What employers pay on top of salary
When budgeting for a hire, the salary on the job description is only part of the cost. Three statutory obligations add directly to the wage bill: employer National Insurance, auto-enrolment pension contributions, and (for larger employers) the apprenticeship levy. From April 2025, employer NI increased to 15% and the secondary threshold fell to £5,000 per year, making the on-cost significantly higher than in previous years.
Employer National Insurance (15%)
Employer NI is charged at 15% on all employee earnings above the secondary threshold of £5,000 per year (£416.67 per month). This changed in April 2025 from the previous rate of 13.8% on earnings above £9,100. For a £30,000 salary, the employer NI bill increased from £2,892 to £3,750 per year. Employment Allowance of up to £10,500 can offset this for eligible employers.
Auto-enrolment pension (minimum 3%)
Employers must contribute at least 3% of qualifying earnings to a workplace pension for eligible employees. Qualifying earnings are calculated on the band between £6,240 and £50,270. Contributions above the minimum are at the employer's discretion. Many employers contribute more to attract and retain staff. This is in addition to the employee's own contribution of at least 5%.
Apprenticeship levy (0.5% above £3m)
Employers with a total annual pay bill above £3 million pay 0.5% of their payroll as the apprenticeship levy. The first £15,000 is offset by the government, meaning only the amount above £3m attracts the charge. Levy funds can be used to pay for apprenticeship training through the apprenticeship service. Smaller employers are exempt and do not need to pay.
Employment Allowance
Eligible employers can claim up to £10,500 per year to reduce their employer NI bill. To qualify, your total employer NI liability in the previous tax year must have been under £100,000, and you must have more than one director or at least one other employee. It cannot be claimed by single-director companies with no other employees, which includes most sole-director contractor limited companies.
| Cost component | Rate | Threshold |
|---|---|---|
| Employer NI | 15% | On salary above £5,000/year |
| Auto-enrolment pension | Minimum 3% | On qualifying earnings £6,240 to £50,270 |
| Apprenticeship levy | 0.5% | On payroll above £3,000,000 |
| Employment Allowance | -£10,500 | Reduces employer NI (eligible employers only) |
Frequently asked questions
Employer NI increased from 13.8% to 15%, a 1.2 percentage point rise, and the secondary threshold at which it starts fell from £9,100 to £5,000. The combined effect is significant. For a £30,000 salary, the pre-April 2025 employer NI was £2,892 (13.8% on £30,000 minus £9,100). From April 2025, it is £3,750 (15% on £30,000 minus £5,000), an increase of £858 per employee at that salary. For businesses with multiple employees, this quickly becomes a material cost increase in the annual wage bill.
Qualifying earnings for auto-enrolment are the band of earnings between £6,240 and £50,270 per year. The minimum 3% employer contribution is calculated on this range only. For a £30,000 salary, qualifying earnings are £23,760 (£30,000 minus £6,240), and the minimum employer contribution is £712.80 (3% of £23,760). Many employers simplify this by calculating contributions on total pensionable pay from the first pound, which is more generous to employees but not required by law.
It depends on your total employer NI bill. Employment Allowance of £10,500 covers the first £10,500 of your employer NI liability each tax year. If your total employer NI for the year is less than £10,500, your entire bill is offset. This means small employers with a few employees at modest salaries may pay no employer NI at all. As your payroll grows, the allowance becomes a smaller proportion of the total bill, but it still saves £10,500 for any eligible business that claims it.
Many. The statutory costs this calculator covers are just the floor. Real-world employment costs include recruitment (job boards, agency fees typically 15-20% of first-year salary), onboarding and training time, equipment and software licences, office space or remote working costs, employer liability insurance, and the management overhead of supervision and performance review. Statutory sick pay (up to 28 weeks at £116.75 per week in 2026/27), statutory maternity and paternity leave, and holiday entitlement (28 days minimum including bank holidays) all represent further financial obligations that cannot be contracted out of.
Related calculators
Tax Toolkit UK provides free calculators for guidance purposes only. Results are estimates based on 2026/27 rates. Individual circumstances vary. Always consult a qualified accountant or HR adviser before making employment decisions.