Employer Cost Calculator
Calculate the true cost of employing someone in the UK — salary, employer National Insurance, workplace pension, and Apprenticeship Levy. Includes Employment Allowance savings and multi-employee totals for the 2025-26 or 2024-25 tax year.
Key Takeaway
On a £30,000 salary in 2025-26, employer on-costs add around £4,344 — that’s £3,750 in NI plus £594 pension at 3% on qualifying earnings. The total employment cost is roughly 14.5% above the salary.
Key Facts — 2025-26
Employer NI Rate
15%
Min. Employer Pension
3%
Employment Allowance
£10,500
Apprenticeship Levy
0.5%
Base Salary
£30,000.00
Gross annual salary
Employer NI
£3,750.00
Per employee, before EA
Employer Pension
£712.80
On qualifying earnings
Apprenticeship Levy
£0.00
Not applicable
Total Cost Per Employee
£34,462.80
Salary + NI + pension + levy
Effective Overhead
14.88%
On-costs as % of salary
| Item | Amount |
|---|---|
| Base salary | £30,000.00 |
| Employer NI per employee | £3,750.00 |
| Employer pension(on £23,760.00 qualifying earnings) | £712.80 |
| Total cost per employee | £34,462.80 |
What Makes Up the True Cost of Employment?
When you employ someone, the gross salary is only part of the cost. Employers must also pay employer National Insurance on top of the salary, contribute to a workplace pension, and — for larger businesses — pay the Apprenticeship Levy.
Employer NI is charged at 15% on earnings above the secondary threshold (£5,000 in 2025-26). Unlike employee NI, there is no upper limit — the rate applies to all earnings above the threshold. This means employer NI scales directly with salary.
Workplace pension contributions are mandatory under auto-enrolment. The statutory minimum employer contribution is 3%, which can be applied to qualifying earnings (the band between £6,240 and £50,270) or to the full salary depending on your scheme rules.
The Apprenticeship Levy applies to employers with a total annual pay bill over £3 million. It is charged at 0.5% of the total payroll, less a £15,000 allowance, and the funds are ring-fenced for apprenticeship training.
Employment Allowance
The Employment Allowance lets eligible employers reduce their annual employer NI liability by up to £10,500 (from April 2025). It is applied against your total employer NI bill across all employees — not per employee.
To be eligible, your employer NI liability in the previous tax year must be below £100,000. Companies where the director is the sole employee cannot claim. The allowance only reduces employer NI; it does not affect pension contributions or Apprenticeship Levy.
For small businesses with several employees, the Employment Allowance can eliminate employer NI entirely. For example, a business with 3 employees each earning £30,000 would have a total NI bill of £11,250 — the £10,500 allowance reduces this to just £750.
Worked Example
Scenario: A small business employs one person on a £35,000 salary. Employer pension at 3% on qualifying earnings. Employment Allowance claimed.
Employer NI: (£35,000 − £5,000) × 15% = £4,500. After Employment Allowance: £4,500 − £4,500 = £0 (fully offset).
Employer pension: Qualifying earnings = £35,000 − £6,240 = £28,760. Pension = £28,760 × 3% = £863.
Total cost: £35,000 + £0 (NI after EA) + £863 = £35,863 — an overhead of just 2.5% thanks to Employment Allowance.
Frequently asked questions
What is the true cost of employing someone in the UK?
The true cost of employing someone is their gross salary plus employer National Insurance, employer pension contributions, and (for large employers) the Apprenticeship Levy. For a £30,000 salary in 2025-26, employer NI is £3,750, employer pension at 3% on qualifying earnings is around £594, giving a total cost of approximately £34,344 — about 14.5% above the salary.
How is employer pension contribution calculated?
Employer pension can be calculated on qualifying earnings (the band between £6,240 and £50,270) or on total earnings depending on your pension scheme rules. The statutory minimum employer contribution is 3% on qualifying earnings. Using the full salary base increases the cost but provides better employee benefits.
What is the Apprenticeship Levy and who pays it?
The Apprenticeship Levy is a 0.5% tax on total payroll bills over £3 million per year, paid by larger UK employers. Employers receive a £15,000 allowance to offset the levy. For example, a business with a £5 million payroll pays 0.5% of £5 million minus the £15,000 allowance, giving a net levy of £10,000 per year.
Can I reduce my employer costs with Employment Allowance?
Yes. Eligible employers can reduce their annual employer NI bill by up to £10,500 (from April 2025). To qualify, your employer NI liability in the previous tax year must have been below £100,000. Companies where the director is the only employee are not eligible. The allowance is applied to your employer NI — it does not reduce pension or Apprenticeship Levy costs.
Sources
Related Calculators
- Employer NI Calculator — Detailed employer National Insurance calculation with Employment Allowance.
- Take-Home Pay Calculator — See what employees actually take home after all deductions.
- Pension Tax Relief Calculator — Annual Allowance, tapered allowance, and carry forward.
Last updated March 2026. Reflects 2025-26 tax year rates.
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