National Insurance contributions (NIC)
are the UK’s social security contributions: employees pay Class 1 NIC above a primary threshold, employers pay secondary Class 1 on most earnings (15% above a low threshold since 2025), and NIC funds state pension and benefits. NIC runs through PAYE alongside income tax.
What employers need to know
Employer NIC is the UK’s main employment on-cost — budget it on top of every salary, with the Employment Allowance offsetting a slice for smaller employers. Benefits in kind attract Class 1A; termination payments above £30,000 carry employer NIC too.
For contingent labour, NIC is where umbrella non-compliance concentrated — schemes ‘saving’ NIC are the target of the April 2026 agency-liability reform. Rates and thresholds: gov.uk.
Related terms: PAYE, employer costs
FAQ
Do NIC contributions build the state pension?
Yes — qualifying years of NIC (or credits) build entitlement, with 35 years needed for the full new state pension. Gaps can be filled with voluntary Class 3 contributions, a point expatriates leaving the UK often manage deliberately.
Does NIC apply to foreign workers in the UK?
Generally yes from day one of UK employment, unless a certificate under the UK’s coordination arrangements or a totalisation agreement keeps them in a home system temporarily. The old 52-week concessions apply narrowly — check the specific corridor.