Employee Cost Calculator UK

How much does an employee really cost a UK employer?

The salary on a job offer is just one part of the story. When you employ someone in the UK, the actual cost to your business is substantially higher — and understanding the full picture is essential for budgeting, pricing, and headcount planning.

This employee cost calculator gives you an accurate view of total employment costs, broken down by each component so you can see exactly where your money goes.

Employer National Insurance (NI) contributions

Employer National Insurance is one of the largest additional costs on top of salary. For the 2025/26 tax year, employers pay 15% on earnings above £5,000 per year (the Secondary Threshold). For a £30,000 salary, this equates to approximately £3,750 in employer NI contributions — over and above the salary itself.

Note that employer NI is different from employee NI. Employees also pay NI on their own earnings, but this is deducted from their take-home pay and doesn't affect your cost as an employer.

Auto-enrolment pension contributions

Since 2019, all employers must auto-enrol eligible workers into a workplace pension scheme and contribute at least 3% of qualifying earnings. Qualifying earnings are calculated on the band between £6,240 and £50,270 per year.

Many employers choose to contribute more than the minimum to remain competitive. A 5% employer contribution is increasingly common, while some larger employers offer 8–10% for senior roles.

Other employment costs to consider

Beyond NI and pension, there are several other costs that form part of the true employment bill:

• Holiday entitlement: Employees are legally entitled to 5.6 weeks' paid holiday per year (28 days including bank holidays for a full-time worker). This represents roughly 10.8% of working time you're paying for but not receiving output.
• Statutory sick pay (SSP): If an employee is off sick for more than 3 days, you must pay SSP at £116.75 per week (2025/26 rate). Many employers offer enhanced sick pay beyond the statutory minimum.
• Training and development: Induction training, ongoing CPD, and professional qualifications all have a cost that's often overlooked in salary-based planning.
• Equipment and workspace: Desk, computer, phone, software licences, and a share of office overheads can add £3,000–£8,000 per year per employee.
• Management time: Every employee requires some level of management, supervision, and administration — time that has a real cost even if it's not directly visible.

Employee cost by salary band

Estimates based on 2025/26 NI rates and 5% pension contribution on qualifying earnings. Excludes benefits and overheads.

Freelancer vs employee: the real cost comparison

Many businesses face the choice between hiring an employee or engaging a freelancer or contractor. On the surface, a freelancer charging £40/hour looks expensive compared to a £30,000 salaried employee. But when you calculate total employment costs — NI, pension, holiday, sick pay, equipment — the real comparison is often much closer than it first appears.

For a 40-hour week with 28 days' holiday, a £30,000 employee delivers approximately 1,696 working hours per year. Their true hourly cost (including NI, pension, and benefits) is typically around £20–£25 per hour — which can be competitive with a freelancer for stable, predictable work. However, freelancers offer flexibility and no ongoing employment obligations.