Guide
The true cost of an employee in the UK (2026/27)
Updated
A useful rule of thumb is salary plus 15–18% before overheads. Here is where that number comes from, line by line.
The unavoidable statutory costs
- Employer National Insurance
- 15% of everything above £5,000, £4,500 on a £35,000 salary. See our employer NI guide.
- Auto-enrolment pension
- Minimum 3% of qualifying earnings (£6,240–£50,270), £863 at £35,000. Opt-outs reduce this, but you must budget as if enrolled.
- Apprenticeship levy
- 0.5% of the pay bill, but only for employers with a pay bill over £3m a year.
The costs behind the statutory line
- Holiday and sickness cover: 5.6 weeks statutory holiday means ~10.8% of working time is paid non-productive time; cover for it is a real cost in small teams.
- Equipment and software: £500–£2,000/year for a desk worker is typical once laptop, licences and support are annualised.
- Employers' liability insurance: legally required, from roughly £60–£200 per employee per year for office work.
- Recruitment: agency fees of 15–25% of first-year salary, amortised over tenure, are often the largest hidden line.
Worked example: £35,000 hire
| Line | Annual cost |
|---|---|
| Gross salary | £35,000 |
| Employer NI (15% above £5,000) | £4,500 |
| Pension (3% of qualifying earnings) | £863 |
| Statutory total | £40,363 |
| + equipment, insurance, overheads (typical) | £1,500–£3,000 |
| Realistic first-year total | £41,900–£43,400 |
Use the calculator for your own numbers, it itemises each statutory line with the current rates.