Payroll Cost Calculator
What does it really cost to employ someone?
Employment Details
Enter salary and additional costs to calculate true employment cost
Base salary before taxes and benefits
UK rate is 15% from April 2025 (above £5,000 threshold)
Pension, health insurance, company car, etc.
Desk, equipment, software, training, etc.
Enter a salary to calculate employment cost
How This Calculator Works
When you hire an employee, the cost isn't just their salary. This calculator reveals the true total cost by adding all employer expenses.
The Full Calculation
1. **Gross Salary:** What you advertise and promise the employee (£30,000/year).
2. **Employer National Insurance (UK) / Payroll Tax (US):** In the UK, employers pay 13.8% NI on salaries above £9,100. In the US, it's 7.65% FICA (Social Security + Medicare). This is ON TOP of the salary—the employee never sees this money, but you pay it.
3. **Pension Contributions:** UK employers must contribute minimum 3% to employee pensions (auto-enrolment). Many offer 5-10% to be competitive. This is also on top of salary.
4. **Benefits:** Health insurance, dental, gym membership, travel loans, childcare vouchers—these are costs, not just perks. Even "unlimited holiday" has a cost (someone not working is someone you're paying for zero output).
5. **Other Overhead:** Recruitment costs (averaged per year), training, equipment (laptop, monitor, software licenses), desk space, onboarding time.
Example
£30,000 salary + £2,883 Employer NI (13.8% on £30k - £9,100) + £900 Pension (3% minimum) + £2,000 Benefits (health insurance) + £1,500 Other overhead = £37,283 true cost
That's 24% more than the advertised salary.
This calculator lets you input your specific rates and benefits to see your true hiring cost.
When to Use This Calculator
Hiring Decisions
Before posting a job at £40,000, calculate the true cost. Can your business afford £50,000+? If not, you need to lower the salary or wait.
Budget Planning
You have £100,000 for new hires. How many people can you hire? If true cost per person is £37k, you can only hire 2-3 people, not 3-4.
Raise Negotiations
An employee wants a £5,000 raise. True cost with NI and pension: £6,280. Is that increase justified by their value to the business?
Contractor vs Employee
Contractors cost more per hour but have zero employer NI, pension, benefits, or holiday pay. Calculate an employee's true hourly cost, then compare to contractor quotes.
Pricing Your Services
If you provide services, your employee costs must be covered by your prices. If an employee costs £50k true cost and bills 1,200 hours/year, they cost £41.67/hour—charge clients at least £80-100/hour to cover overhead and profit.
Redundancy Planning
If you need to let someone go, calculate the true savings (not just salary). Redundancy might save £50k/year in true costs, not £35k in salary.
Geographic Arbitrage
Hiring remotely in a cheaper location? The salary might be 30% lower, but NI and pension rates are the same (if UK-based). Calculate whether the savings are worth the coordination complexity.
Common Mistakes to Avoid
Forgetting Employer NI
This is the most common error. It's 13.8% on salary above £9,100 (UK), not on the full salary. So a £30k employee costs £2,883 in Employer NI, not £4,140. But many people forget it entirely and budget only for the salary.
Not Including Pension
UK law requires 3% minimum employer pension contribution. Many businesses offer 5-10% to be competitive. This is a mandatory cost you can't avoid.
Underestimating Benefits
Health insurance is £500-2,000/year per employee. Death in service insurance, income protection, dental, travel loans—these add up fast. "We offer great benefits!" = "Our true costs are 15-20% higher than salary."
Ignoring Equipment Costs
Every employee needs: Laptop (£1,000, replace every 3 years = £333/year), monitor (£200, replace every 5 years = £40/year), software licenses (Office, Slack, project tools = £200-500/year), phone (if relevant). Plus desk, chair, office space if not remote.
Not Factoring Recruitment
Recruiting is expensive: Job ads (£200-500), recruiter fees (15-25% of salary = £4,500-7,500 for a £30k hire), or your time interviewing (10-20 hours at your opportunity cost). Amortize this over the expected tenure (3-4 years).
Forgetting Holiday Pay
UK: 28 days minimum (20 statutory + 8 bank holidays). That's 5.6 weeks, but you still pay their salary. So they work 46.4 weeks but you pay for 52. This is built into the salary, not an extra cost, but many people forget when calculating hourly cost.
Comparing to Contractor Quotes Incorrectly
"A contractor costs £400/day, an employee costs £30k/year = £115/day. Contractors are more expensive!" Wrong. The employee costs £37k true cost, works 220 days (52 weeks - 6 weeks holiday/sick - not all time is productive) = £168/day. Plus you have long-term commitment risk. Contractors might actually be cheaper for short-term needs.