Employer true-cost calculator
A salary is only part of what an employee costs. Add employer National Insurance, the workplace pension and setup costs and the real figure is meaningfully higher. This estimates the full 2026/27 cost of a hire.
What is in the number
The true cost is built from the salary plus the things that come with it. For 2026/27 the main on-costs are employer National Insurance at 15% on earnings above the £5,000 secondary threshold, and the workplace pension (minimum 3% on qualifying earnings between £6,240 and £50,270). On top of those come one-off and running costs: equipment, software, training and recruitment.
The Employment Allowance can reduce a small employer's National Insurance bill by up to £10,500 a year. It is a single yearly amount for your whole payroll, not per employee, so tick the box only if this hire's NI is genuinely covered by your remaining allowance.
How to use the result
Use the ongoing annual figure for budgeting and the first-year figure for cashflow planning, since recruitment and equipment land up front. As a rule of thumb, the real cost of a hire is comfortably above the advertised salary once NI and pension are in, before you add anything else.
Employer NI (15% above the £5,000 secondary threshold), the £10,500 Employment Allowance, and the auto-enrolment pension minimums (3% on qualifying earnings of £6,240-£50,270) were verified June 2026 for the 2026/27 tax year from GOV.UK. Rates change each April - check current figures. This is a simplified estimate: it excludes the Apprenticeship Levy, statutory sick/maternity pay, holiday cover, benefits in kind and other employer costs, and it is not tax or payroll advice.
Frequently asked questions
- What is the difference between the ongoing annual cost and the first-year cost?
- The ongoing annual cost is what the hire costs every year: salary and bonus, employer NI, pension, plus software and training. The first-year cost adds your one-off equipment and recruitment spend on top, since those land up front. Use the annual figure for budgeting and the first-year figure for cashflow planning.
- When should I tick the Employment Allowance box?
- Tick it only if this hire's employer NI is genuinely covered by your remaining allowance. The £10,500 is a single yearly amount for your whole payroll, not per employee, so if you have several staff your allowance may already be used up. Ticking it here reduces this hire's NI to zero, which can understate your real cost if the allowance is spent elsewhere.
- Why does the pension figure look lower than my contribution percentage suggests?
- The employer pension is applied to qualifying earnings between £6,240 and £50,270, not the full salary. So 3% is charged on the band within those limits, not on the whole wage. That is why the pension cost can seem smaller than expected, especially at lower salaries where less of the pay falls inside the qualifying band.
- What does the percentage in the verdict line mean?
- It shows the on-costs above salary as a proportion of pay, before any one-off setup. So if it says roughly 8% on top, employer NI and pension add about that much to the wage you advertised. It is a quick way to see how much more than the headline salary a hire really costs you each year.
- Does this figure cover everything an employee will cost me?
- No. It is a simplified 2026/27 estimate covering salary, employer NI, pension and the setup costs you enter. It excludes the Apprenticeship Levy, statutory sick and maternity pay, holiday cover, benefits in kind and other employer costs. Treat the result as a planning estimate, not tax or payroll advice, and check current rates as they change each April.