UK Employer Cost Calculator

From April 2025, employer National Insurance contributions (NIC) are charged at 15% on earnings above the secondary threshold of £5,000. This is an increase from the previous rate of 13.8% above £9,100. The combination of a higher rate and lower threshold significantly increases employer costs, particularly for lower-paid roles.

For an employee earning £60,000 in 2025/26, the employer pays: £8,250 in employer NIC (15% on £55,000 above the £5,000 threshold), plus pension contributions of at least £1,320.90 (3% of qualifying earnings between £6,240 and £50,270). The total employer cost is approximately £69,571 before apprenticeship levy, making the hidden cost around 16% above the headline salary.

Auto-enrolment requires employers to enrol eligible workers into a workplace pension scheme and make minimum contributions. For 2025/26, the minimum employer contribution is 3% of qualifying earnings, which are earnings between £6,240 and £50,270. For someone earning £50,000, the employer pension cost is approximately £1,320.90 per year.

The apprenticeship levy is a tax on employers with an annual pay bill exceeding £3 million. It is charged at 0.5% of the total pay bill, with a £15,000 annual allowance. For example, an employer with a £5 million pay bill would pay (£5,000,000 x 0.5%) - £15,000 = £10,000 in apprenticeship levy. Small employers with a pay bill under £3 million do not pay the levy.

The Employment Allowance for 2025/26 is £10,500, up from £5,000 in previous years. It allows eligible employers to reduce their employer NIC bill by up to £10,500 per year. Most small and medium businesses qualify, but companies where the director is the only employee paid above the NIC threshold are excluded. It is not available to public sector employers.

April 2025 brought two significant changes to employer costs. First, the employer NIC rate rose from 13.8% to 15%. Second, the secondary threshold (the point at which employer NIC kicks in) dropped from £9,100 to £5,000. Together, these changes mean employers pay more NIC on a much larger portion of each employee salary. The Employment Allowance increase to £10,500 partially offsets this for smaller employers.

The minimum auto-enrolment contribution of 3% must be calculated on qualifying earnings (between £6,240 and £50,270 for 2025/26). However, many employers choose to contribute more, or to calculate contributions on total earnings rather than qualifying earnings. Some employers offer matching contributions where they will match what the employee puts in, up to a set percentage.

Employers can reduce hiring costs through several means: claiming the Employment Allowance (worth up to £10,500 in NIC savings), using salary sacrifice schemes which reduce NIC on sacrificed amounts, hiring apprentices under 25 (NIC exempt up to £50,270), and claiming the National Insurance holiday for hiring in certain freeport areas. Planning pension contributions carefully and using the apprenticeship levy for training can also help optimise total costs.