What is the true cost of an employee?

The true cost of an employee goes beyond just their salary. It includes employer National Insurance contributions (15% above threshold), workplace pension contributions (minimum 3%), and potentially other costs like training, equipment, software, and benefits.

How much extra does an employee cost above their salary?

On average, employers should budget for an additional 15-20% on top of the gross salary. This covers employer NI (up to 15%) and pension contributions (minimum 3%). For a £30,000 salary, the true cost could be around £34,000-£36,000.

What pension contribution must employers pay?

Under auto-enrolment rules, employers must contribute at least 3% of qualifying earnings to workplace pensions. Qualifying earnings for 2025/26 are between £6,240 and £50,270 per year.

Can I reduce the cost of employing someone?

Yes, there are several ways: claim the Employment Allowance (up to £10,500 off your NI bill), hire workers under 21 (reduced NI), use salary exchange for pension contributions (saves both employer and employee NI), or consider apprentices (NI relief available).

What additional costs should I budget for?

Beyond NI and pension, consider: workspace and equipment, software and tools, training and development, recruitment costs, HR administration, sick pay costs, and any benefits you offer like health insurance or company cars.

How do I calculate costs for part-time employees?

Part-time employees are calculated pro-rata. Enter their annual salary (not full-time equivalent) into the calculator. NI thresholds apply to actual earnings, so part-time workers on low earnings may fall below the threshold.

Employee Cost Calculator 2025/26 | True Hiring Cost

How much does an employee really cost? Enter a salary to see the full picture — employer NI, pension, and hidden costs that add 15-20% on top for 2025/26.

Understanding the True Cost of Employment in 2025/26

When budgeting for new hires, many employers focus solely on the salary figure. However, the true cost of employing someone includes several additional mandatory and optional costs that can add 15-30% or more to the base salary.

Mandatory Employer Costs

Every UK employer must pay these costs on top of salary:

Employer National Insurance: 15% on earnings above £5,000/year
Workplace Pension: Minimum 3% of qualifying earnings for auto-enrolled employees
Employers' Liability Insurance: Legally required for most employers

Example: True Cost of a £30,000 Salary

Cost Element	Amount
Gross Salary	£30,000
Employer NI (15% above £5,000)	£3,750
Pension (3% of qualifying earnings)	~£714
Total Cost	~£34,464

Ways to Reduce Employment Costs

Employers can legitimately reduce their costs through:

Employment Allowance: Save up to £10,500 on your NI bill
Salary Exchange: Both employer and employee save NI when pension contributions are exchanged for salary
Hiring Under-21s: No employer NI on earnings up to £50,270
Apprenticeships: Similar NI benefits plus potential funding for training

Hidden Costs to Consider

Beyond the statutory costs, employers often overlook:

Recruitment and onboarding costs
Equipment and workspace
Training and professional development
HR and payroll administration
Sick pay and absence costs
Benefits and perks

Break Down Each Cost Component

For a detailed look at individual cost elements, use our dedicated calculators: employer NI calculator to model NI costs at different salary levels, workplace pension calculator to compare pension scheme types, and SSP calculator to budget for potential sick pay costs. Don't forget to check your team's holiday entitlement too.

True Cost of an Employee Calculator 2025/26