The NICs Reality Check: Where Employer Costs Stand in 2026/27
The employer National Insurance changes announced in the October 2024 Budget took effect in April 2025, and they're still the single biggest driver of rising employment costs for most UK businesses. If you were hoping for a reversal in the 2026/27 tax year, there wasn't one.
On top of that, April 2026 brought a sizeable minimum wage rise and day-one Statutory Sick Pay, and the November 2025 Budget added a change to pension salary sacrifice that lands in 2029. Here's where things stand, with the figures you need for budgeting.
Employer NICs for 2026/27: The Key Figures
| Item | 2024/25 | 2025/26 and 2026/27 |
|---|---|---|
| Employer (secondary) Class 1 rate | 13.8% | 15% |
| Secondary threshold | £9,100 a year | £5,000 a year (£96 a week) |
| Employment Allowance | £5,000 | £10,500 |
| Employment Allowance eligibility cap | £100,000 NICs bill | Removed |
Source: HMRC rates and thresholds for employers 2026 to 2027.
The Double Whammy: Higher Rate, Lower Threshold
The rate rise from 13.8% to 15% sounds modest until you multiply it across a whole workforce. The bigger sting is the threshold: employers now pay NICs on everything above £5,000 instead of £9,100, so an extra £4,100 of every employee's salary is caught.
In real terms, take someone earning £25,000:
- Before April 2025: (£25,000 − £9,100) × 13.8% = £2,194
- Now: (£25,000 − £5,000) × 15% = £3,000
That's about £806 more per employee per year, and the gap is proportionally biggest for part-time and lower-paid staff, because so much more of their pay now sits above the threshold.
The Employment Allowance Silver Lining
The Employment Allowance lets eligible employers knock up to £10,500 off their employer NICs bill each year, and since April 2025 there's no longer a £100,000 cap on who can claim. For a small business, that can absorb most or all of the increase.
A few employers still can't claim, most notably companies where the director is the only employee paid above the secondary threshold. Check the eligibility rules on GOV.UK, and remember the allowance isn't automatic: you claim it through your payroll software each tax year.
Reliefs Worth Knowing About
Employers pay 0% employer NICs on earnings up to £50,270 a year for employees under 21 and apprentices under 25, and the same relief applies for the first year of a qualifying military veteran's civilian employment. If you hire in these groups, make sure payroll is using the right NI category letters, because it's an easy saving to miss.
It's Not Just NICs: Other 2026 Cost Rises
National Insurance isn't happening in isolation. From April 2026:
- National Living Wage (21 and over) rose from £12.21 to £12.71 an hour, and the 18–20 rate rose to £10.85. Every pay rise also increases the NICs you pay on it.
- Statutory Sick Pay is now paid from the first day of absence rather than the fourth, and the lower earnings limit has gone, so lower-paid staff now qualify. It's £123.25 a week, or 80% of average weekly earnings if that's lower.
- Statutory maternity and paternity pay rose to £194.32 a week (or 90% of average weekly earnings if lower).
Day-one SSP in particular makes accurate absence records more important. If you're not tracking short absences properly, you won't know what they're costing you.
Coming in 2029: The Salary Sacrifice Cap
Many employers responded to the NICs rise by pushing pension salary sacrifice, because sacrificed pay has been free of both employer and employee NICs. The November 2025 Budget changed the outlook: from 6 April 2029, only the first £2,000 a year of pension contributions made through salary sacrifice will be exempt from National Insurance. Anything above that will attract NICs as normal. Income tax relief on pension contributions isn't affected.
That's still a few years away, but if your benefits strategy relies heavily on salary sacrifice savings, factor it into any long-term cost projections now rather than in 2028.
What This Means for HR Departments
The direct impact is obvious: payroll costs are up, and they're staying up. The knock-on effects are where HR earns its keep. Recruitment plans get more scrutiny, pay review budgets get squeezed, and every new role needs a stronger business case.
The Practical Checklist
- Know your real numbers. Get payroll or your accountant to model the full cost of each role, including NICs, pension and the new SSP rules, not just salary.
- Claim everything you're entitled to. Employment Allowance, the under-21 and apprentice reliefs, and the veterans' relief are all easy to miss.
- Plan for 2029. If salary sacrifice is a big part of your package, start thinking about what replaces those savings.
- Review your budget assumptions. These rates are here to stay, so build them into your forecasts for recruitment, retention and pay reviews.
The Bigger Picture: Retention Over Recruitment
With hiring more expensive, it's cheaper than ever to keep good people rather than replace them. That makes engagement, development and well-being initiatives look like better investments, and many of the things employees value most, such as flexible working, fair and well-run leave, and clear career paths, don't add anything to the NICs bill at all.
Some organisations are also reviewing their mix of employees and contractors. Tread carefully: IR35 rules still apply, and HMRC's appetite for investigating employment status hasn't gone anywhere. Getting status wrong costs far more than the NICs you were trying to save.
Communication: Managing the Rumour Mill
Employer NICs don't directly affect take-home pay, but employees worry about indirect effects: hiring freezes, smaller pay rises, cuts to benefits. Be honest about what's changing and why. Don't promise everything will stay exactly the same if you know it won't; that's a trust-destroyer waiting to happen.
Technology and Process Efficiency
When people cost more, wasted admin time costs more too. Now's a good time to look at where your HR team's hours go. Automating routine tasks like holiday requests, approvals and absence tracking frees time for the work that actually moves the needle, and it gives you the accurate records that day-one SSP and the new six-year holiday record rules now demand.
It's also worth checking whether your current systems are earning their keep. Are you paying for features nobody uses? Every efficiency saving helps.
The Bottom Line
The 2025 NICs changes weren't a one-off blip; they're the new baseline, and 2026's wage and sick pay changes have added to it. They're manageable, but only with proper planning: know your true cost per employee, claim every relief available, keep an eye on the 2029 salary sacrifice cap, and put more effort into keeping the people you've got.
Every other HR department in the country is dealing with exactly the same pressures. The ones that handle them well will have a real advantage.
