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Employee True Cost Calculator
A £28,000 salary doesn't cost you £28,000. Employer National Insurance, pension contributions and the hidden extras stack on top before you've even paid for a day's work. See the real annual cost and the real cost per hour, in under a minute.
Eligible employers can knock up to £10,500 off their total employer NIC bill each year via the Employment Allowance (not available to companies where the only person paid above the threshold is a director). This calculator shows the cost before that allowance.
Where the money goes
| Item | Amount |
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Salary ÷ hours vs. the real cost per hour
You pay for 52 weeks a year but only get roughly 46 weeks of actual work once holiday and sick days are stripped out — and that's before NI, pension and extras are added.
Who this is for
Any small business or tradesperson thinking about their first (or next) hire, and anyone comparing the true cost of taking someone on as an employee versus using a subcontractor. It takes a gross salary and adds Employer National Insurance, pension and the hidden extras that don't show up on a payslip but absolutely show up in your bank account.
Why is employer National Insurance 15%?
The Employer NIC rate rose to 15% and the secondary threshold was cut to £5,000 from April 2025 — a jump that caught a lot of small employers out, because it meant paying NI on a much bigger slice of every salary than before. Both figures are editable in the tool above, so you can update them as they change — always check the current rate and threshold on gov.uk before relying on a figure.
Do I have to pay their pension?
Yes, for eligible staff. Under auto-enrolment, employees aged 22 to State Pension age earning over £10,000 a year must be enrolled, with a minimum employer contribution of 3% on qualifying earnings. If you're not sure whether a particular member of staff needs to be enrolled, check our pension auto-enrolment checker.
Is holiday pay an extra cost on top?
Not really, no — for salaried staff, holiday pay is already inside the salary you agreed, not billed separately. But it's exactly why the cost per productive hour comes out higher than salary divided by contracted hours: you're paying for 52 weeks a year but only getting around 46 weeks of actual work once statutory holiday and sick days are taken out. Check exact entitlement with our holiday entitlement calculator, and what a longer absence would cost with the SSP calculator.
Employee or subcontractor — which is cheaper?
Honestly, it depends. Subcontractors usually cost more per day worked, but nothing at all when there's no work for them — you're only paying for output. Employees cost less per hour once you have steady, ongoing work, because that true annual cost is spread across every hour they're there, busy or quiet. Either way, employment status is a legal test based on how the work is actually done, not something you can simply choose on paper — get it wrong and HMRC can reclassify the relationship after the fact. If you're setting a rate, sanity-check it against our minimum wage checker, and if a role is at risk of redundancy, our redundancy pay calculator gives a ballpark of statutory liability.
Please note: this tool gives a guide or estimate only. It may not be 100% accurate and is not professional advice — always check the figures before you rely on them. Rates, thresholds, allowances and rules can change without notice and may be out of date by the time you use this tool. Verify against HMRC / GOV.UK or your accountant before acting. Everything you type stays in your browser — nothing is uploaded, saved or sent anywhere.
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