What Is Employer NIC? A Plain-English Explainer

From 6 April 2026, employer NIC is charged at 15% on earnings above £5,000 per year, making it the highest rate since before 2011 and a direct employer cost on virtually every member of staff ^[1]. National Insurance Contributions, often shortened to NIC, come in two forms: the amount deducted from the employee's wages (primary Class 1), and the amount the employer pays on top of wages (secondary Class 1). This article focuses entirely on the employer side.

Key takeaways

• Employer NIC is secondary Class 1 National Insurance, paid entirely by the employer ^[4].
• The rate is 15% on earnings above £5,000 per year for the 2026-27 tax year ^[1].
• Employer NIC does not appear on the employee's payslip and is not deducted from wages.
• Employment Allowance can offset up to £10,500 of employer NIC per tax year for eligible employers ^[6].
• Some employees, including under-21s and apprentices under 25, attract zero employer NIC up to £50,270 per year ^[5].

How employer NIC differs from employee NIC

National Insurance is collected through the PAYE payroll system and covers two distinct obligations ^[2]. The employee's contribution is deducted from gross pay before the employee receives a net amount. The employer's contribution is an additional cost layered on top of gross pay. Both are calculated in the same payroll run and remitted to HMRC in the same payment.

Employer NIC is secondary Class 1. Employee NIC is primary Class 1. The word "secondary" refers not to importance but to the party responsible: the employer ^[4]. Secondary NIC does not show anywhere on the employee's payslip. The employee sees their own deductions; the employer absorbs the secondary cost separately.

The earnings bands that determine who pays what

Employee NIC starts at the Primary Threshold of £12,570 per year. Employer NIC starts at the lower Secondary Threshold of £5,000 per year ^{[3] [1]}. This gap means that for an employee earning between £5,000 and £12,570, the employer pays NIC while the employee pays nothing.

An employee earning £10,000 per year attracts employer NIC of approximately £750 (15% of the £5,000 above the Secondary Threshold) with no employee NIC deducted from their own pay.

The current employer NIC rate and threshold

For the 2026-27 tax year, the standard employer NIC rate is 15% and the Secondary Threshold (the trigger point) is £5,000 per year, £417 per month, or £96 per week ^[1]. Both figures are set by statute and normally reviewed each April.

What the threshold shift means for payroll costs

The Secondary Threshold was £9,100 per year before April 2025. Its reduction to £5,000 means employers now pay NIC on earnings across a wider band than before ^{[3] [2]}. A part-time worker earning £8,000 per year, who previously fell below the old threshold, now triggers £450 of employer NIC at the current rate.

Employers managing headcount costs should factor this into hiring decisions, particularly for lower-paid or part-time roles. HMRC-recognised payroll software calculates the correct amount automatically, but understanding the mechanics helps when budgeting for total staff costs.

Which employees trigger employer NIC

Most employed workers trigger employer NIC once their earnings cross the Secondary Threshold ^[7]. NIC category letters determine the rate. Category A covers most employees. The payroll software applies the correct rate based on the letter assigned to each employee record.

Employer NIC is due regardless of whether the employee is full-time or part-time, on a zero-hours contract, or working a temporary arrangement, provided their earnings exceed the Secondary Threshold in the relevant pay period ^[8]. The employer cannot choose to opt out of the calculation for specific workers.

For businesses running multiple pay frequencies or employing workers on varying hours, a payroll platform built for SMEs calculates NIC per employee per pay period using the correct weekly, monthly or annual threshold automatically.

Reliefs that reduce the employer NIC bill

Several reliefs reduce or eliminate employer NIC for specific categories of worker ^[5]. Employers who qualify and correctly assign the relevant NI category letter in their payroll records can make material savings on their monthly PAYE bill.

The most commonly applicable reliefs are:

• Under-21 employees (category M): no employer NIC on earnings up to £50,270 per year.
• Apprentices under 25 (category H): no employer NIC on earnings up to £50,270 per year.
• Armed forces veterans (category V): no employer NIC for 12 months from first civilian employment, up to £50,270 per year.
• Freeport employees (categories F, I, S, L): no employer NIC up to £25,000 per year, for up to 36 months.
• Investment Zone employees (categories N, E, K, D): same zero-rate relief structure, up to £25,000 per year, for up to 36 months.

Freeport and Investment Zone are two separate government schemes with distinct category letters. Both thresholds happen to be £25,000 per year, but the letters are not interchangeable in payroll records ^[5].

Employment Allowance provides a further reduction of up to £10,500 per year across the employer's whole NI bill ^[6]. It is claimed via the Employer Payment Summary and applied automatically each pay period until the allowance is exhausted for that tax year.

For payroll bureaux managing clients across varied workforce compositions, applying reliefs through the correct NI category letter in the payroll record (rather than as a manual adjustment) ensures consistency across schemes and reduces the risk of overpayment.

Conclusion

Employer NIC is a substantial and unavoidable payroll cost, sitting entirely on the employer side of the ledger. At 15% on earnings above £5,000, it exceeds the employee NIC rate of 8% and applies to a broader earnings band than it did before April 2025. Understanding the threshold, the category letters, and the reliefs available is the starting point for managing the total cost of employment accurately. For a deeper walkthrough of the calculation mechanics, including worked examples for directors and zero-rate employees, the employer National Insurance guide on the Moonworkers blog covers the full picture.

Frequently asked questions

Is employer NIC the same as PAYE?

Employer NIC and PAYE income tax are separate obligations that flow through the same payroll system. PAYE is the income tax deducted from the employee's wages and paid to HMRC on the employee's behalf. Employer NIC is a separate charge levied on the employer, calculated on the same wages but at a different rate and from a different threshold ^{[2] [9]}. Both are submitted in the same Full Payment Submission but appear as distinct liabilities in the PAYE account.

Does employer NIC come out of the employee's pay?

No. Employer NIC is entirely the employer's cost and is not deducted from the employee's gross or net pay ^[4]. It does not appear on the payslip as a deduction line. The employee only sees their own primary Class 1 NIC, which is a deduction from gross pay. The employer pays secondary NIC directly to HMRC as part of the monthly PAYE settlement.

What happens if an employer does not pay NIC on time?

HMRC charges interest and penalties for late or missing NIC payments. The NIC liability is due alongside PAYE income tax by the 22nd of the month following the pay period (19th for postal payments) ^{[8] [9]}. Persistent non-payment triggers escalating penalty notices and can result in formal debt recovery action.

How does Employment Allowance work with employer NIC?

Employment Allowance reduces an eligible employer's total Class 1 NIC liability by up to £10,500 per tax year ^[6]. The reduction is applied incrementally each pay period, offsetting the NIC due until the £10,500 is exhausted. Single-director companies where the director is the only employee triggering secondary Class 1 NIC are excluded from claiming the allowance ^[5].