What is the true cost of hiring an employee in the UK in 2026/27?

Total cost-to-employer is gross salary plus Class 1 Secondary NIC at 15% on salary above the £5,000 Secondary Threshold, plus the workplace pension contribution (auto-enrolment minimum 3% of qualifying earnings, typical 5-10% on full salary), plus Class 1A Employer NI at 15% on any taxable Benefits in Kind. For a £45,000 salary with auto-enrolment pension and no benefits, the total employer cost is roughly £52,000 - about 1.16x the headline salary. Generous benefits push the multiplier to 1.20-1.30x.

How much is UK Employer NI (Class 1 Secondary) in 2026/27?

Employer NI is 15% of salary above the Secondary Threshold of £5,000 per year. The rate jumped from 13.8% to 15% in April 2025 and the threshold dropped from £9,100 to £5,000 in the same change, materially increasing employer payroll costs. For a £30,000 salary, employer NI is (£30,000 - £5,000) x 15% = £3,750 per year. For a £75,000 salary it is £10,500. There is no upper limit on employer NI - the 15% applies on all salary above the £5,000 threshold.

What is the minimum employer pension contribution for auto-enrolment?

Under UK auto-enrolment (Pensions Act 2008), the employer minimum contribution is 3% of qualifying earnings - the slice of salary between £6,240 and £50,270 per year. For a £30,000 salary, that is 3% of £23,760 = £712.80 per year. The total minimum contribution including the employee 5% must reach 8% of qualifying earnings combined. Many employers go beyond the minimum - 5-10% of full gross salary is common in professional services, and tech companies often offer a generous "salary match" up to 8%.

What is the Employment Allowance and who can claim it?

The Employment Allowance reduces an employer's Class 1 Secondary NIC bill by up to £10,500 per tax year in 2026/27 (uprated from £5,000 in April 2025). It is available to employers whose total Class 1 Secondary NIC in the previous tax year was less than £100,000 (the £100k threshold removed in April 2025 - previously also restricted by Employer NI < £100k from connected companies). Single-director limited companies (one employee who is the sole director) are excluded. The allowance is claimed via PAYE submissions and applied as a credit against monthly NIC liability until exhausted.

Do I pay Apprenticeship Levy on every employee?

No - the Apprenticeship Levy is a 0.5% tax on the total annual pay bill above £3,000,000, offset by a £15,000 annual employer allowance. Employers below that threshold pay no levy at all, regardless of individual salaries. For levy-payers above £3m, the 0.5% applies on the additional pay bill (so a marginal £1,000 of salary costs £5 in levy). It is best modelled at the workforce level, not per employee - see our separate Apprenticeship Levy calculator.

How are Benefits in Kind costed for the employer?

Benefits in Kind (private medical, company cars, gym memberships, etc.) are reported on the P11D and the employer pays Class 1A Employer NI at 15% on the total annual cash equivalent. So a £1,500/year medical policy costs the employer £1,500 in premiums plus £225 in Class 1A - £1,725 of true cost. The employee pays Income Tax on the BIK at their marginal rate but no employee NI under the standard P11D route. Class 1A is a genuine employer-only charge - it is not deducted from the employee.

How does the £5,000 Secondary Threshold compare to the employee thresholds?

The employee Primary Threshold (PT) is £12,570 - the same as the Personal Allowance - and employee Class 1 NIC kicks in there at 8%. The employer Secondary Threshold is now £5,000, well below the PT, so an employee earning £8,000 pays no employee NI but the employer still pays 15% on £3,000 = £450. This gap between the employer ST and the employee PT was widened deliberately in April 2025 to raise employer revenue, and is now a meaningful cost on part-time / lower-wage employees that did not exist under the £9,100 ST.

What is a typical cost ratio (total cost / salary) in the UK?

For a UK PAYE employee in 2026/27, the cost ratio runs roughly 1.13x to 1.30x depending on benefits and pension generosity. Bare statutory minimum (15% employer NI + 3% auto-enrolment on qualifying earnings) is about 1.15x at typical salaries. Add a 5% on-gross pension and you reach 1.20x. Generous tech-style benefits (8% pension match, £2,000 medical, £6,000 EV BIK) push the ratio to 1.30x or higher. Above £100k salary the pension share shrinks as a proportion (auto-enrolment caps at the UEL), so the ratio comes back down slightly unless the employer continues matching on the full gross.

UK Employer Cost Calculator 2026/27

The true cost of hiring a UK employee in 2026/27 - cash salary plus 15% Class 1 Secondary NIC above the £5,000 threshold, workplace pension (auto-enrolment minimum 3% of qualifying earnings), Class 1A NI at 15% on Benefits in Kind, and the £10,500 Employment Allowance for eligible small employers. Verified against HMRC rates and thresholds for employers 2026 to 2027.

Worked scenarios for 2026/27

£25k entry-level: bare statutory

£28,563

Ratio 1.14x - NIC £3,000, pension £563
£45k UK median: AE pension + medical

£53,888

Ratio 1.20x - NIC £6,000, pension £1,163
£65k mid-senior: 5% on-gross pension

£78,975

Ratio 1.22x - NIC £9,000, pension £3,250
£75k tech package: 8% pension + EV BIK

£96,100

Ratio 1.28x - NIC £10,500, pension £6,000
£130k senior leader: full benefits

£169,225

Ratio 1.30x - NIC £18,750, pension £13,000
£35k small employer w/ Employment Allowance

£35,863

Ratio 1.02x - NIC £0, pension £863

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What is the true cost of hiring a UK employee?

When a UK employer agrees a salary with a candidate, the headline number on the job spec is only the start. By the time the employer has settled their share of National Insurance, the workplace pension contribution, Class 1A NI on any benefits, and the cash cost of those benefits themselves, the real annual outlay sits 13% to 30% above the salary line. That difference is what payroll teams and finance directors call the on-cost or employer loading, and getting it wrong by 10 percentage points can sink a hiring budget halfway through a financial year.

This calculator models every statutory and common voluntary employer cost for the 2026/27 tax year, against the same rules HMRC and The Pensions Regulator publish on gov.uk. Punch in a gross salary and a few benefit choices and you see the total cost-to-employer, broken down by line.

Employer National Insurance: 15% above £5,000

The biggest single on-cost is Class 1 Secondary National Insurance, paid by the employer on top of the cash salary. For 2026/27 the rules are:

Rate: 15% (up from 13.8% before April 2025).
Secondary Threshold (ST): £5,000 per year (down from £9,100 in 2024/25).
No upper limit: unlike employee Class 1, employer NI applies to all salary above the £5,000 threshold, with no ceiling.

The rate hike and threshold drop announced in the Autumn Budget 2024 was the single biggest UK payroll tax change in a decade. The headline 1.2 percentage point rate rise (13.8% to 15%) is the easy part of the maths; the £4,100 cut to the Secondary Threshold quietly raised employer NI on every £1 of salary between £5,000 and £9,100, exactly the range where part-time and lower-paid workers sit. For a £30,000 employee the year-on-year increase from 2024/25 to 2026/27 was roughly £866 - small per head, but multiplied across a 1,000-person workforce that is a near-million-pound annual bill.

Worked example: £45,000 salary, 2026/27

Salary above ST: £45,000 - £5,000 = £40,000
Employer NI: £40,000 x 15% = £6,000 per year
Equivalent 2024/25 calculation: £35,900 x 13.8% = £4,954.20 - the new regime costs the employer an extra £1,045.80 for the same job at the same headline salary.

The calculator handles 2023/24, 2024/25, 2025/26 and 2026/27 so you can compare year-on-year directly.

Employment Allowance: the £10,500 credit for small employers

Small employers can claim Employment Allowance as a credit against their total Class 1 Secondary NIC bill. For 2026/27 the allowance is £10,500 per year (up from £5,000 in 2024/25; uprated in April 2025).

Eligibility rules (from gov.uk):

Your total Class 1 Secondary NIC in the previous tax year was less than £100,000 (the connected-companies cap also dropped here in April 2025; before then the £100k applied to the group total).
You are not a single-director limited company whose only employee is the sole director - this rule is in place to stop one-person LtdCos zeroing out the new £5k ST hit.
You employ at least one other person who is paid above the Secondary Threshold.

In the calculator, toggle “Apply Employment Allowance” to see your net Class 1 Sec NIC after the credit. The allowance is a year-end cap, not a per-employee figure: a small employer with five staff would apply the £10,500 across the group’s total NIC bill, not £10,500 per employee. For modelling a single hire, treating it as available is a useful upper bound - just be aware that in real payroll the allowance is exhausted across the whole workforce.

Auto-enrolment workplace pension: 3% minimum

Since 2018, every UK employer has had to automatically enrol qualifying workers into a workplace pension. The 2026/27 minimum employer contribution is:

3% of qualifying earnings, where qualifying earnings = salary between £6,240 (Lower Earnings Limit) and £50,270 (Upper Earnings Limit).
Total minimum contribution (employer + employee + tax relief) must reach 8% of qualifying earnings.

For a £30,000 salary, qualifying earnings = £30,000 - £6,240 = £23,760; employer 3% = £712.80 per year. For a £50,270+ salary the maximum qualifying earnings is £50,270 - £6,240 = £44,030, so the employer 3% caps at £1,320.90 per year under pure statutory auto-enrolment.

Beyond the minimum

Most employers offer more than the statutory minimum. Common patterns:

Salary match (typical in professional services): employer matches employee contribution up to 5-8% of full gross salary.
Flat employer percentage on gross (typical in tech): 5%, 8% or 10% of gross paid by the employer regardless of employee contribution.
Defined benefit accrual (public sector, dwindling in private): no pound-for-pound contribution, but an actuarially equivalent cost that can sit at 25%+ of salary for some career-average schemes.

Toggle the “Pension base” selector in the calculator between “Qualifying earnings” (auto-enrolment) and “Gross salary” (matched / flat schemes) to see the impact. A 5% on-gross scheme on a £75,000 salary costs the employer £3,750 - nearly 3x the statutory minimum.

Benefits in Kind and Class 1A Employer NI

When the employer provides a non-cash benefit - private medical, company car, gym membership, life insurance, gifted training - it goes on the P11D and the employer pays Class 1A Employer NI at 15% on the total cash equivalent. Class 1A is a genuine employer-only charge: the employee pays Income Tax on the BIK at their marginal rate but no employee NI.

Worked example: £1,500 private medical policy

Cash outlay: £1,500 (the premium paid to the insurer).
Class 1A NI: £1,500 x 15% = £225.
True cost to employer: £1,725 per year.

The calculator lets you toggle three common benefit categories and enter their annual cash equivalent:

Private medical insurance - typical £1,000-£2,500/year per employee.
Company car BIK value - the P11D x appropriate percentage figure (use our P11D / BIK calculator to derive this).
Other benefits - gym, life cover, training, vouchers above the £50 trivial-benefit threshold.

For salary sacrifice schemes (EV, cycle-to-work, pension), the cost dynamics flip - the employer saves Class 1 employer NI on the sacrificed amount but pays Class 1A on the new BIK. For a low-emission EV at 4% appropriate percentage, the net employer saving versus paying the salary in cash is typically 1-3% of the sacrifice value.

Apprenticeship Levy: a payroll-level tax, not per employee

The Apprenticeship Levy is a 0.5% charge on the total annual pay bill above £3,000,000, offset by a £15,000 employer allowance. It is collected monthly via PAYE alongside Income Tax and NI.

Crucially, this is not a per-employee cost. Employers with a total pay bill under £3m pay zero levy, regardless of any individual employee’s salary. Employers above the threshold pay 0.5% on the marginal pay bill, which for one additional employee on a £50,000 salary is just £250 per year (£50,000 x 0.5%).

Because the calculation requires the whole pay bill, the employer cost calculator does not include Apprenticeship Levy in the per-employee total. We surface a flag in the breakdown when your modelled scale (above £100k salary for a single employee) suggests you are likely a levy-payer; for the actual figure use our Apprenticeship Levy calculator with your full pay bill.

Putting it all together: the cost multiplier

The cost ratio (total cost / gross salary) is the most useful headline. Typical UK ranges in 2026/27:

1.13x to 1.15x: bare statutory minimum - auto-enrolment pension, no BIK, no Employment Allowance available (large employer).
1.15x to 1.20x: typical UK PAYE employee with auto-enrolment pension and modest benefits (£1,500 medical).
1.20x to 1.25x: generous on-gross pension match (5-8%) plus medical.
1.25x to 1.35x: tech-style packages with 8-10% pension, EV salary sacrifice, £2,000 medical, life cover, etc.

For finance and HR teams the practical rule of thumb is plan for ~1.20x on every cash salary unless your scheme is unusually lean or unusually generous, and use this calculator to verify the actual figure before signing the offer letter.

Why the April 2025 changes matter for budgeting

The Autumn Budget 2024 changes were the largest single employer-side tax shift in a decade. For a 50-person employer paying an average £35,000:

2024/25 employer NI bill: ~£178,710 (£25,900 x 13.8% per head x 50).
2026/27 employer NI bill: ~£225,000 (£30,000 x 15% per head x 50).
Net increase: ~£46,290 per year - around £926 per employee per year.

The Employment Allowance uprate from £5k to £10.5k partially offsets this for small employers (the threshold rules also widened, so more SMEs now qualify), but for large employers the change was unequivocally a cost rise. Many employers absorbed it in 2025/26 by trimming pay rises - ONS AWE data showed slower private-sector wage growth in H2 2025 directly correlated to the new employer NI burden.

Sources

HMRC: Rates and thresholds for employers 2026 to 2027 (retrieved 2026-05-25).
HMRC: National Insurance rates and contributions (retrieved 2026-05-25).
HMRC: Employment Allowance (retrieved 2026-05-25).
HMRC: Apprenticeship Levy (retrieved 2026-05-25).
gov.uk: Workplace pensions: employer contributions (retrieved 2026-05-25).
The Pensions Regulator: Automatic enrolment earnings thresholds 2026/27 (retrieved 2026-05-25).

See our methodology for sources, retrieval dates, and testing approach.

UK Apprenticeship Levy Calculator - 0.5% on pay bill above £3m, £15k allowance.
P11D / BIK Calculator - cash equivalent of company car, fuel, medical and other benefits.
Company Car Tax Calculator - drill into the CO2 appropriate percentage to get the BIK figure for this calculator.
Salary Sacrifice Calculator - employer NI savings on pension and EV sacrifice.
IR35 Deemed Payment Calculator - the comparable calculation for off-payroll workers inside IR35.
National Insurance Rates Explainer - Class 1, Class 1A, Class 1B and Class 2/4 in context.

Frequently asked questions

What is the true cost of hiring an employee in the UK in 2026/27?: Total cost-to-employer is gross salary plus Class 1 Secondary NIC at 15% on salary above the £5,000 Secondary Threshold, plus the workplace pension contribution (auto-enrolment minimum 3% of qualifying earnings, typical 5-10% on full salary), plus Class 1A Employer NI at 15% on any taxable Benefits in Kind. For a £45,000 salary with auto-enrolment pension and no benefits, the total employer cost is roughly £52,000 - about 1.16x the headline salary. Generous benefits push the multiplier to 1.20-1.30x.
How much is UK Employer NI (Class 1 Secondary) in 2026/27?: Employer NI is 15% of salary above the Secondary Threshold of £5,000 per year. The rate jumped from 13.8% to 15% in April 2025 and the threshold dropped from £9,100 to £5,000 in the same change, materially increasing employer payroll costs. For a £30,000 salary, employer NI is (£30,000 - £5,000) x 15% = £3,750 per year. For a £75,000 salary it is £10,500. There is no upper limit on employer NI - the 15% applies on all salary above the £5,000 threshold.
What is the minimum employer pension contribution for auto-enrolment?: Under UK auto-enrolment (Pensions Act 2008), the employer minimum contribution is 3% of qualifying earnings - the slice of salary between £6,240 and £50,270 per year. For a £30,000 salary, that is 3% of £23,760 = £712.80 per year. The total minimum contribution including the employee 5% must reach 8% of qualifying earnings combined. Many employers go beyond the minimum - 5-10% of full gross salary is common in professional services, and tech companies often offer a generous "salary match" up to 8%.
What is the Employment Allowance and who can claim it?: The Employment Allowance reduces an employer's Class 1 Secondary NIC bill by up to £10,500 per tax year in 2026/27 (uprated from £5,000 in April 2025). It is available to employers whose total Class 1 Secondary NIC in the previous tax year was less than £100,000 (the £100k threshold removed in April 2025 - previously also restricted by Employer NI < £100k from connected companies). Single-director limited companies (one employee who is the sole director) are excluded. The allowance is claimed via PAYE submissions and applied as a credit against monthly NIC liability until exhausted.
Do I pay Apprenticeship Levy on every employee?: No - the Apprenticeship Levy is a 0.5% tax on the total annual pay bill above £3,000,000, offset by a £15,000 annual employer allowance. Employers below that threshold pay no levy at all, regardless of individual salaries. For levy-payers above £3m, the 0.5% applies on the additional pay bill (so a marginal £1,000 of salary costs £5 in levy). It is best modelled at the workforce level, not per employee - see our separate Apprenticeship Levy calculator.
How are Benefits in Kind costed for the employer?: Benefits in Kind (private medical, company cars, gym memberships, etc.) are reported on the P11D and the employer pays Class 1A Employer NI at 15% on the total annual cash equivalent. So a £1,500/year medical policy costs the employer £1,500 in premiums plus £225 in Class 1A - £1,725 of true cost. The employee pays Income Tax on the BIK at their marginal rate but no employee NI under the standard P11D route. Class 1A is a genuine employer-only charge - it is not deducted from the employee.
How does the £5,000 Secondary Threshold compare to the employee thresholds?: The employee Primary Threshold (PT) is £12,570 - the same as the Personal Allowance - and employee Class 1 NIC kicks in there at 8%. The employer Secondary Threshold is now £5,000, well below the PT, so an employee earning £8,000 pays no employee NI but the employer still pays 15% on £3,000 = £450. This gap between the employer ST and the employee PT was widened deliberately in April 2025 to raise employer revenue, and is now a meaningful cost on part-time / lower-wage employees that did not exist under the £9,100 ST.
What is a typical cost ratio (total cost / salary) in the UK?: For a UK PAYE employee in 2026/27, the cost ratio runs roughly 1.13x to 1.30x depending on benefits and pension generosity. Bare statutory minimum (15% employer NI + 3% auto-enrolment on qualifying earnings) is about 1.15x at typical salaries. Add a 5% on-gross pension and you reach 1.20x. Generous tech-style benefits (8% pension match, £2,000 medical, £6,000 EV BIK) push the ratio to 1.30x or higher. Above £100k salary the pension share shrinks as a proportion (auto-enrolment caps at the UEL), so the ratio comes back down slightly unless the employer continues matching on the full gross.

Other UK tax calculators that pair with the Employer Cost.