An employer's cost is not the salary. On top of it sits secondary Class 1 National Insurance, charged at 15% on everything above the secondary threshold of £5,000 a year in 2026/27, and paid by the employer rather than deducted from the employee. A £30,000 salary carries £3,750 of employer NI and costs £33,750 before anything else; £40,000 carries £5,250 and costs £45,250. The Employment Allowance, £10,500 for 2026 to 2027, is set against that bill for eligible employers, which changes the total for a small payroll considerably.
The arithmetic, and the threshold that drives it
Secondary Class 1 contributions are 15% of earnings above the secondary threshold, which GOV.UK publishes for 2026 to 2027 as £96 a week, £417 a month or £5,000 a year. There is no upper limit: unlike the employee charge, which drops to 2% above the upper earnings limit, the employer rate stays at 15% however high the salary goes. So £25,000 costs £3,000 of employer NI, £50,000 costs £6,750, £60,000 costs £8,250 and £105,000 costs £15,000. The threshold is low enough that almost any real salary is largely inside the charge.
The Employment Allowance
Eligible employers may claim the Employment Allowance against their secondary Class 1 bill: £10,500 for 2026 to 2027. It is claimed against the employer's total NI bill for the year, not per employee, so it disappears quickly on a payroll of any size: at a £30,000 average salary it covers about two and three quarter employees' worth of employer NI and then stops. It is not available to every employer, and a company whose only employee is a director paid above the threshold has its own rule, so the eligibility page is the one to read rather than the rate.
What this changes about a pay rise
Every £1,000 added to a salary costs the employer £1,150 once secondary NI is on it, while the employee sees £720 of it at the basic-rate marginal 28% and £580 at the higher-rate 42%. That wedge is the reason employer pension contributions and salary sacrifice are offered: a contribution made as sacrifice reduces the salary, so it carries no employer NI and no employee NI, and both sides keep more of the same money. It is also why a bonus can look expensive to a business and thin to the person receiving it: the same £1,000 is £1,150 out and £720 in.
What an employer PAYE calculator actually works out
Four obligations sit behind the phrase. Deduct Income Tax and employee National Insurance from pay and hand them to HMRC. Pay secondary National Insurance on top. Report each payment to HMRC on or before payday through a Full Payment Submission. And, where applicable, deduct student loan repayments and pay into a workplace pension under automatic enrolment. The tax and employee NI are the employee's money being passed on; only the secondary contribution and the employer pension contribution are a cost to the business, and only those two should be in a cost-of-hire figure.
Budgeting a hire honestly with an employer salary calculator
Take the salary, add 15% of everything above £5,000, add the employer pension contribution (3% of qualifying earnings is the automatic-enrolment minimum, and many employers pay more), then add the things that are not payroll at all: equipment, software seats, insurance, recruitment. On a £35,000 hire the statutory floor alone is about £39,500 before any of those. Subtract the Employment Allowance only if the business is eligible and has not already used it elsewhere, and remember it is an annual figure for the whole payroll rather than a per-head discount.
Questions people ask about employer national insurance calculator
How much is employer National Insurance in 2026/27?
15% of earnings above the secondary threshold, which is £96 a week, £417 a month or £5,000 a year. There is no upper limit, so the rate does not fall on high salaries the way the employee rate does.
What does a £30,000 employee cost?
£33,750 in salary and employer National Insurance, before pension, before the Employment Allowance and before anything that is not payroll. £40,000 costs £45,250 on the same basis.
Is employer NI deducted from the employee?
No. It is the employer's own charge and must not appear as a deduction on a payslip. If you see it deducted from your pay, that is worth questioning: the usual context is an umbrella company, where the assignment rate is not a salary and the cost is met from it.
Does the Employment Allowance apply per employee?
No, it is one annual amount set against the employer's whole secondary NI bill, £10,500 for 2026 to 2027, and only for eligible employers.