National Insurance

National Insurance (NI) is a tax on earnings and profits in the UK. It funds social security benefits including the State Pension, statutory sick pay, and maternity pay.

Employers must pay Class 1 secondary National Insurance contributions on employee earnings above a certain threshold. The rate and thresholds are set annually by the government.

Employer NI is a significant labour cost component. It must be factored into staffing budgets alongside wages, pension contributions, and holiday pay. NI is typically calculated and reported through the PAYE system.

Understanding NI obligations is essential for accurate payroll processing and labour cost forecasting.