From April 2025, employers pay 15% National Insurance on all earnings above £5,000 per year. On a £35,000 salary, that is an extra £4,500 per year cost to your employer — equivalent to 12.9% on top of your gross pay. You never see this money, but it comes from the same budget that could fund your wages.
What is employer NI?
National Insurance contributions exist in several classes. What most people know are Class 1 employee contributions — the deductions visible on your payslip. But there is a parallel charge: Class 1 employer National Insurance contributions, paid by your employer on top of your gross salary.
Employer NI is not visible to employees. It does not appear on any payslip. It is paid directly by employers to HMRC via PAYE each month. For most employees, it is entirely invisible. Yet in 2024/25, HMRC collected approximately £106 billion in employer NI — making it one of the largest revenue streams in the entire UK tax system, comparable in size to income tax and dwarfing many named taxes that receive far more public attention.
The 2025 rate change
In the October 2024 Autumn Budget, two changes to employer NI were announced with effect from 6 April 2025:
- The rate rose from 13.8% to 15% — an increase of 1.2 percentage points.
- The Secondary Threshold fell from £9,100 to £5,000 per year — meaning employer NI starts on earnings above £5,000 rather than £9,100.
The combined effect of these two changes was significant. For an employee earning £30,000 per year, the employer NI bill rose from approximately £2,882 (at 13.8% on earnings above £9,100) to £3,750 (at 15% on earnings above £5,000) — an increase of £868 per year, per employee.
The OBR estimated these changes would raise an additional £25 billion per year in employer NI revenue by 2029/30, making it the largest single revenue measure in the October 2024 Budget.
Get Your Free Stealth Tax Briefing
Join 10,000+ people tracking the real cost of the UK tax system. Free weekly briefing. No spam. Unsubscribe anytime.
What it costs on your salary
The table below shows the employer NI cost at different salary levels in 2025/26, using the 15% rate on earnings above the £5,000 Secondary Threshold. It also shows the employer NI as a percentage of the employee's gross salary — the "hidden uplift" on employment cost.
| Gross Salary (£) | Employer NI (£/yr) | Total Cost to Employer (£) | Employer NI as % of Gross |
|---|---|---|---|
| £20,000 | £2,250 | £22,250 | 11.3% |
| £30,000 | £3,750 | £33,750 | 12.5% |
| £40,000 | £5,250 | £45,250 | 13.1% |
| £60,000 | £8,250 | £68,250 | 13.75% |
| £80,000 | £11,250 | £91,250 | 14.1% |
| £100,000 | £14,250 | £114,250 | 14.3% |
Calculation: Employer NI = 15% × (gross salary − £5,000). Source: HMRC NI rates 2025/26. Does not include employer pension contributions or apprenticeship levy.
How it affects pay rises
When an employer considers giving a pay rise, the relevant calculation is not just the gross increase — it is the gross increase plus the employer NI on that increase. A £1,000 gross pay rise costs the employer £1,150 (£1,000 + £150 employer NI at 15%). This acts as a direct tax on wage growth.
For employers managing tight wage budgets — particularly in sectors like hospitality, retail and social care where margins are thin — the employer NI cost of pay rises is a genuine constraint on how much wages can rise. The IFS has modelled that in the long run, around 80% of the employer NI burden is passed back to workers through slower wage growth. In the short run, the percentage is lower but the direction is the same.
The true cost of employing someone in the UK
Employer NI is one of several employer-side costs layered on top of a worker's gross salary. The full cost of employing someone in the UK in 2025/26 includes:
- Gross salary
- Employer NI (15% on earnings above £5,000)
- Minimum employer pension contribution (3% of qualifying earnings under auto-enrolment)
- Apprenticeship Levy (0.5% of total annual pay bill above £3 million — applies to larger employers)
- Any employer-funded benefits (health insurance, life cover, etc.)
For a £35,000 employee at a medium-large employer, the total cost is approximately £35,000 + £4,500 (NI) + £784 (pension) + £175 (levy, where applicable) = approximately £40,459. The employee receives £35,000 gross and takes home substantially less after their own tax. HMRC receives £4,500 in employer NI before the employee's income tax and NI are even counted.
Why this matters to you
Three practical reasons why employer NI matters to employees, not just employers:
Your theoretical pre-tax income is higher than your stated salary. If your employer pays you £35,000 and also pays £4,500 in employer NI, the total value of your economic contribution that is taxed is £39,500. Understanding this total cost is important for salary negotiations — particularly if you are moving to self-employment or contracting, where you bear these costs directly.
The April 2025 change constrained wages. The OBR projected in its March 2025 Economic Outlook that the employer NI increase would reduce employment levels and wage growth — particularly for lower-paid workers, where the falling Secondary Threshold disproportionately increases the cost of employing part-time and lower-wage staff.
It explains why your total tax rate is higher than your payslip suggests. Our full analysis of total UK tax burden includes employer NI as part of the real picture — because economically, it is.
As a contractor, understand your total cost
If you're considering contracting through a limited company, Contractor Calculator's free tools model your take-home pay and total tax — including employer NI, corporation tax, and dividend tax. Understanding the full picture before you switch is essential.
Use Contractor Calculator →Use salary sacrifice to reduce both NI bills
Salary sacrifice pension arrangements reduce your gross salary (cutting both employee and employer NI) while channelling the savings into your pension. Many employers pass their employer NI saving back to employees as extra pension contributions. Ask your HR team if your employer operates a salary sacrifice scheme — it is one of the highest-value tax efficiency moves available.
Model the saving with our calculator →