Updated for 2025/26 — Free Instant Calculation

Employee Cost Calculator UK (2025/26)

Calculate the true cost of hiring an employee in the UK, including Employer’s NI at the new 15% rate (from April 2025), pension contributions, and all hidden costs. Most UK employers underestimate their true employment costs by 20–40%.

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From April 2025, Employer’s National Insurance increased to 15% (from 13.8%) and the secondary threshold dropped to £5,000 (from £9,100). This has significantly increased the cost of employment for UK businesses — particularly for lower-paid workers.

This employee cost calculator gives you the complete picture: salary, NI, pension, recruitment, equipment, training and workspace — so you know the true annual cost before making a hiring decision. The result is typically 1.3x–1.6x the base salary.

Employee Cost Calculator UK (2025/26)

Calculate the true cost of an employee including Employer’s NI, pension, and all hidden costs. Typically 1.25–1.5x the gross salary.

📐 Formula: Total Cost = Salary + Employer’s NI + Pension + Overheads
Employer’s NI = 15% × (Salary − £5,000 threshold). Working days = 252 − 28 holiday = 224.

NI applies to bonus too

Legal minimum 3%

Total Annual Cost of Employment

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⚠️ Disclaimer: Based on 2025/26 UK rates. NI: 15% on earnings above £5,000/year. Consult your accountant for precise figures.

Frequently Asked Questions

What is Employer's NI in 2025/26? ▼
From April 2025, Employer's National Insurance is charged at 15% on all employee earnings above £5,000 per year (the secondary threshold). This increased from 13.8% and the threshold dropped from £9,100. For a £30,000 salary, this means £3,750 in employer NI (15% of £25,000).
What is the Employment Allowance in 2025/26? ▼
The Employment Allowance allows eligible employers to reduce their Employer's NI bill by up to £10,500 per year (increased from £5,000 in 2024/25). Most small businesses with more than one employee qualify. This can significantly offset the NI rate increase.
Is it cheaper to use contractors instead? ▼
Contractors avoid Employer's NI and pension costs but typically charge 30–50% more than equivalent employees. For ongoing roles, employees are usually more cost-effective. However, IR35 rules mean mis-classifying employees as contractors carries significant risk. Always take professional advice.
How can I reduce employment costs legally? ▼
Key strategies include: salary sacrifice pension arrangements (reduces NI for both parties), claiming the Employment Allowance, using the Apprenticeship Levy for training, and reviewing workforce mix. If high staffing costs are affecting profitability, our business cost reduction consultancy can identify sustainable savings.

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