The chancellor has announced changes to the employers’ national insurance contribution rate, increasing it from 13.8% to 15%, and the threshold at which employers’ national insurance becomes payable has been reduced by £4,100 from £9,100 to £5,000.
She also announced an increase in the employment allowance of £5,500 from £5,000 to £10,500.
Employer’s with employers NIC liability over £100,000 in the previous tax year, but would be otherwise eligible, will now be able to claim the £10,500 Employment allowance
Estimated increased Employers National Insurance Contribution (ER’s NIC) cost (or saving)
Smaller employers could be better off with the increased employment allowance, however a lot of employers will be significantly worse off
Effect of Lower Earnings Limit reduction – cost to employers
The cost per employee of reducing the level of wages at which employers’ national insurance is paid, costs £615 per employee (£9,100 – £5,000 = £4,100 x 15%)
Illustrative example
| Extra cost per employee |    £615 | |||||||
| Number of employees | Â Â Â Â Â Â Â Â 5 | Â Â Â Â Â Â Â 10 | Â Â Â Â Â Â Â 15 | Â Â Â Â Â Â Â Â Â 20 | Â Â Â Â Â Â Â Â Â 25 | Â Â Â Â Â Â Â Â Â 50 | Â Â Â Â Â Â Â 100 | Â Â Â Â Â Â Â 150 |
| Extra cost |  £3,075 |   £6,150 |   £9,225 |   £12,300 |   £15,375 |   £30,750 |   £61,500 |   £92,250 |
| Extra employers allowance saving |  £5,500 |   £5,500 |   £5,500 |     £5,500 |    £5,500 |     £5,500 |     £5,500 |     £5,500 |
| Extra cost / (saving) | (£0)* | £650 | £3,725 | £6,800 | £9,875 | £25,250 | £56,000 | £86,750 |
*There is a potential saving of £2,425 if you currently pay over £10,500 in employers’ national insurance
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Extra 1.2% – cost to employers
| Illustrative example
Current employers national insurance (ER’s NIC) at |
13.80% |  £15,000 |   £20,000 |   £25,000 |   £50,000 | £100,000 |   £250,000 |   £500,000 |
| Additional cost of ER’s NIC at | 1.20% |    £1,304 |     £1,739 |     £2,174 |     £4,348 |       £8,696 |     £21,739 |     £43,478 |
Cost of national minimum wage increase
The extra 6.7% national minimum wage (NMW) increase which may affect what you pay your staff either because you currently pay your staff the minimum wage (or to maintain the differential) will cost an extra £1,601.60 per employee per annum working full time (40 hours per week)
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Illustrative example
| Number of hours worked in week | 40 | Hours | 52 | weeks in year | ||||
| Current national minimum wage (NMW) (age 21 and over) | £11.44 | per hour | ||||||
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| New national minimum wage (age 21 and over) | £12.21 | per hour | ||||||
| Current gross wage cost per employee | £23,795.20 | |||||||
| New gross wage cost per employee from 6 April 2024 | £25,396.80 | |||||||
| Additional cost per employee | £1,601.60 | |||||||
| Number of employees | 5 | 10 | 15 | 20 | 25 | 50 | 100 | 150 |
| Additional cost of increase in national minimum wage | Â Â Â Â Â Â Â 8,008 | Â Â 16,016 | Â Â 24,024 | Â Â 32,032 | Â Â 40,040 | Â Â Â Â 80,080 | Â Â 160,160 | Â Â 240,240 |
| Additional ERs NIC on the increase in NMW at | Â Â Â Â Â Â Â 1,201 | Â Â Â Â 2,402 | Â Â Â Â 3,604 | Â Â Â Â 4,805 | Â Â Â Â 6,006 | Â Â Â Â 12,012 | Â Â Â Â 24,024 | Â Â Â Â 36,036 |
| 15% | ||||||||
| Total additional cost of increase in NMW | Â Â Â Â Â Â Â 9,209 | Â Â 18,418 | Â Â 27,628 | Â Â 36,837 | Â Â 46,046 | Â Â Â Â 92,092 | Â Â 184,184 | Â Â 276,276 |
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These are illustrative example only, providing estimates of the additional cost for employers. If you would like a specific calculation done for your business, please contact one of our payroll team, or your partner, or our Carlisle office on 01228 534371 or email advice@saint.co.uk
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