If you're thinking about taking someone on, it's worth understanding how employer National Insurance works now. The changes that came in from April 2025 made employing people noticeably more expensive, especially in lower-paid roles.

What changed

Two things changed for employers:

  • The rate went up from 13.8% to 15%.
  • The threshold went down. Employers now start paying on earnings above £5,000 a year, instead of £9,100.

The lower threshold is the part many small businesses miss. It means you pay National Insurance on a much bigger slice of each employee's pay, which hits part-time and lower-paid roles hardest.

What it means in practice

Take a full-time employee on the 2026 National Living Wage of £12.71 an hour, working 37.5 hours a week. That's a salary of roughly £24,800 a year.

Employer National Insurance on that salary is 15% of everything above £5,000, which comes to roughly £2,970 a year. Add at least 3% employer pension on qualifying earnings, and the real cost of that employee is well over £28,000 before you've counted holiday cover, equipment or training.

The Employment Allowance

There is good news for many small businesses. The Employment Allowance lets eligible employers reduce their employer National Insurance bill by up to £10,500 a year in 2026/27.

For a small team, that can wipe out most or all of your employer National Insurance. A few things to know:

  • You claim it through your payroll software, so make sure it's switched on.
  • Not every business qualifies. For example, a limited company where the only employee is also a director usually can't claim it.
  • It's a yearly allowance, so it covers your whole payroll, not each employee.

If you've hired your first employee recently, check with your accountant that you're claiming it.

How to plan your hiring around it

  1. Budget for the full cost, not the salary. A useful rule of thumb is to add 15% to 20% on top of salary for National Insurance and pension.
  2. Check the Employment Allowance before assuming you can't afford a hire.
  3. Think about hours. Because of the lower threshold, two part-time staff can cost more in National Insurance than one full-time person doing the same hours.
  4. Consider temporary cover for short-term needs. If the work won't last, a temporary worker through an agency means the agency handles payroll and employer costs, and you pay only for the hours used.

The bottom line

Hiring is more expensive than it was two years ago, but for many small businesses the Employment Allowance takes much of the sting out. Know your real cost per employee before you advertise, and you'll make better decisions about whether to hire permanently or bring in temporary help.

If you're weighing up a hire in Oxfordshire or Buckinghamshire, tell us about the role and we'll help you think through the options. This article is general guidance, so speak to your accountant about your own situation.