Practical Ways to Reduce Your Employer’s National Insurance Bill
Employer’s National Insurance is a major employment cost.
Employer’s Class 1 National Insurance is charged at 15% on earnings above the relevant threshold for 2026/27. For businesses with several employees, even a modest increase in payroll can therefore have a significant effect on costs.
There are, however, legitimate ways to reduce or manage the liability.
1. Make sure you claim the Employment Allowance
The Employment Allowance reduces an eligible employer’s Class 1 National Insurance liability.
According to the supplied article, the allowance is worth up to £10,500 for the year, although it cannot exceed the employer’s actual qualifying liability.
The important point is that the allowance is not necessarily given automatically. Eligible employers normally need to claim it through their payroll software.
Businesses should therefore check that:
- they meet the qualifying conditions;
- the claim has been made for the correct tax year;
- connected-company rules have been considered; and
- the allowance has been allocated to the correct PAYE scheme.
A company where the only employee earning above the secondary threshold is also a director will generally not qualify.
2. Consider the structure of your workforce
Employer’s National Insurance is calculated separately for each employee.
This means that two part-time employees may, in some circumstances, produce a lower overall employer’s National Insurance liability than one higher-paid full-time employee because each employee benefits from their own threshold.
The source article gives an example of one employee earning £4,000 per month compared with two employees earning £2,000 each.
On the figures used in the article, employing the two part-time workers reduces the employer’s National Insurance bill by £62.55 per month, or £750.60 per year.
However, staffing decisions should not be made purely for tax reasons. Employers must also consider:
- operational requirements;
- employment law;
- training and management time;
- holiday cover;
- pension costs; and
- whether the roles are genuinely suitable for part-time working.
3. Employ workers under the age of 21
A higher employer’s National Insurance threshold applies to qualifying employees under 21.
The supplied article gives a threshold of £50,270 per year for 2026/27. Employer’s National Insurance is generally charged only on earnings above that threshold, provided the correct National Insurance category is used.
This can make employing younger workers more affordable, while also creating opportunities to build skills within the business.
Employers must retain evidence of the employee’s age and ensure the correct payroll category is applied.
4. Take on qualifying apprentices
A similar higher threshold can apply to qualifying apprentices under the age of 25.
For 2026/27, the source article again gives an annual threshold of £50,270.
The employee must meet the statutory definition of an apprentice. Simply calling a junior employee an apprentice is not sufficient.
There should normally be a genuine approved apprenticeship arrangement and appropriate supporting documentation.
5. Employ armed forces veterans
A relief is available for qualifying armed forces veterans during the first 12 months of their first civilian employment after leaving the armed forces.
The employer’s National Insurance saving applies up to the veterans’ upper secondary threshold.
This can reduce the cost of taking on an experienced former service person, although employers must check that the employee and the employment fall within the rules.
6. Consider incentives available in special tax sites
Businesses operating in qualifying Freeports or Investment Zones may benefit from a higher employer’s National Insurance threshold for certain new employees working in designated special tax sites.
The supplied article states that the relief can apply during the employee’s first three years of employment, subject to the relevant conditions.
These reliefs are location-specific and detailed eligibility requirements apply.
7. Consider salary sacrifice arrangements
Although this point is not covered in detail in the source article, some properly structured salary sacrifice arrangements can reduce both salary and the associated employer’s National Insurance liability.
Common examples may include qualifying pension contributions and certain other exempt benefits.
The arrangement must be implemented correctly and should not reduce cash earnings below the National Minimum Wage.
Keep the commercial decision first
Tax relief should support a sensible commercial decision, not drive an artificial one.
Taking on an unnecessary employee purely to secure an allowance is unlikely to save money overall. Equally, splitting one genuine role between two people may create extra administration and employment costs that outweigh the National Insurance saving.
The best approach is to model the full cost of each option.
At williams lester accountants, we can review your payroll structure, confirm whether valuable reliefs are being claimed and help you understand the true cost of employing staff.