Payroll Cost Calculator
Estimate total cost to employ someone including salary, taxes, and benefits.
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.
Frequently Asked Questions
What's the difference between gross salary and true cost?
Gross salary is what the employee sees on their contract. True cost is what your business pays, including employer National Insurance, pension, benefits, equipment, and overheads. True cost is typically 20-35% higher than gross salary.
Do I really need to pay Employer National Insurance?
Yes, it's the law in the UK. Employers pay 13.8% NI on all earnings above £9,100/year per employee (2024 threshold). This is separate from employee NI (which is deducted from their salary). You can't avoid it unless the employee is a contractor (self-employed), in which case they pay their own NI.
What's included in 'benefits' typically?
Common benefits: Health insurance (£500-2,000/year), pension above minimum (extra 2-7% of salary), life insurance/death in service (£100-300/year), dental (£150-400/year), gym membership (£200-600/year), cycle-to-work scheme, childcare vouchers, training budget (£500-2,000/year).
How much should I budget per employee for equipment?
Minimum: £1,500-2,000/year. This covers laptop replacement (£1,000 every 3 years), monitor, keyboard/mouse, software licenses (Office, Slack, specialist tools), phone (if needed). If you provide office space, add desk, chair, utilities, internet (£1,000-3,000/year per person).
Is hiring a contractor better than an employee?
It depends. Contractors: Higher hourly rate, but zero NI, pension, benefits, holiday pay, or equipment costs. No long-term commitment. Employees: Lower hourly rate, but 20-35% extra costs, plus long-term commitment, notice periods, redundancy risk. For short-term projects or part-time needs, contractors are cheaper. For full-time long-term roles, employees are cheaper.
What's the minimum true cost ratio?
In the UK, absolute minimum is salary × 1.17 (13.8% NI + 3% pension). Realistically, expect salary × 1.25-1.35 once you include benefits, equipment, and overheads. If you're offering competitive benefits, it's salary × 1.40-1.50.