Employer National Insurance for a client's new hire: 15% above £5,000 a year, worked for three salaries

A client is about to take on their first employee and asks what it will cost on top of the wage. The salary is the obvious part. The employer's National Insurance is the part clients forget, and it is a short sum once the practice knows the threshold and the rate. This guide works it for three salaries.

What the source says

GOV.UK's employer rates page for 2026 to 2027 gives the Class 1 secondary threshold as £96 a week, £417 a month and £5,000 a year. The employer rate on pay above it is 15% for the standard categories. The same page gives the Employment Allowance as £10,500. It also lists a higher upper secondary threshold of £967 a week (£50,270 a year) for employees under 21 and for apprentices under 25, which matters because employer NI on their pay stops being due at that point.

The sums: three annual salaries

Employer NI = (annual salary - £5,000) x 15%, for an employee in the standard category.

Check each: £13,000 x 0.15 = £1,300 + £650 = £1,950. £25,000 x 0.15 = £2,500 + £1,250 = £3,750. £55,000 x 0.15 = £5,500 + £2,750 = £8,250.

For the £30,000 hire, the cost to the client before pension and any other cost is £30,000 + £3,750 = £33,750.

Why the monthly run is 60p different

Payroll works per pay period, using the £417 monthly threshold, not £5,000 a year. For the £30,000 salary:

• Monthly pay: £30,000 / 12 = £2,500
• Above the threshold: £2,500 - £417 = £2,083
• Employer NI: £2,083 x 0.15 = £312.45 (£312.4500)
• Over twelve months: £312.45 x 12 = £3,749.40

The annual sum gave £3,750, so the monthly figure is £3,750 - £3,749.40 = £0.60 lower. The cause is that £417 x 12 = £5,004, not £5,000. If a client queries why payroll shows £3,749.40, this is the answer; it is not an error.

What to check with the client

• Is the employee in the standard category? Under 21s and apprentices under 25 have a different upper threshold, which changes the sum on higher pay. I did not read the category-letter guidance, so confirm the letter before running payroll.
• Does the client claim the Employment Allowance? Whether a client qualifies is a separate question; see which clients can claim the £10,500.
• Is the hire a student loan payer? That is a deduction from the employee, not a cost to the client; see student loan deductions through payroll.
• Is the client taking pay as salary or dividends? For a director the sums differ; see dividend tax for a director.

What I did not read

I did not read the GOV.UK pages on National Insurance category letters, directors' annual earnings period, pension contributions, or Class 1A on benefits (the rates page states 15%, but I have not worked it). The sums assume one employee, the standard category, a full tax year, and no Employment Allowance applied. I have not compared the 2025 to 2026 figures.

Overlyft builds AI staff who join your practice team and take a client's new-starter details, work out the employer National Insurance and the monthly payroll figure for each pay run, and show the sum for the person running payroll to approve before anything is submitted.

This is general information, not legal or financial advice. Check the GOV.UK and HMRC pages for your client's case.