Employer NI and cost of employment calculator

Employer NI is 15% of earnings above the secondary threshold, worked out on each payday. The rate stays at 15% however much someone earns. For employees under 21, apprentices under 25 and veterans in the first 12 months of their first civilian job, the employer pays nothing on earnings up to the upper secondary threshold and 15% above it.

Employers also pay Class 1A National Insurance at 15% on taxable benefits such as company cars and private medical insurance.

The headline cost is salary plus employer NI plus employer pension contributions.

• Employer NI at 15% above £5,000 a year.
• Pension. Under automatic enrolment, staff aged 22 to State Pension age earning over £10,000 must be enrolled. The employer pays at least 3% of qualifying earnings between £6,240 and £50,270, with 8% going in altogether. Many employers pay more, or work it out on full salary.
• Apprenticeship Levy. Employers with a pay bill over £3 million pay 0.5% of it, less a £15,000 allowance.

On top of that come costs this calculator leaves out, such as holiday cover, Statutory Sick Pay, equipment, training and recruitment.

Employment Allowance cuts your employer Class 1 National Insurance bill by up to £10,500 a year in 2026/27. You claim it through your payroll software, and it reduces the NI on each payroll run until the allowance is used up or the tax year ends. It covers all the employer NI on a single salary of about £75,000, or on two £30,000 salaries with £3,001.20 to spare.

Most businesses and charities can claim, and since April 2025 that includes employers with Class 1 NI bills over £100,000. You cannot claim if:

• your company has one director and they are the only employee paid above the secondary threshold
• you do more than half your work in the public sector
• the employee does household work such as a nanny or gardener, unless they are a care or support worker

Connected companies share one allowance between them.

Every pound an employee gives up for a pension, an electric car or a bike lowers their earnings for NI, so the employer saves 15% on it as well as the employee's own saving. On a £40,000 salary, a 5% pension sacrifice of qualifying earnings is £1,688 a year and saves the employer £253.20. Some employers add that saving to the employee's pension.

From 6 April 2029, pension contributions made through salary sacrifice above £2,000 a year will be charged employee and employer NI, so the NI saving on pensions will be limited to the first £2,000. Salary sacrifice cannot take anyone's pay below the National Living Wage, which is £12.71 an hour for workers aged 21 and over. The salary sacrifice calculator shows the employee's side.

A company whose only employee is its sole director cannot claim Employment Allowance, so every pound of salary above £5,000 costs 15% in employer NI. A director's NI is worked out on the year's earnings, so a salary of £12,570 costs £1,135.50 in employer NI, 15% of the £7,570 above the secondary threshold, and pays no employee NI. A salary between £6,708 and £12,570 still builds a State Pension qualifying year. Whether a higher salary is worth it depends on corporation tax relief and dividends, which the dividend tax calculator helps with.