From April 2025, employer National Insurance increased to 15% with the secondary threshold reduced to £5,000. This page explains how to calculate employer NI correctly and find the true fully-loaded cost of employment for UK SME owners.
Employer NI is calculated on earnings above the secondary threshold (£5,000 per year from April 2025). Multiply annual earnings above £5,000 by 15% to get the annual employer NI cost.
Salary plus employer NI is still not the full cost. Add pension contributions (minimum 3% on qualifying earnings under auto-enrolment) and other on-costs to get the true fully-loaded figure.
| Salary | Employer NI | Pension (3%) | Total cost | On-cost % |
|---|---|---|---|---|
| £25,000 | £3,000 | £600 | £28,600 | 14.4% |
| £35,000 | £4,500 | £900 | £40,400 | 15.4% |
| £45,000 | £6,000 | £1,200 | £52,200 | 16% |
| £55,000 | £7,500 | £1,500 | £64,000 | 16.4% |
Two changes took effect simultaneously. The rate increased from 13.8% to 15% — an increase of 1.2 percentage points. And the secondary threshold fell from £9,100 to £5,000 — meaning NI now applies to a larger portion of each salary. For a £35,000 employee, the combined impact increased the annual NI bill by approximately £900 compared to 2024/25.
For a business with 10 employees at £35,000 average salary, the total additional NI cost is approximately £9,000 per year. This arrived without offset for most SMEs and must be absorbed either by pricing, efficiency, or reduced profit.
To calculate the minimum revenue a role must generate to be commercially neutral: divide fully-loaded cost by target gross margin. A £40,400 fully-loaded role at 40% gross margin requires £101,000 of annual revenue to break even. At 25% gross margin, the same role requires £161,600.
The LumixAI Headcount Cost Modeller applies the April 2025 NI rate automatically. Enter your roles and get fully-loaded cost and revenue justification instantly.
Try it free →For service businesses that price by time, using salary rather than fully-loaded cost means every piece of work is systematically underpriced. The gap of 15-20% represents direct margin leakage on every project, every quote, every retainer.