UK Employment Allowance + Employer NIC Menu Pricing Guide (2026): Recover Payroll Cost Without Blunt Price Hikes

Most owner-operators do not miss payroll pressure because they are careless. They miss it because payroll moved in three different places at once.

In 2026 UK pricing, the dangerous mistake is using only one headline number. You need NLW, employer NIC, and Employment Allowance in one model.

Quick Summary

• From 1 April 2026, NLW for age 21+ is GBP 12.71.
• GOV.UK employer rates for 2026 to 2027 show Class 1 secondary NIC at 15% with updated thresholds.
• The currently published Employment Allowance baseline is up to GBP 10,500 for eligible employers; verify current-year eligibility rules before final pricing rollout.
• Practical workflow: recost labour-heavy items first, then recover remaining payroll gap with selective price moves.

Why This Matters Right Now

ONS data for December 2025 (published 15 January 2026) shows:

• CPI annual rate: 3.6%
• Restaurants and hotels annual rate: 3.8%

So demand is not your only risk. If your payroll model is stale, contribution falls even when covers look stable.

The Payroll Loading Formula You Actually Need

Start with item-level labour, not blended monthly guesswork.

loadedLabourPerDish =
  (loadedHourlyLabourCost / 60) x labourMinutesPerDish

Then pricing floor:

requiredNetPrice =
  (foodCost + loadedLabourPerDish + otherVariableCosts)
  / (1 - targetContributionMargin)

For NIC + allowance planning, track this separately:

netEmployerNicCash =
  max(0, grossEmployerNic - employmentAllowanceApplied)

This is what turns payroll policy into actual cash impact.

Worked Example (Small UK Bistro)

Assumptions:

• Monthly gross payroll: GBP 21,400
• Modeled monthly employer NIC before allowance: GBP 2,470
• Employment Allowance allocation: GBP 875/month (GBP 10,500 over 12 months)
• Net employer NIC cash: GBP 1,595/month
• Monthly dishes sold: 4,200

NIC cash per dish:

1,595 / 4,200 = GBP 0.38

If your old model used GBP 0.17 NIC per dish, you are under-recovering:

0.38 - 0.17 = GBP 0.21 per dish

At 4,200 dishes, that is GBP 882 per month of hidden margin leakage.

Menu Strategy That Avoids Guest Pushback

Do not apply one flat increase everywhere. Recover where labour minutes are heavy and demand is less price-sensitive.

Use this order:

1. Re-time top 20 items (actual minutes, not old SOP estimates)
2. Rebuild required net prices with updated loaded labour
3. Protect 3 to 5 traffic anchors
4. Apply bigger moves to high-labour, low-contribution items
5. Roll out on one effective date across POS, site, and delivery apps

20-Minute Weekly Control

1. Export hours and wage by role from payroll/POS.
2. Update loaded hourly cost assumptions.
3. Recheck contribution for top sellers.
4. Track NIC and allowance usage against plan.
5. Trigger action when contribution floor is missed 2 weeks in a row.

Common Mistakes

1. Treating Employment Allowance as a full payroll fix.
2. Repricing from wage headlines without labour-minute updates.
3. Using VAT-inclusive totals for internal margin decisions.
4. Updating dine-in prices but forgetting delivery and QR ordering menus.

Related Guides

• UK NLW + Employer NI Menu Pricing Playbook
• UK Restaurant April 2026 Repricing Playbook
• UK Cafe Cash Runway Checklist
• Break-Even Sales Calculator

KitchenCost helps you recost recipes and rebuild item floors quickly when payroll assumptions change.

Try KitchenCost.

Sources (checked on 2026-02-14)

• GOV.UK - Rates and thresholds for employers 2026 to 2027
• GOV.UK - Rates and thresholds for employers 2025 to 2026
• GOV.UK - Minimum wage rates for 2026
• ONS - Consumer price inflation, UK: December 2025
• Reddit: r/smallbusinessuk - cost of living impact on small firms