See what an employee really costs your business — gross salary plus employer National Insurance and pension. UK 2026/27 rates. No sign-up.
⚖︎ Results are for informational purposes and do not constitute tax advice. For specific situations, consult a licensed accountant or the relevant tax authority.
iHow it is calculated
The cost of employment is more than the salary you advertise. On top of the gross salary the employer pays secondary (employer) National Insurance — 15% on earnings above £5,000 a year (2026/27) — plus the employer pension contribution under auto-enrolment, a minimum of 3% on qualifying earnings (£6,240–£50,270). Eligible employers can reduce their NI bill by up to £10,500 a year through the Employment Allowance. The April 2025 changes — the rate rising from 13.8% to 15% and the threshold dropping from £9,100 to £5,000 — pushed the cost of every hire noticeably higher.
total cost = gross + employer NI (15% above £5,000) + employer pension (3%)
Hiring on a £35,000 salary (2026/27): employer National Insurance = 15% × (£35,000 − £5,000) = £4,500. That alone makes the total cost of employment £39,500/year. Add the minimum 3% auto-enrolment pension on qualifying earnings (£863) and the cost rises to about £40,363. The same £35,000 salary leaves the employee roughly £28,720 take-home — so the business pays about £39,500 for an employee who receives around £28,720.
?Frequently asked questions
What is the true cost of employing someone in 2026/27?
It is the gross salary plus employer National Insurance (15% on earnings above £5,000 a year) plus the employer pension contribution (a minimum 3% under auto-enrolment). On a £35,000 salary the employer NI is £4,500, so the base cost of employment is £39,500 a year — around £40,363 once the 3% pension is added.
What is employer National Insurance?
Employer (secondary) National Insurance is a payroll tax the business pays on top of an employee's wages — it is separate from the employee's own NI. For 2026/27 it is charged at 15% on each employee's earnings above the £5,000 secondary threshold, and it is a deductible business expense.
How is the 15% employer NI worked out?
Take the gross salary, subtract the £5,000 secondary threshold, and charge 15% on the rest. On £25,000 that is 15% × £20,000 = £3,000; on £30,000 it is £3,750; on £50,000 it is £6,750; on £100,000 it is £14,250.
How did the April 2025 changes raise employer costs?
Before April 2025 employer NI was 13.8% on earnings above £9,100 a year. From April 2025 the rate rose to 15% and the threshold fell to £5,000, so employers now pay more NI on every employee — and start paying it far sooner. That higher cost carries into 2026/27.
What is the Employment Allowance?
The Employment Allowance lets eligible businesses reduce their total annual employer National Insurance bill by up to £10,500 for 2026/27. It is a company-level offset applied across your whole payroll, not a per-employee discount, so it can wipe out the employer NI on your first one or two staff entirely.
Who is eligible for the Employment Allowance?
Most employers with an employer NI bill can claim, but there are caveats. You cannot claim if you are a single-director company with no other employees paid above the secondary threshold, and you cannot claim if your total employer (secondary) NI in the previous tax year was £100,000 or more. This calculator shows the cost before any allowance.
How much is the employer pension contribution?
Under auto-enrolment the minimum employer contribution is 3% of qualifying earnings — the band between £6,240 and £50,270 a year. On a £35,000 salary that is 3% × (£35,000 − £6,240) = about £863 a year, on top of the salary and employer NI.
Can you show a full cost-of-employment example?
For a £35,000 salary: gross £35,000 + employer NI £4,500 = £39,500. Add the minimum 3% employer pension (£863) and the total is roughly £40,363 a year. The same employee takes home about £28,720 after their own income tax and National Insurance.
Why is the cost of employment higher than the gross salary?
Because the gross salary is only what you promise the employee — the business also pays employer National Insurance and a pension contribution on top. So the cost to the employer is greater than the gross salary, which in turn is greater than the employee's take-home after their own tax and NI. On £35,000 that is £39,500 cost, £35,000 gross, about £28,720 take-home.
What does a £50,000 or £100,000 hire cost?
At £50,000 the employer NI is £6,750, so the cost of employment is £56,750 before pension. At £100,000 the employer NI is £14,250, giving a cost of £114,250 before pension. Higher salaries mean proportionally more employer NI, since the 15% applies to almost the whole amount above £5,000.
Does this include the Apprenticeship Levy or other on-costs?
No. This tool covers the two biggest and most predictable on-costs — employer National Insurance and the minimum auto-enrolment pension. Larger payrolls may also owe the Apprenticeship Levy (0.5% on pay bills over £3m), and real costs can include equipment, benefits and holiday cover.