If you offer someone £30,000 a year, that is not what they cost you. Employer National Insurance, the workplace pension you must enrol them into, and possibly the Apprenticeship Levy all sit on top. For a typical UK hire the real figure is roughly 15 to 20% above salary — and the employee sees rather less than £30,000 land in their account.
This guide sets out every cost, with the 2026/2027 figures, and works a £30,000 hire through end to end.
The costs that sit on top of salary
1. Employer National Insurance
The largest add-on for most employers. You pay 15% on everything an employee earns above the Secondary Threshold of £5,000 a year.
There is no upper limit. The employee’s own contribution drops to 2% above the Upper Earnings Limit, but yours does not — so on senior salaries the employer bill keeps climbing. See our National Insurance guide.
2. Workplace pension
Auto-enrolment is a legal duty, not a perk. You must enrol anyone aged 22 to State Pension age earning over £10,000 a year, and contribute at least 3% of their qualifying earnings, out of a 8% minimum total.
Qualifying earnings are the band between £6,240 and £50,270, not the whole salary — a detail that catches out most first-time employers, usually by overstating the cost.
3. Apprenticeship Levy
Only if your annual pay bill exceeds £3,000,000. It is 0.5% of the pay bill after a £15,000 allowance, so the vast majority of small employers pay nothing. Our Apprenticeship Levy guide covers the detail.
4. Benefits in kind
Private medical insurance, a company car, gym membership. These cost you the premium and Class 1A National Insurance at 15% on the taxable value, reported on a P11D by 6 July and paid by 22 July. The employee pays income tax on the benefit through their tax code — it is not deducted from their pay as such, but it reduces their take-home.
5. Everything else
- Employers’ liability insurance — a legal requirement from the first employee, with fines up to £2,500 a day without it
- Holiday — 5.6 weeks minimum. Not a separate invoice, but you are paying for roughly 47 working weeks, not 52
- Statutory pay — sick, maternity, paternity. Small employers can reclaim most statutory parental pay, but not statutory sick pay
- Equipment, software, recruitment, training — genuine costs that rarely make it into the salary conversation
What reduces the cost
The Employment Allowance takes up to £10,500 a year off your employer National Insurance bill. For a small employer that can wipe out the employer NI on several staff entirely. It is claimed through payroll on an Employer Payment Summary, and you cannot claim it if your only employee is a director paid above the Secondary Threshold. See the Employment Allowance guide.
Worked example: a £30,000 hire
Assume a 25-year-old on 1257L, National Insurance category A, on the statutory minimum pension, with no benefits in kind.
What it costs you
| Item | Annual |
|---|---|
| Gross salary | £30,000.00 |
| Employer National Insurance (15% above £5,000) | £3,750.00 |
| Employer pension (3% of qualifying earnings) | £712.80 |
| Total cost to you | £34,462.80 |
That is 14.9% above the headline salary — and it excludes insurance, equipment and recruitment. With the Employment Allowance available, the employer NI could fall to nil, bringing the total to £30,712.80.
What they take home
| Item | Annual | Monthly |
|---|---|---|
| Gross salary | £30,000.00 | £2,500.00 |
| PAYE | −£3,484.20 | −£290.35 |
| Employee National Insurance | −£1,394.40 | −£116.20 |
| Employee pension (5% of qualifying earnings) | −£1,188.00 | −£99.00 |
| Take-home | £23,933.40 | £1,994.45 |
So £34,462.80 leaves your account and £23,933.40 reaches theirs. The gap is not a margin anyone keeps — it is tax, National Insurance on both sides, and pension saving that belongs to the employee.
Rules of thumb
| Salary | Rough employer cost | Uplift |
|---|---|---|
| £25,000 | £28,600 | 14% |
| £30,000 | £34,500 | 15% |
| £45,000 | £52,300 | 16% |
| £60,000 | £70,100 | 17% |
The uplift rises with salary because employer National Insurance is uncapped while the Secondary Threshold is fixed. Budget 15 to 20% above salary and you will rarely be caught out. Add benefits in kind and it climbs further.
Common mistakes
- Budgeting the salary only — the true figure is 15 to 20% higher before insurance or equipment
- Applying the pension percentage to full salary — it applies to qualifying earnings, the band between £6,240 and £50,270
- Not claiming the Employment Allowance — up to £10,500 a year, and it must be claimed each tax year
- Forgetting Class 1A on benefits — 15% on the taxable value of anything you provide
- Assuming employer NI is capped — only the employee rate steps down above the Upper Earnings Limit
Contractors are not automatically cheaper
A contractor day rate carries no employer National Insurance, pension or holiday. But you must check whether the engagement falls inside IR35 — if it does, and you are a medium or large business, you become responsible for deducting PAYE and paying employer National Insurance anyway. Getting that wrong is expensive, and HMRC looks at how the work is actually done rather than what the contract says.
Our employment cost calculator works this out for any salary, and the free payslip generator produces payslips with PAYE, National Insurance and pension calculated automatically.