True Cost of an Employee Calculator
Work out what an employee really costs a UK employer once salary, employer National Insurance, workplace pension, Apprenticeship Levy and practical overheads are added. Useful when budgeting a hire, comparing salary bands, or checking whether a role still makes sense after the on-costs.
Estimate annual employer cost
Start with salary. Add bonus, overtime, NI category, pension basis, Employment Allowance and itemised overheads.
Used for the minimum wage sense check only.
Pay additions
Leave as 0 to derive from salary and hours.
Reliefs apply zero rate only up to the relevant upper threshold.
Employer-wide allowance, not automatic per employee.
Use if the employer's pay bill is above the levy allowance.
Optional catch-all if you do not want to itemise below.
Optional itemised overheads
These are budgeting fields. Benefits may also create tax, reporting or Class 1A NI consequences that this page does not calculate.
Employer NI
15%
Charged above the relevant secondary threshold, before any Employment Allowance offset.
Pension minimum
3%
Usually based on qualifying earnings between GBP 6,240 and GBP 50,270.
Levy rate
0.5%
For employers with a pay bill above the Apprenticeship Levy allowance.
Why the advertised salary is not the full cost
When a role is advertised at GBP 35,000, the employer does not simply budget GBP 35,000. Payroll costs sit on top. Employer National Insurance starts at a much lower point than employee National Insurance, workplace pension duties can add another percentage, and larger employers may also face Apprenticeship Levy.
Then come the ordinary costs that do not show on the payslip: laptop, phone, software seats, payroll admin, HR support, recruitment fees, training, professional memberships, insurance, travel and benefits. A London office-based hire might need a travelcard contribution or desk space. A remote hire might need a better equipment budget. Someone working in the field may need mileage, tools, PPE or a van.
This calculator separates statutory payroll costs from practical extras. That makes it useful for deciding whether you can afford a hire, comparing a permanent employee with a contractor, or sanity-checking a salary rise before you promise it.
| Cost type | How this calculator treats it |
|---|---|
| Salary, bonus and overtime | Gross pay that can drive NI, pension and levy |
| Employer NI | Calculated from official Class 1 thresholds |
| Pension | Qualifying earnings or full salary basis |
| Overheads | User-entered estimate for real-world extras |
How this employee cost calculator works
Inputs used
- Gross annual salary, annual bonus, overtime hours and tax year.
- Contracted weekly hours and minimum wage category for a sense check.
- Employer National Insurance category, including under-21, apprentice, veteran, Freeport and Investment Zone thresholds.
- Remaining Employment Allowance available to offset employer NI.
- Employer pension rate and whether contributions are based on qualifying earnings or full salary.
- Optional Apprenticeship Levy, catch-all extra costs and itemised overheads such as recruitment, training, equipment, healthcare, travel and perks.
Calculation method
- Calculate gross pay as salary plus bonus and overtime.
- Apply employer Class 1 National Insurance at the official employer rate above the relevant secondary threshold.
- Reduce employer NI by the remaining Employment Allowance entered, capped at the calculated NI for this employee.
- Calculate employer pension contributions on qualifying earnings or full gross pay, depending on the selected basis.
- Add Apprenticeship Levy at 0.5% of gross pay if selected.
- Add catch-all and itemised overheads, then show annual, monthly and on-cost percentage totals.
Assumptions
- The calculation is annual and simplified. Payroll software may calculate NI by pay period, with special rules for directors and irregular pay.
- Employment Allowance is treated as a remaining employer-wide pot. The calculator does not decide whether the employer is eligible.
- Qualifying earnings are modelled using the common GBP 6,240 to GBP 50,270 annual band and the selected employer pension percentage.
- The National Minimum Wage check uses salary plus bonus and overtime against contracted hours plus overtime hours. It does not adjust for unpaid breaks, salaried-hours rules or accommodation offsets.
What this does not cover
- It does not calculate employee take-home pay. Use the Take-Home Pay Calculator for employee deductions.
- It does not decide Employment Allowance eligibility. Use the Employment Allowance Calculator when that page is complete, or check GOV.UK guidance.
- It does not include statutory sick pay, maternity/paternity pay, holiday accrual for casual workers, benefits in kind, Class 1A NI on benefits, payroll bureau fees, redundancy costs or employment law advice.
Worked example: a GBP 35,000 employee
A GBP 35,000 salary in 2026/27 is well above the employer secondary threshold of GBP 5,000. If the employee also earns a bonus or paid overtime, that extra gross pay normally increases the employer-cost base too. With a standard employee, employer National Insurance is charged at 15% on pay above the relevant threshold before any Employment Allowance offset.
If the employer also contributes 3% on qualifying pension earnings, the pension cost is based on the slice of gross pay between GBP 6,240 and GBP 50,270. Add onboarding, equipment, training and benefits, and the annual cost is meaningfully higher than the headline salary.
That difference is not a reason to avoid hiring. It is a reason to budget properly. A good employee can more than pay for themselves, but the cash flow needs to survive payroll, pension payments and all the small costs that tend to arrive after the offer letter is signed.
Hiring budget checklist
Check whether the role is comfortably above the National Minimum Wage once the real working pattern is known. Salaried roles can still create minimum wage problems if hours creep up or unpaid time is handled badly.
Check whether any employer NI relief genuinely applies. Under-21 and apprentice reliefs do not wipe out all employer NI forever; they create a zero-rate band up to a specific upper secondary threshold.
Check whether pension contributions are based on qualifying earnings or the whole salary. Many employers use more generous pension rules than the statutory minimum, which is good for staff but changes the hiring cost.
Costs people often forget
Benefits and Class 1A NI
Medical insurance, company cars and some other benefits can create extra reporting and NI costs.
Recruitment and onboarding
Agency fees, job adverts, background checks and training time can dwarf the first month's payroll cost.
Absence and cover
Sick pay, holiday cover and management time are real costs, even when they are not neat percentage add-ons.
Pay rises and bonuses
A salary increase also increases employer NI, pension costs and sometimes levy exposure.
True employee cost FAQs
What is the employer National Insurance rate in 2026/27?
Does Employment Allowance reduce the cost of each employee?
Is employer pension calculated on the whole salary?
Should I include Apprenticeship Levy?
Does this calculator include employee tax?
Official sources
Last verified: May 9 2026. Calculations are estimates based on the published rules and assumptions shown on this page.
- GOV.UK employer rates and thresholds 2026 to 2027 - Class 1 employer NI thresholds, 15% employer rate, Employment Allowance, Apprenticeship Levy and 2026 minimum wage rates
- GOV.UK National Insurance rates and allowances - annual Class 1 thresholds including secondary threshold, upper secondary thresholds and employer rate
- GOV.UK workplace pensions for employers - minimum 3% employer contribution and qualifying earnings basis
- GOV.UK workplace pension contributions - qualifying earnings band and minimum automatic enrolment contributions
- GOV.UK National Minimum Wage rates - current minimum hourly rates from April 2026