No contribution needed |
National Insurance Calculator for Employers
We offer a National Insurance calculator specifically designed for employers. This tool makes it easy to calculate employer NICs based on employee earnings. Enter the relevant salary figures, and the calculator will instantly show the amount of NI due.
Employer NI Calculator 2025/26
Calculation Results:
Earnings: £0.00
Employer's NI: £0.00
Rates and Thresholds:
Payroll Software
In practice, employer NICs are typically calculated automatically using payroll software such as BrightPay or Sage.
These tools stay up to date with the latest tax rules and thresholds, ensuring accurate calculations for each pay period.
When you input employee earnings, hours worked, and other relevant data, the software calculates both employee and employer NICs in real time, generates payslips, and updates reports for HMRC submissions.
This automation helps reduce errors and simplifies compliance with PAYE regulations.
Benefits in Kind and Settlement Agreements
Class 1A National Insurance is paid by employers on certain benefits in kind provided to employees, such as company cars, private medical insurance, or gym memberships. It’s due annually. For 2025/26, the rate is 15% of the taxable value of the benefits provided.
Class 1B National Insurance is also paid by employers, but it applies when a business enters into a PAYE Settlement Agreement (PSA) with HMRC. This allows the employer to cover the tax and NI on minor or hard-to-value benefits, such as staff gifts or occasional entertainment, without passing the cost on to the employee. The 2025/26 rate is 15%, calculated on the grossed-up value of the benefits.
Deadlines for paying Class 1A and 1B National Insurance can be found here.
Employment Allowance
To support smaller businesses, the government offers Employment Allowance (EA).
In the 2025/26 tax year, eligible employers can claim up to £10,500 off their annual employer Class 1 NICs bill.
Companies with a single director as the sole employee cannot claim EA.
This Employment Allowance can significantly reduce the National Insurance cost for many small businesses.
How to Reduce Employer NI
There are several strategies businesses can use to reduce employer NI liabilities. National Insurance contributions can lead to significant savings — especially for small or growing businesses. Here are some legitimate methods:
Claim the Employment Allowance
You may be eligible for the Employment Allowance, which gives you up to £10,500 off your annual NI bill.
Hire Employees from Exempt Groups
There are 0% NI thresholds for certain employees:
- Under 21s
- Apprentices under 25
- Ex-forces veterans (first 12 months of civilian employment)
For these employees, employers pay 0% NICs on earnings up to the Upper Secondary Threshold.
Use Salary Sacrifice Schemes
Implement salary sacrifice for things like:
- Pension contributions
- Cycle-to-work schemes
- Electric car leases
These reduce the employee’s gross pay and, therefore, reduce the employer’s NIC liability.
Conclusion
Understanding Secondary Class 1 National Insurance contributions is essential for employers who want to manage payroll costs effectively and comply with HMRC regulations. By staying up to date with current thresholds, rates, and exemptions, businesses can plan better, make informed hiring decisions, and take advantage of available reliefs like the Employment Allowance.
