The Chancellor's decision to raise employer National Insurance from 13.8% to 15% from April 2025 (alongside reducing the secondary threshold from £9,100 to £5,000) was described at the time as "the biggest business tax rise since the 1990s." The combined cost to UK employers was estimated at £25 billion per year. The question for workers is: how much of that landed on your payslip?
How Employer NI Affects Pay Rises
Employer NI is a cost that sits on top of your salary — HMRC charges your employer 15% of everything you earn above £5,000/year (in 2025/26 and 2026/27). This means hiring you, or giving you a raise, is now 1.2 percentage points more expensive than it was before April 2025.
For a worker earning £35,000:
- Old employer NI cost: 13.8% × (£35,000 − £9,100) = £3,574/year
- New employer NI cost: 15% × (£35,000 − £5,000) = £4,500/year
- Extra cost to the employer: £926/year
If that employer was going to give you a £1,500 pay rise and instead absorbs the extra £926 NI cost, you might only receive a £574 raise.
The Evidence: Pay Growth Has Slowed
ONS data from early 2026 shows that private sector wage growth has moderated following the NI increase. Many SMEs explicitly cited NI as a reason for smaller pay awards. Large employers with tight margins (retail, hospitality, care) were hit hardest.
What About the Employment Allowance?
The Employment Allowance — which reduces the employer NI bill for eligible businesses — rose from £5,000 to £10,500 from April 2025 to offset some of the NI increase for small employers. Businesses with a total employer NI bill under £10,500/year pay nothing. This insulates the smallest employers from the increase.
Frequently Asked Questions
Do I pay any of this employer NI?
No — employer NI comes from the employer's budget, not your pay. However, because it increases the total employment cost, it can indirectly affect the pay rises employers can afford to give you.
Is employer NI visible on my payslip?
No. You see your employee NI deduction (8% or 2%), but employer NI is an employer-side payment and doesn't appear on your payslip.
Understand all your NI deductions with our National Insurance Guide.