How Much Does It Cost to Employ Someone in the UK in 2026/27?
For the 2026/27 tax year, the true cost of employing someone in the UK is typically 10–15% more than their gross salary. An employee paid £30,000 will cost you around £34,463 a year once you add employer’s National Insurance at 15% (£3,750) and the minimum 3% workplace pension contribution (£712.80). The good news: eligible small employers can knock up to £10,500 off their National Insurance bill through the Employment Allowance.
Below we break down each cost line by line, using rates confirmed for 2026/27, so you can budget with confidence before you make your first, or next, hire.
What are the three main costs of employing someone?
Every employer faces three unavoidable costs:
- Gross salary – the headline figure on the employment contract, which must meet at least the National Minimum Wage for the employee’s age.
- Employer’s National Insurance – a payroll tax you pay on top of salary; it never comes out of the employee’s pay.
- Employer pension contributions – a minimum of 3% of qualifying earnings for staff who are auto-enrolled into a workplace pension.
On top of these sit practical overheads such as payroll software, employers’ liability insurance, recruitment and training. They are smaller, but each deserves a line in your budget.
Employer’s National Insurance in 2026/27
For 2026/27 you pay employer’s (secondary) Class 1 National Insurance at 15% on each employee’s earnings above the secondary threshold of £5,000 a year (£96 a week or £417 a month). These figures are confirmed in HMRC’s official rates and thresholds for employers 2026 to 2027.
There are two valuable reliefs. You pay no employer NI on earnings up to £50,270 a year for employees under 21, or for apprentices under 25. And the Employment Allowance, covered below, can wipe out up to £10,500 of your total bill.
Workplace pension contributions
Under auto-enrolment you must enrol any employee aged 22 to State Pension age who earns over £10,000 a year into a workplace pension. For 2026/27, contributions are based on qualifying earnings between £6,240 and £50,270. The legal minimum is 8% of qualifying earnings in total, of which the employer must pay at least 3%; the employee usually pays the remaining 5%, with tax relief included.
Worked example: the real cost of a £30,000 employee
Here is the full-year cost of one employee on a £30,000 salary in 2026/27, assuming minimum pension contributions and a standard NI category:
- Gross salary: £30,000.00
- Employer’s NI: £30,000 − £5,000 = £25,000 × 15% = £3,750.00
- Employer pension (3%): £30,000 − £6,240 = £23,760 × 3% = £712.80
- Total employment cost: £34,462.80 – roughly 14.9% above the headline salary.
If you claim the Employment Allowance, the first £10,500 of employer NI across your whole payroll disappears, enough to cover the NI on almost three employees at this salary level. You can run the same sums for any salary, hours or pension setup in seconds with our free Cost of Hiring an Employee Calculator.
What about someone on the National Living Wage?
From 1 April 2026 the National Living Wage rises to £12.71 an hour for workers aged 21 and over. A full-time employee working 37.5 hours a week earns £24,784.50 a year. Employer’s NI on that salary is £2,967.68 and the 3% pension adds £556.34, taking the total cost to around £28,308.52. The other April 2026 rates are £10.85 an hour for 18 to 20-year-olds and £8.00 for under-18s and eligible apprentices.
Don’t forget the Employment Allowance
The Employment Allowance lets eligible employers reduce their employer’s Class 1 National Insurance bill by up to £10,500 in 2026/27. Most small limited companies, sole traders and partnerships with staff qualify, although a company whose only employee paid above the secondary threshold is also its sole director cannot claim. You claim through your payroll software, and the allowance then offsets your employer NI each pay run until it is used up.
Other employment costs to budget for
Beyond salary, NI and pension, a sensible hiring budget allows for:
- Holiday pay – at least 5.6 weeks’ paid leave a year. It is already inside an annual salary, but it is a real cost for hourly staff and holiday cover.
- Statutory Sick Pay – £123.25 a week, or 80% of average weekly earnings if that is lower, in 2026/27.
- Employers’ liability insurance – a legal requirement for almost all employers.
- Payroll running costs – software, Real Time Information submissions to HMRC, pension administration and payslips.
- Recruitment and training – one-off costs, but easily several hundred pounds per hire.
Many small employers find it cheaper and safer to hand the whole job to a specialist. Our fixed-fee payroll, pension and auto-enrolment service looks after payslips, RTI filings, pension duties and compliance, and our Take-Home Pay Calculator shows what your employee will actually receive.
Frequently asked questions
How much does an employee on £30,000 really cost in 2026/27?
Around £34,463 a year: £30,000 salary, £3,750 employer’s National Insurance at 15%, and £712.80 minimum employer pension contribution. The Employment Allowance can remove up to £10,500 of the NI element across your payroll if you are eligible.
Do I pay employer’s National Insurance for every employee?
You pay 15% on each employee’s earnings above £5,000 a year in 2026/27. However, no employer NI is due on earnings up to £50,270 for staff under 21 or apprentices under 25, and the £10,500 Employment Allowance can eliminate the bill entirely for many small employers.
What is the minimum wage from April 2026?
From 1 April 2026 the National Living Wage is £12.71 an hour for workers aged 21 and over. The rate is £10.85 for 18 to 20-year-olds and £8.00 for under-18s and eligible apprentices. Paying below these rates is unlawful, so check pay against them every April.
Written by the Accountactical Team — ACCA-Approved Accountants, London.
This article is general information for UK employers, not formal tax advice. Please speak to an accountant about your own circumstances before acting on it.
