Employee Cost Calculator

Hiring an employee in the UK costs significantly more than their gross salary. On top of the salary itself, employers must pay employer National Insurance contributions, workplace pension contributions under auto-enrolment, and often additional costs like training, equipment, and recruitment fees. Understanding the true cost of employment is essential for business planning, budgeting, and comparing the cost of hiring versus outsourcing. For the 2026-27 tax year, employer National Insurance is charged at 15% on all earnings above the secondary threshold of GBP 5,100 per year. This means an employee earning GBP 30,000 costs an extra GBP 3,735 in employer NI alone. Auto-enrolment pension rules require employers to contribute a minimum of 3% on qualifying earnings between GBP 6,240 and GBP 50,270. Combined, these statutory costs can add 15% to 20% on top of the headline salary. The Employment Allowance provides some relief for eligible employers, reducing the NI bill by up to GBP 10,500 per year. However, this allowance has strict eligibility criteria and cannot be claimed by single-director companies with no other employees. This calculator breaks down every component so you can see exactly where the money goes.

How to Use This Calculator

To use the employee cost calculator: 1. Enter the annual gross salary for the role. This is the salary before any deductions, the amount advertised in the job listing. 2. Toggle employer NI on or off. In most cases this should be on, as employer NI is a statutory requirement. It is calculated at 15% on earnings above GBP 5,100 (the 2026-27 secondary threshold). 3. Toggle auto-enrolment pension on or off. The default employer contribution rate is 3%, the legal minimum. You can increase this if your company offers a more generous pension scheme. 4. If eligible, turn on the Employment Allowance to see how it reduces your NI liability. This is worth up to GBP 10,500 per year but only available to qualifying employers. 5. Optionally add any additional annual costs in the advanced section. These might include recruitment fees (typically 10% to 20% of salary), training costs, equipment, software licences, or employee benefits like health insurance. 6. Review the results: total annual cost, monthly cost, the breakdown of each component, and the percentage above the base salary. The pie chart shows visually how the total cost is split.

How It Works

The total employment cost is calculated as follows: Employer NI = (Annual Salary - GBP 5,100) x 15% For a GBP 30,000 salary: (30,000 - 5,100) x 0.15 = GBP 3,735 Pension Contribution = (Qualifying Earnings) x Pension Rate Qualifying earnings are capped between GBP 6,240 and GBP 50,270. For a GBP 30,000 salary at 3%: (30,000 - 6,240) x 0.03 = GBP 712.80 For a GBP 100,000 salary at 3%: (50,270 - 6,240) x 0.03 = GBP 1,320.90 (capped) Employment Allowance: If applied, up to GBP 10,500 is deducted from the employer NI amount. If NI is less than the allowance, NI becomes zero. Total Annual Cost = Salary + Employer NI + Pension + Additional Costs Cost Above Salary = Total Cost - Salary Percentage Above Salary = (Cost Above Salary / Salary) x 100 Monthly Total = Total Annual Cost / 12 Example: GBP 30,000 salary with NI and 3% pension Total = 30,000 + 3,735 + 712.80 = GBP 34,447.80 (14.83% above salary)

The figures in this calculator are based on 2026-27 HMRC employer NI thresholds and The Pensions Regulator auto-enrolment minimums. HMRC updates thresholds annually, usually in the Autumn Statement or Budget. The employer NI rate of 15% took effect in April 2025 and represents an increase from the previous 13.8% rate. Employers should also be aware that certain employee benefits (company cars, private medical insurance, etc.) attract additional employer NI through P11D reporting. For a full picture of employee take-home pay, use our Salary Calculator. To understand pension contributions from the employee perspective, try our Pension Calculator.