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.

£175,000 Salary: True UK Employer Cost 2026/27

A £175,000 headline salary costs a UK employer £201,821 at bare statutory minimum (auto-enrolment pension only) and £203,546 on a typical package with £1,500 medical insurance. That is a 1.16x multiplier on the cash salary. Employer NIC alone is £25,500 at the 15% Class 1 Secondary rate above the £5,000 threshold. Verified against HMRC rates and thresholds for employers 2026 to 2027.

Statutory minimum

£201,821

Ratio 1.15x - NIC £25,500

Typical UK package

£203,546

Ratio 1.16x - pension £1,321

Employer NIC alone

£25,500

15% of salary above £5,000 ST

How the cost is built up for £175,000

Cash gross salary: £175,000 - what lands in the employee's pre-tax pay.
Class 1 Secondary NIC: 15% on the slice above the £5,000 Secondary Threshold = £25,500.
Workplace pension: 3% of qualifying earnings (£6,240 to £50,270) = £1,321. On-gross schemes apply the % to the full salary instead.
Benefits in Kind: cash equivalent (e.g. £1,500 medical premium) plus Class 1A Employer NI at 15% on top.
Employment Allowance: small employers can offset up to £10,500 against their total annual Class 1 Sec NIC bill - off by default here.

All four packages at £175,000

Total cost, employer NIC, pension contribution and cost ratio across four common UK employer profiles for 2026/27. Adjust the values interactively on the main calculator.

Package	Total cost	Ratio	Employer NIC	Pension	BIK + Class 1A
Statutory	£201,821	1.15x	£25,500	£1,321	£0
Typical UK	£203,546	1.16x	£25,500	£1,321	£1,725
Generous	£210,975	1.21x	£25,500	£8,750	£1,725
Tech	£219,100	1.25x	£25,500	£14,000	£4,600

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Related calculators

Employer cost calculator - adjust pension %, BIK and Employment Allowance interactively.
Apprenticeship Levy calculator - the 0.5% pay-bill tax above £3m, separate from per-employee cost.
P11D / BIK calculator - derive the BIK cash equivalent for company cars and other benefits.
Salary calculator - the employee side of the same salary - take-home, employee NI and Income Tax.

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.