Employee and Employer NI Calculator: How It Works

This calculator works out the National Insurance (NI) contributions for both an employee and an employer in the UK for the 2024/25 tax year. You enter the gross pay, the employee’s NI category (usually A), and the calculator returns the employee’s NI deduction, the employer’s NI contribution, and the total cost to the employer. It uses the standard rates and thresholds set by HMRC, so you can quickly see the real cost of employing someone.

Formula

For the 2024/25 tax year, the employee NI calculation uses two thresholds:

• Primary Threshold (PT): £1,048 per month (or £242 per week). No employee NI is paid on earnings up to this amount.
• Upper Earnings Limit (UEL): £4,189 per month (or £967 per week). Earnings between the PT and UEL are charged at 8% (for category A). Earnings above the UEL are charged at 2%.

The employee NI formula is:

Employee NI = (Gross Pay - PT) × 8% - (Gross Pay - UEL) × 2% (only if Gross Pay > UEL)

For the employer, the Secondary Threshold (ST) is £758 per month (or £175 per week). Employer NI is charged at 13.8% on earnings above this threshold:

Employer NI = (Gross Pay - ST) × 13.8% (only if Gross Pay > ST)

Note: The employee NI formula above is simplified for category A. For other categories (e.g., C for pensioners, J for under-21s), the rates and thresholds differ. This calculator uses the standard rates for most employees.

Worked Example

Let’s use the default values: gross pay = £3,000 per month, category A.

1. Employee NI:
   – Earnings above PT: £3,000 – £1,048 = £1,952
   – 8% of £1,952 = £156.16
   – Since £3,000 is below UEL (£4,189), no 2% charge applies.
   – Employee NI = £156.16
2. Employer NI:
   – Earnings above ST: £3,000 – £758 = £2,242
   – 13.8% of £2,242 = £309.40
   – Employer NI = £309.40
3. Total cost to employer: £3,000 + £309.40 = £3,309.40

The calculator gives the same results: employee NI £156.16, employer NI £309.40, total cost £3,309.40.

When to Use This Calculator

Use this calculator when you need to:

• Work out the take-home pay for a salaried employee (subtract employee NI, income tax, and pension contributions from gross pay).
• Budget for the true cost of hiring someone (gross salary + employer NI + pension + other benefits).
• Compare job offers or contract rates – a contractor’s day rate often includes the employer NI that a permanent employee would not see.
• Check payroll calculations for a small business or self-employed person with employees.

The calculator assumes monthly pay. If you pay weekly, multiply the weekly gross by 52 and divide by 12 to get the monthly equivalent, or use the weekly thresholds instead (PT £242, ST £175, UEL £967).

Common Mistakes and Misconceptions

One frequent error is forgetting that employer NI is an additional cost on top of the gross salary. Many small business owners budget only for the salary and are surprised by the extra 13.8% charge.

Another misconception is that NI is calculated on total annual earnings. In reality, it is calculated per pay period (weekly or monthly), so the thresholds are applied to each pay period. This means that if an employee has a one-off bonus in a month, they may pay higher NI that month, but they won’t get a refund at year-end if their annual earnings are below the annual threshold.

Also, note that the employee NI rate for category A is 8% between PT and UEL, but for earnings above UEL it drops to 2%. This is often confused with income tax, which has a higher rate above a certain threshold.

NI Categories and Special Cases

Most employees are category A, but there are others:

• Category B: Married women and widows entitled to reduced rate – employee NI is 1.85% (not 8%).
• Category C: Employees over State Pension age – no employee NI, but employer NI still applies.
• Category H: Apprentices under 25 – employer NI is 0% up to a higher threshold (£967 per week in 2024/25).
• Category J: Employees under 21 – employer NI is 0% up to the UEL.
• Category M: Employees under 21 – same as J but for those who are not apprentices.
• Category Z: Employees under 21 who are working while studying – same as J.

This calculator uses category A for all, so if you have a different category, you’ll need to adjust the rates manually. For example, for category C, employee NI is £0, and employer NI is still 13.8% on earnings above ST.

How to Read the Results

The Employee NI is the amount deducted from the employee’s gross pay. It appears on the payslip as a deduction. The Employer NI is the amount the employer pays to HMRC on top of the gross salary. The Total cost to employer is the actual cash cost of employing that person for the month, before any other benefits or pension contributions.

For a full picture of employment costs, add pension contributions (usually 3-8% of salary), recruitment costs, training, and any benefits in kind (which may also attract NI).

Limitations of the Formula

This calculator is for standard monthly salaried employees. It does not account for:

• Annual earnings above the Upper Earnings Limit for NI (which is £50,270 in 2024/25). The formula already handles this, but if you enter a monthly gross above £4,189, the 2% rate kicks in.
• Directors, who have an annualised NI calculation and may pay NI differently.
• Employees with multiple jobs – each job is treated separately for NI.
• Self-employed individuals, who pay Class 2 and Class 4 NI instead.

Also, the thresholds change each tax year (usually in April), so always check the current rates for the relevant tax year.

Frequently Asked Questions

Do I pay employer NI on top of my salary?

Yes, employer NI is an additional cost paid by the employer to HMRC. It is not deducted from the employee’s salary. The employee only sees the employee NI deduction on their payslip.

What is the difference between employee NI and employer NI?

Employee NI is deducted from the employee’s gross pay and reduces their take-home pay. Employer NI is paid by the employer on top of the gross salary. Both go to HMRC, but they are calculated separately.

Can I claim back employer NI?

Generally, employer NI is a business expense and can be deducted from profits for corporation tax purposes. There are also specific reliefs, such as the Employment Allowance, which can reduce employer NI by up to £5,000 per year for eligible businesses.

What is the Employment Allowance?

The Employment Allowance is a tax relief that reduces the amount of employer NI a business has to pay. For 2024/25, it is £5,000 per year. It is available to most businesses, but not to companies where the director is the only employee.

How do I calculate NI for a weekly-paid employee?

Use the weekly thresholds: PT £242, ST £175, UEL £967. Apply the same rates (8% and 2% for employee, 13.8% for employer) to the weekly gross pay. The calculator works on monthly figures, so you’d divide the weekly gross by 4.33 to get a monthly equivalent, or manually use the weekly thresholds.

Does the calculator include income tax?

No, it only calculates National Insurance. Income tax is separate and depends on the employee’s tax code and total income. To get take-home pay, you would also need to subtract income tax and any pension contributions.

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in gross | Gross pay | £ | 3000 | 0
sel cat | NI category | A=1, B=1, C=0, H=1, J=1, M=1, Z=1
out employee_ni | Employee NI | £ | max(0, (gross - 1048) * 0.08) - max(0, (gross - 4189) * 0.02) | 2
out employer_ni | Employer NI | £ | max(0, (gross - 758) * 0.138) | 2
out total_cost | Total cost to employer | £ | gross + employer_ni | 2