True Employee Cost
Employer Cost Calculator
See the full annual cost of an employee in the UK including employer National Insurance and pension contributions.
groupEmployee Package
Auto-enrolment minimum is 3%.
Equipment, training, benefits-in-kind.
paymentsTotal Cost Breakdown
Total Annual Employer Cost
£45,464.20
+13.7% on top of salary
Gross Salary£40,000.00
Employer NI (13.8%)£4,264.20
Pension£1,200.00
Other Costs£0.00
Effective Hourly (≈1,920 hrs)£23.68
Employer NI: 13.8% above £9,100 secondary threshold (2024/25). Employment Allowance not applied.
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Salary First
Start with the gross headline salary you'll quote to the candidate.
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Add Statutory
Layer on employer NI and pension — these scale with salary.
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Don't Forget Extras
Equipment, software, travel and training all add to true cost.
Common Questions
Does Employment Allowance apply to me?expand_more
Most small employers can claim Employment Allowance — up to £5,000 off their employer NI bill each year. You qualify if your total employer NI was under £100,000 in the previous tax year. Sole-director limited companies (one director, no other employees) cannot claim it. This calculator shows the headline cost — subtract Employment Allowance from your total annual employer NI to see the cash impact.
What about the Apprenticeship Levy?expand_more
Only employers with an annual pay bill over £3 million pay the 0.5% Apprenticeship Levy. If you're under that threshold, you don't pay it directly — but you can still access apprenticeship funding via the government's co-investment scheme (95% funded by the state for non-levy payers in 2024/25).
What's the true cost beyond salary and NI?expand_more
Rule of thumb: budget 1.25× to 1.4× the gross salary as the all-in employer cost. On top of NI (13.8% above £5,000 secondary threshold) and pension (3% minimum employer auto-enrolment), include: 28 days statutory holiday (≈10% of salary as productive-time cost), sick pay reserve, equipment (laptop, software licenses ~£1,500–£3,000/yr), training budget, and the workspace cost if office-based. Recruitment fees alone often run £4,000–£8,000 for mid-level hires.
Should I hire a contractor instead?expand_more
Contractors look cheaper on paper (no NI, pension, holiday) but are typically 1.5–2× the day rate of an employee on equivalent skill, plus you have less control over their work. Be very careful with IR35: HMRC can deem your contractor an employee for tax purposes if they work like one (set hours, your equipment, your direction) and bill you for backdated NI. Use HMRC's CEST tool before engaging.
When should I consider salary sacrifice schemes?expand_more
Salary sacrifice (pension, electric car, cycle-to-work, childcare vouchers via legacy schemes) reduces both employer and employee NI because the gross salary drops. On a £40k employee sacrificing £4k into pension, the employer saves about £550/yr in NI. It's a genuine win-win — many employers share the saving with the employee as an extra contribution, which improves retention at near-zero net cost.