The bill arrived in April 2025. Most employers are still feeling it.

Employer National Insurance at 15%, applied from a Secondary Threshold of £5,000 per year. Down from £9,100. That single adjustment — £9,100 to £5,000 — added more than £600 to the employer NI cost of every employee earning above that threshold. Overnight. On the same payroll. With the same staff doing the same work.

It hasn't moved for 2026/27. The rate stays at 15%. The threshold stays at £5,000. What has changed is that the full-year impact is now embedded — the 2025/26 tax year has closed, and the cost that surprised people twelve months ago is now just the cost of employment in the UK.

Employer National Insurance in 2026/27 is 15% on employee earnings above £5,000 per year. There is no upper limit. Unlike employee NI, which reduces at the Upper Earnings Limit, employer NI runs at 15% from £5,000 upward without a ceiling.

The Calculation in Real Terms

Take an employee on the National Living Wage, working 37.5 hours per week.

At £12.71 per hour, their annual earnings are approximately £24,785. Employer NI is 15% of (£24,785 minus £5,000) = 15% of £19,785 = £2,967.75 per year.

For comparison, the same employee pre-April 2025 with the old £9,100 Secondary Threshold: 15% of (£24,785 minus £9,100) = 15% of £15,685 = £2,352.75 per year.

The change costs £615 more per year for this single employee. Across a workforce of twenty, that is £12,300 in additional employer NI annually — before accounting for the NLW increase from £12.21 to £12.71 that also took effect in April 2026, which adds further cost on top.

This is why payroll costs have risen sharply for labour-intensive businesses. Not one change. A stack of them, compounding.

The Employment Allowance Situation

The Employment Allowance allows eligible employers to reduce their employer NI bill by up to £10,500 per year. It is claimed through payroll software at the start of the tax year by ticking the Employment Allowance box. HMRC does not remind you. If you don't claim it, you don't get it.

Eligibility rules for 2026/27:

Eligible: Most employers with two or more employees, charities, CASCs. The allowance reduces the employer NI bill up to a maximum of £10,500 — it does not generate a refund if your NI bill is lower.

Not eligible: Companies where the only employee paid above the Secondary Threshold is a sole director. Connected companies that have already claimed the allowance through a related entity. Employers whose employer NI liability exceeded £100,000 in the previous tax year.

The sole director exclusion catches a significant number of limited company directors. If you are the only person on your payroll and you are a director, the Employment Allowance is not available to your company. If you hire a second employee — a part-time assistant, a bookkeeper on a few hours per month — who earns above the Secondary Threshold, the exclusion may lift. The structure of your payroll has a direct effect on Employment Allowance eligibility.

The Director NI Calculation

Director NI operates differently from standard employee NI, and this difference extends to the employer NI calculation.

Directors have an annual earnings period. NI is calculated on cumulative earnings across the tax year rather than on each monthly payment independently. The Secondary Threshold applies annually — £5,000 per year — not on a monthly pro-rated basis.

The practical effect: in the early months of the tax year, when the director's cumulative earnings are below or close to the Secondary Threshold, employer NI accrues slowly. As earnings accumulate through the year and pass the threshold further, the employer NI charge increases.

This is not an error. It is correct. But payroll software set up without the director flag activated will calculate NI incorrectly — treating the director as a regular employee and applying monthly thresholds rather than the annual one.

What Employment Costs Actually Look Like in 2026/27

The total employer cost of an employee is not their gross salary. It is gross salary, plus employer NI, plus employer pension contribution under auto-enrolment, plus any benefits provided.

At the National Living Wage of £12.71 per hour, full-time 37.5 hours:

For a worker on £30,000 annual salary:

These are the numbers that go into a hiring decision. The gap between gross salary and total employment cost in 2026/27, with the elevated employer NI and combined with auto-enrolment, is running at approximately 14-15% on top of gross for most employers.

bookd. calculates employer NI correctly for every payroll it manages — including director annual earnings periods, Employment Allowance eligibility checks, and the full employer cost reporting that lets business owners see what their staff actually cost. If your current payroll setup isn't giving you a clear employer cost figure, that gap matters more than it sounds.

Frequently Asked Questions

What is the employer National Insurance rate in 2026?

The employer Class 1 National Insurance rate is 15% for the 2026/27 tax year, unchanged from April 2025. It applies to employee earnings above the Secondary Threshold of £5,000 per year. There is no upper earnings limit for employer NI — it applies at 15% on all earnings above the threshold.

What is the Secondary Threshold for employer NI in 2026?

The Secondary Threshold — the point at which employer NI begins — is £5,000 per year (£416.67 per month, £96.15 per week) for 2026/27. This was reduced from £9,100 in April 2025. Employer NI is charged at 15% on all earnings above this threshold.

Can sole directors claim the Employment Allowance?

No. Companies where the only employee paid above the Secondary Threshold is a director are excluded from the Employment Allowance. A sole director company cannot claim the £10,500 Employment Allowance unless a second employee joins the payroll who earns above the Secondary Threshold.

What is the Employment Allowance in 2026?

The Employment Allowance is £10,500 for 2026/27. It allows eligible employers to reduce their employer NI bill by up to £10,500 per year. It is claimed through payroll software at the start of the tax year. Sole director companies and employers with employer NI liabilities above £100,000 in the previous year are excluded.

How is employer NI calculated for directors?

Directors have an annual earnings period for NI purposes rather than a monthly one. NI is calculated on the director's cumulative earnings across the tax year. The Secondary Threshold of £5,000 applies annually. On annual earnings of £12,570, the employer NI is: 15% of (£12,570 minus £5,000) = 15% of £7,570 = £1,135.50 per year.

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