BusinessCalculator.co.uk

Employee Cost & Employer NI Calculator

See what an employee really costs your business once employer National Insurance and pension are added to the salary.

Using 2026/27 UK tax rates

Percentage of pay you contribute. Automatic enrolment minimums may apply.

Advanced options

Equipment, software, insurance, training, recruitment fees.

A business-level relief of up to £10,500.00 against your total employer NI bill — not per employee. Not available to single-director companies with no other employees.

Total annual cost

£40,550.00

Salary and bonus
£35,000.00
Employer National Insurance
£4,500.00
Employer pension
£1,050.00
Equivalent monthly cost
£3,379.17

What this means

Paying £35,000.00 costs the business £40,550.00 a year, or £3,379.17 a month. Employer National Insurance alone adds £4,500.00. Use the annual figure when you are pricing work or planning a hire; use the monthly figure for cash flow.

Quick answers

How much does an employee really cost?
Typically 12-20% more than the headline salary once employer National Insurance and a minimum pension contribution are added, before recruitment, equipment or other overheads. Enter a salary above for an exact figure.
What is the 2026/27 employer NI rate?
Employer (secondary Class 1) National Insurance is charged at 15% on earnings above the Secondary Threshold of £5,000.00 a year, with no upper limit.
What is the Secondary Threshold?
The Secondary Threshold is the point at which employer National Insurance starts being charged on an employee's pay — £5,000.00 a year in 2026/27. Below it, no employer NI is due.
Should pension contributions be included in employee cost?
Yes. Automatic enrolment requires a minimum employer pension contribution for eligible staff, and it's a genuine ongoing cost alongside salary and employer NI, so it should always be added to any cost comparison.

Budget for more than salary alone

The true cost of an employee can include employer National Insurance, pension contributions, equipment, training and other employment-related costs.

Planning against the total cost rather than the headline salary makes hiring decisions easier to hold to.

You may also find useful

How we calculated it

Employer National Insurance is charged at 15% on earnings above the Secondary Threshold of £5,000.00 a year. Bonuses are treated as additional earnings, so they attract employer NI too.

The pension figure is your employer contribution as a percentage of total pay. Total cost = pay + employer NI + pension + any other costs you enter.

Assumptions

Standard category-A National Insurance, contributions calculated on total pay for a full tax year, and no reliefs for veterans, apprentices, freeports or investment zones. Employer pension contributions are shown gross and salary sacrifice is not modelled.

How this calculator works

The advertised salary is only part of what a hire costs. Employer National Insurance is paid by the business on top of pay and never appears on the employee's payslip. Automatic enrolment then requires a minimum employer pension contribution for eligible staff, and beyond that come recruitment fees, equipment, software licences, training and employer's liability insurance. If you're weighing up a permanent hire against a contractor, the day rate to salary calculator converts a day rate into a comparable annual figure.

Employment Allowance is a business-level relief that reduces your total employer NI bill for the year by up to £10,500.00. It is claimed once for the whole payroll, not per employee, and a company whose only employee is a single director is not eligible. Ticking the option below shows the effect on this role's cost, but if you employ several people the allowance is used up across the payroll as a whole.

Worked examples

£25,000 salary

Employer NI is 15% of (£25,000 − £5,000) = £3,000, and a 3% pension contribution adds £750. Total annual cost is £28,750, about £2,395.83 a month — 15% above the headline salary.

£40,000 salary

Employer NI is 15% of (£40,000 − £5,000) = £5,250, and the 3% pension adds £1,200. Total annual cost is £46,450, about £3,870.83 a month — roughly 16% above the headline salary.

£60,000 salary

Employer NI is 15% of (£60,000 − £5,000) = £8,250, and the 3% pension adds £1,800. Total annual cost is £70,050, about £5,837.50 a month — again around 17% above the headline salary, before any equipment, software or recruitment costs are added.

Key terms explained

Secondary Threshold
The earnings level above which an employer starts paying employer National Insurance on an employee's pay — £5,000.00 a year in 2026/27.
Employment Allowance
A relief of up to £10,500.00 against a business's total employer National Insurance bill for the year, claimed once for the whole payroll rather than per employee.

Common mistakes

  • Comparing salary alone between two hiring options

    A lower salary with a higher employer pension contribution, or vice versa, can cost the same overall. Always compare total annual cost, not just the headline salary.

  • Assuming Employment Allowance applies to a specific role

    Employment Allowance is a whole-business relief, not a per-employee one, and it isn't available where the only employee paid above the Secondary Threshold is a single director.

  • Leaving out one-off and ongoing overheads

    Recruitment fees, equipment, software licences and insurance are real costs of a hire that don't show up in salary or employer NI figures alone.

Common questions

How is employer National Insurance calculated?

Employer National Insurance is charged at 15% on an employee's earnings above the Secondary Threshold, with no upper limit. Bonuses count as earnings too, so they attract the same charge.

What does a £30,000 employee cost?

With a typical 3% employer pension contribution, employer NI is 15% of (£30,000 − £5,000) = £3,750 and the pension adds £900, giving a total annual cost of around £34,650. Enter your own salary above for a precise figure including any other costs.

What does a £40,000 employee cost?

With a 3% employer pension contribution, employer NI is 15% of (£40,000 − £5,000) = £5,250 and the pension adds £1,200, giving a total annual cost of £46,450 — about £3,870.83 a month.

Should pension contributions be included?

Yes. Automatic enrolment requires a minimum employer pension contribution for eligible staff, and it's an ongoing cost just like salary and employer NI, so leaving it out understates the true cost of the role.

What is Employment Allowance?

Employment Allowance lets an eligible business reduce its total employer National Insurance bill by up to £10,500.00 a year. It's claimed once against the whole payroll rather than for any single employee.

Does Employment Allowance belong to one employee?

No. It's a business-level relief applied against your total employer National Insurance bill across all staff, not an allowance attached to a particular role or person, and it isn't available to a single-director company with no other qualifying employees.

What other employment costs should I budget for?

Recruitment fees, a laptop and other equipment, software licences, employer's liability insurance, training, and cover for holiday and sickness. Adding these in the optional field gives a far more realistic annual figure than salary and NI alone.

Sources

Last reviewed: 7 September 2026 · Statutory rates: 2026/27. This calculator is information only and is not tax, accounting or financial advice.