How Much Does an Employer Pay for an Employee in the UK?

(Updated for the 2025/26 Tax Year)

Employing staff in the UK is about more than just offering a salary. In 2025/26, employers are facing significant changes to National Insurance contributions that will increase payroll costs—particularly for small businesses.

This guide breaks down what you need to know about employer costs this year, including the latest updates on NICs, pension duties, and reliefs like the Employment Allowance.

1. 📈 Employer National Insurance Contributions (NICs) – Now 15%

As of April 2025, employers must pay 15% NIC on employee earnings above the new secondary threshold of £5,000 per year (previously £9,100).

This is a 1.2 percentage point increase, alongside a lower threshold, meaning employers will pay more NICs on a broader portion of wages.

Example:
If an employee earns £30,000 annually:
– NIC-eligible earnings = £30,000 – £5,000 = £25,000
– Employer NIC = 15% × £25,000 = £3,750 per year

2. 💰 Employment Allowance Doubled to £10,500

The Employment Allowance has increased to £10,500 for 2025/26, and some restrictions on claiming it have been removed. Employers with a NIC liability over £100,000 in the previous year can now still claim this relief if eligible.

This makes payroll more affordable for small employers, especially those expanding their teams or hiring for the first time.

3. 🏦 Workplace Pension Contributions

Employers must contribute at least 3% of qualifying earnings into a workplace pension scheme for eligible employees.

2025/26 Qualifying Earnings:
– Lower threshold: £6,240
– Upper threshold: £50,270

Example:
Salary: £30,000
Qualifying earnings = £30,000 – £6,240 = £23,760
Employer contribution = 3% × £23,760 = £712.80

Employers may also benefit from salary sacrifice arrangements, which reduce NIC liabilities while boosting pension contributions.

4. 📅 Holiday Pay, Statutory Leave, and Other Obligations

Employers are also responsible for:

• 28 days of paid annual leave (this can include bank holidays)
• Statutory Sick Pay (SSP): £118.75/week
• Parental leave pay (maternity, paternity, adoption, shared and new from 2025 – neonatal leave and pay)
• National Minimum Wage increases effective April 2025

These statutory costs should be accounted for in payroll planning and tracked in real time.

5. 🧾 Summary of 2025/26 Employer Payroll Costs

The Bottom Line: Expect Higher Payroll Costs in 2025/26

With rising NICs and wage increases, many businesses will face higher payroll costs this year. Some may look to salary sacrifice, restructure pay, or outsource payroll to manage these changes smoothly.

How Be Payroll Can Help

At Be Payroll, we support small businesses, solo employers, and accountants by handling all things payroll, including:

• All payroll calculations (tax, NIC, pension and other statutory payments)
• Employment Allowance setup and compliance
• Monthly reporting, payslips and RTI submissions
• Automatic enrolment pension compliance, reporting and communications
• Year-end filings

Whether you’re new to employing or just want payroll off your plate, we’re here to make it easy.