A £32,000 salary does not cost £32,000. Add employer National Insurance at 15% on everything above £5,000, and the minimum 3% pension contribution, and it costs £36,823 before you have bought a laptop. This calculator gives you the real figure, and the cost per hour actually worked.
The number most owners carry in their head is out of date. Until April 2025, employer National Insurance was 13.8% and did not start until £9,100. It is now 15% from £5,000, which added roughly £900 a year to a £32,000 hire and rather more in proportion to a part-time one. If your sense of what a hire costs was formed before that, it is too low.
Set the salary or hourly rate, the age band and the pension basis, and the calculator returns the full annual cost, the monthly cost, and — the figure that matters when you are pricing work — the cost per hour the person is actually at their desk rather than on holiday or off sick.
2026/27 tax year
Rates checked 17 August 2026
How this is worked out
Gross pay is the starting point: either the salary you enter, or the hourly rate times contracted hours times 52. For staff paid only for the hours they work, holiday pay is added at 12.07%, which is 5.6 weeks expressed as a percentage of the 46.4 weeks actually worked.
Employer National Insurance is 15% of everything above the £5,000 secondary threshold. There is no upper limit, so it keeps applying however senior the hire. Under-21s and apprentices under 25 are the exception: nothing is due on them until £50,270.
Employer pension is 3% by default, applied to qualifying earnings — the slice of pay between £6,240 and £50,270 — because that is the statutory basis. Switch it to full salary if that is what your scheme uses, which makes it more expensive.
Cost per productive hour divides the total by the hours left after holiday and expected sickness. It is the number that matters when you are pricing work, and it is always higher than people expect.
The figures it uses
- Employer National Insurance: 15% above a £5,000 secondary threshold, no upper limit
- Upper secondary threshold for under-21s and apprentices under 25: £50,270
- Employment Allowance: £10,500 against the total employer NI bill
- Pension: 3% employer minimum on qualifying earnings of £6,240 to £50,270
- National Living Wage from 1 April 2026: £12.71 (21+), £10.85 (18–20), £8.00 (under 18 and apprentice)
- Statutory holiday: 5.6 weeks, accruing at 12.07% for hours-worked staff
All figures checked against HMRC, gov.uk and Bank of England sources on 17 August 2026. This is general information, not tax advice — for anything with real money on it, put it past your accountant.
Questions
How much does an employee cost on top of their salary?
For a typical salaried hire in 2026/27, on-costs run at roughly 16% to 20% of salary once employer National Insurance at 15% above £5,000 and a 3% pension contribution are counted. The percentage is higher on low salaries, because the £5,000 NI threshold and the £6,240 pension floor are fixed amounts rather than proportions, and it falls slowly as salary rises.
Is employer National Insurance really 15%?
Yes, on earnings above the £5,000 secondary threshold, and it stays at 15% with no upper limit. The rate rose from 13.8% and the threshold fell from £9,100 in April 2025, which is why a hire that looked affordable in 2024 does not any more. Both figures are unchanged for 2026/27.
Does the Employment Allowance make the first employee free of NI?
It can, but the allowance is £10,500 against your total employer NI bill for the year, not per employee, so it is used up by whoever you count first. It is also not available to a company whose only employee is a single director. Tick the allowance box in the calculator to see the effect, and leave it unticked if earlier hires have already absorbed it.
What is the National Living Wage in 2026/27?
£12.71 an hour for workers aged 21 and over from 1 April 2026, up from £12.21. The 18 to 20 rate is £10.85, and the under-18 and apprentice rate is £8.00. The calculator flags an hourly rate below the band you select.
Should holiday pay be counted as an extra cost?
Not for salaried staff — their holiday is already inside the salary, which is why paid time off reduces productive hours rather than adding to the bill. For staff paid per hour worked, holiday accrues on top at 12.07%, and that is a real additional cost.
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