Employer's National Insurance
Employer's National Insurance is the contribution a company pays on its employees' earnings, charged at 15% on pay above the secondary threshold of £5,000 a year. It is a company cost on top of gross salary.
Also known as: secondary Class 1 NIC, employer NIC
How it works
Every pound of salary above the secondary threshold costs the company an extra 15% in National Insurance. There is no upper limit — unlike the employee's own contributions, which drop to 2% above the upper earnings limit of £50,270, the employer charge continues at the same rate on every pound.
The threshold matters most in owner-managed companies. Paying a director a salary above £5,000 creates an employer charge, unless Employment Allowance covers it. Paying below it avoids the charge but still needs to be above the lower earnings limit of £6,500 for the year to count towards the state pension. Getting that balance right is the reason directors' salaries are usually set to a specific figure rather than a round number.
Employer's National Insurance is deductible for corporation tax, which softens the cost, but it is still the main reason dividends have historically beaten salary for profit extraction. Dividends carry no National Insurance at all, though from 6 April 2026 dividend rates rose to 10.75% and 35.75%, narrowing the gap.
Class 1A at the same rate applies to most taxable benefits, and reliefs exist for employees under 21, apprentices under 25, veterans and freeport or investment zone employees.
Who this affects
- Any company with employees, where the charge adds meaningfully to the cost of each hire
- Single-director companies deciding where to set the annual salary
- Companies giving benefits in kind, which attract Class 1A at the same rate
- Employers of under-21s and apprentices, who may pay nothing up to a higher threshold
Common mistakes
- Budgeting for gross salary and forgetting the 15% on top
- Setting a director's salary below the lower earnings limit and losing a qualifying year
- Assuming Employment Allowance is available to a sole-director company
Frequently asked questions
What is the employer's National Insurance rate?
15% on earnings above the secondary threshold of £5,000 a year, with no upper limit.
Do dividends attract employer's National Insurance?
No. Dividends are a distribution of profit, not earnings, so no National Insurance is due on them by either the company or the shareholder.
What salary avoids employer's National Insurance?
Pay at or below the secondary threshold of £5,000 avoids the charge, but the optimum figure depends on Employment Allowance, corporation tax relief and state pension credit.
Is it deductible for corporation tax?
Yes. Employer's National Insurance is an allowable business expense and reduces taxable profit.
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Reviewed by Waqas Sagar ACA FCCA FMAAT · Last reviewed 13 September 2026 · Figures for 2026/27 · About our practice
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