Employer Cost Calculator 2026-27

The true cost of employing someone in the UK is significantly higher than their gross salary. Employers must pay employer National Insurance at 15% on earnings above £5,000, plus workplace pension contributions of at least 3% of qualifying earnings under auto-enrolment. At the pension minimum these mandatory costs add roughly 13-16% on top of salaries between £20,000 and £60,000. On a £35,000 salary, for instance, employer NI comes to £4,500 and the 3% pension on £28,760 of qualifying earnings to £862.80, so the statutory extras total £5,362.80 and the employee costs £40,362.80, an uplift of 15.3%.

Additional statutory costs include the Apprenticeship Levy (0.5% of the total pay bill less a £15,000 allowance, so only employers with a pay bill over £3m pay it), employer's liability insurance (roughly £100-£500 a year) and workplace pension administration fees. The pension minimum is charged on qualifying earnings between £6,240 and £50,270, and the 15% NI rate above £5,000 has applied since April 2025. Statutory paid holiday of 5.6 weeks is a cost too, since you pay for time not worked. Depending on the role, there may also be costs for recruitment, training, equipment and benefits, and recruitment alone typically runs at 10-20% of salary, amortised over a typical 2-3 year tenure. With those overheads included, the total usually lands 15-25% above gross salary.

This calculator totals the mandatory employer-side costs for a given salary: employer NI, the employer pension contribution (on qualifying earnings or the whole salary, depending on your scheme) and, for pay bills over £3m, the Apprenticeship Levy. The result is the loaded cost per employee to use when setting budgets or weighing a permanent hire against a contractor. It does not deduct the £10,500 Employment Allowance, which reduces the whole business's NI bill, or apply the 0% employer NI rate on pay up to £50,270 for employees under 21 and apprentices under 25.

Several costs sit outside the statutory list. Office space runs roughly £500-£1,500 a month per employee in London and less elsewhere. Equipment such as a laptop, phone and software licences costs roughly £1,500-£3,000 up front plus around £800 a year in SaaS subscriptions. Training and development absorbs 1-3% of salary, often more for tech roles. Statutory sick pay is £123.25 a week for up to 28 weeks. Maternity and paternity pay are largely reclaimed but still hit cashflow. Management overhead is easy to overlook: a salaried manager typically spends 10-20% of their time on each direct report.

Salary sacrifice lowers costs on both sides. When an employee sacrifices £5,000 a year into their pension, the company saves 15% NI (£750) and 0.5% Apprenticeship Levy (£25), plus some auto-enrolment top-up if contributions are matched. The employee saves income tax at 20-45% plus employee NI at 8% or 2%. Many employers share the NI saving back as an additional pension contribution, turning a 5% salary sacrifice into a 5.75% pension contribution at no extra cost beyond the admin. From 6 April 2029 the National Insurance Contributions (Employer Pensions Contributions) Act 2026 limits the NI saving on both sides to the first £2,000 sacrificed each year, so the employer's NI saving on a £5,000 sacrifice falls to £300.

A comparison with contracting shows where the loaded figure earns its keep. A £450-a-day contractor costs £117,000 a year over 260 working days, typically more than a £75,000 permanent employee whose fully loaded cost is roughly £94,000. In return the contractor brings zero training cost, no holiday or sick pay, no pension obligation, no redundancy liability and the flexibility to release them when the contract ends. Contracting is most cost-effective for short engagements under 6 months, specialist skills not needed long-term or a rapid scale-up. For stable long-term work, a permanent hire is cheaper at full utilisation, generally by 10-15%.