The True Cost of an Employee in 2026 to 2027

An employee on £30,000 a year costs their employer a good deal more than £30,000. On top of salary come employer National Insurance, a workplace pension contribution and the costs of equipment and training. And because of holiday and sickness, the hours they actually work are fewer than the hours you pay for.

The figures below are for the 2026 to 2027 tax year, which runs from 6 April 2026 to 5 April 2027.

Employer National Insurance

Employers pay Class 1 National Insurance at 15% on earnings above the secondary threshold of £5,000 a year (£96 a week).

For some employees the employer pays 0% up to £50,270 a year, and 15% only above that. This applies to:

• employees under 21;
• apprentices under 25;
• eligible veterans in their first year of civilian employment.

Many smaller employers can claim the Employment Allowance, which reduces their employer National Insurance bill by up to £10,500 for the 2026 to 2027 tax year. The calculator shows NI before the allowance, because the allowance applies to the whole payroll, not to each employee.

Workplace pension

Employers must automatically enrol staff aged between 22 and State Pension age who earn at least £10,000 a year and normally work in the UK. The minimum employer contribution is 3% of qualifying earnings, which for most schemes means earnings between £6,240 and £50,270 a year. The total minimum, including the employee's share, is 8%.

Worked example

An employee aged over 21 on a salary of £30,000:

That is 19.9% more than salary. They are paid for 37.5 × 52 = 1,950 hours, but after 28 days' holiday (including bank holidays) and 4 sick days, they work about 1,710. The true cost of each working hour is £35,963 ÷ 1,710 = £21.03, against an hourly wage of £15.38.

Calculate your own figures

Use the hourly figure

The cost per working hour is the number to use when you price work or compare staff with subcontractors. Pricing from the hourly wage alone would cost each hour about £5.65 too low in this example. It still leaves out overheads such as premises and vans, which the true cost per job guide adds.