True cost of hiring a UK employee 2026/27

Cost breakdown by component

Direct costs

• Employer NI: 15% of earnings above £5,000/year (2026/27)
• Pension contribution: 3% of qualifying earnings (£6,240-£50,270)
• Apprenticeship Levy: 0.5% (only pay bill >£3m)
• Statutory sick pay: up to £116.75/week (28 weeks max)
• Statutory maternity/paternity/shared parental: 90% of AWE weeks 1-6, £187.18/week (2026/27) or 90% AWE (whichever lower) weeks 7-39

Benefits (typical UK employer)

• Life assurance: 0.1-0.3% of salary
• Private medical insurance: £300-£1,500/year per employee
• Enhanced pension: 5-10% employer contribution (above minimum)
• Season ticket loan / cycle to work / gym: variable

Overhead (typical office employee)

• Desk + laptop: ~£2,000 initial + £500/year
• Software + tools: £500-£2,000/year
• HR + payroll processing: £300-£600/year
• Recruitment: 15-25% of first year salary if agency used

Worked examples

£25,000 employee

• Gross salary: £25,000
• Employer NI (15% × £20,000): £3,000
• Auto-enrol pension (3% × £18,760): £563
• Direct cost: ~£28,563
• Plus overhead (~£3,000): True cost ~£31,600

£50,000 employee

• Gross salary: £50,000
• Employer NI (15% × £45,000): £6,750
• Pension (3% × £43,760): £1,313
• Direct cost: ~£58,063
• Plus overhead + benefits (~£4,000): True cost ~£62,000

£75,000 employee

• Gross salary: £75,000
• Employer NI (15% × £70,000): £10,500
• Pension (assume 5% × qualifying £43,760 capped): £2,188
• Direct cost: ~£87,688
• Plus benefits + overhead: True cost ~£92,000-£95,000

£100,000 employee

• Gross salary: £100,000
• Employer NI (15% × £95,000): £14,250
• Pension (typical 8% enhanced): £3,500
• Benefits + PMI + car allowance: £5,000-£8,000
• True cost ~£125,000-£130,000

Employment Allowance offset

Up to £10,500 employer NI reduction for eligible small businesses.

In short

True employment cost = gross salary × ~1.16-1.30x depending on level. Higher for senior + benefits-heavy roles.