EOR (Employer of Record) Cost UK 2026/27 — All-In Cost Calculator Guide

What an Employer of Record is and why it changes the cost model

An Employer of Record (EOR) is a third-party organisation that employs workers on behalf of another business. The EOR becomes the legal employer — handling payroll, employer NI, pension auto-enrolment, employment contracts and HR compliance — while the client company directs the day-to-day work. EOR services are most commonly used when a business wants to hire in the UK without establishing a legal entity there, or when speed or flexibility matters more than the overhead of direct employment infrastructure.

From a cost perspective, an EOR arrangement has a different structure from direct employment. Instead of paying salary and handling NI, pension and compliance separately, you pay the EOR a single all-in monthly invoice. That invoice covers the worker's gross salary, employer NI, pension contributions, and the EOR's service fee. Understanding what goes into that invoice helps you compare EOR costs against hiring directly.

The components of EOR all-in cost in the UK

For a UK-based worker in 2026/27, the statutory employer costs are: employer NI at 15% on earnings above the £5,000 secondary threshold, and employer auto-enrolment pension at minimum 3% on qualifying earnings (£6,240–£50,270). These are the same whether you hire directly or via an EOR — the EOR pays these amounts on your behalf and passes them on in the invoice.

On top of the statutory costs, the EOR charges a service fee. This is typically structured as a percentage of gross salary (commonly 10–20%, but can be lower for higher-value contracts or longer arrangements) or as a flat monthly fee per worker (£200–£600/month is a common range in the UK EOR market). Some providers charge as a percentage of the gross employment cost (salary + NI + pension), which gives a slightly different headline number.

Worked example: EOR all-in cost at £40,000 salary

Take a worker on a £40,000 gross salary via a UK EOR in 2026/27. Employer NI: (£40,000 − £5,000) × 15% = £5,250/year. Employer pension (min 3%): (£40,000 − £6,240) × 3% = £1,012.80/year. Statutory employer cost: £40,000 + £5,250 + £1,012.80 = £46,262.80/year before the EOR fee.

Add an EOR service fee at 15% of gross salary: 15% × £40,000 = £6,000/year. Total all-in EOR cost: £52,262.80/year, or approximately £4,355/month. Compared to direct employment at £46,263/year (same statutory costs, no EOR fee), the EOR premium is £6,000/year for the convenience of outsourced compliance and no entity setup. For a short-term or experimental hire, that trade-off is often worthwhile.

EOR vs direct employment: when the numbers favour each option

Direct employment is cheaper per head in the long run — once payroll infrastructure and HR processes are in place, there is no ongoing service fee. For a business hiring five or more UK employees on a multi-year basis, the cost of setting up payroll, registering for PAYE, and running auto-enrolment is modest relative to the cumulative EOR fees saved.

EOR makes financial sense when: you are hiring one or two people in the UK and are not yet certain whether to commit to a full entity setup; when the contract duration is under 12 months; or when the administrative overhead of direct employment would divert significant founder or finance time from the core business. The EOR fee is essentially the price of speed and flexibility.

How to calculate your EOR cost

Use our employer cost calculator at /calculator to calculate the statutory layer (salary + NI + pension) for any gross salary. That gives you the direct-employment baseline. Then add your EOR provider's service fee on top to get the all-in EOR cost. You can also add an overhead estimate for any equipment, software or management time the EOR does not cover.

When comparing EOR quotes, check whether the fee is a percentage of gross salary or total employment cost. A 10% fee on total employment cost is more expensive than 10% on gross salary alone because total employment cost already includes NI and pension. Ask your EOR provider to show a line-by-line breakdown of the monthly invoice to avoid comparing different bases.

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Frequently asked questions

How much does it cost to employ someone in the UK?

The true cost to employ someone in the UK is typically 15–20% above gross salary. At £30,000: employer NI £3,750 + pension £713 = approximately £34,463 per year. At £50,000: employer NI £6,750 + pension £1,313 = approximately £58,063 per year. Adding workplace overheads of £2,000–£5,000 can bring the total to 20–25% above the headline salary.

What is the employer NI rate for 2026/27?

For 2026/27, employer Class 1 National Insurance is charged at 15% on employee earnings above the secondary threshold of £5,000 per year (£96 per week, £416 per month). This rate increased from 13.8% in April 2025, when the threshold was simultaneously cut from £9,100 to £5,000. Both changes apply from 6 April 2025.

How much employer NI do I pay on a £35,000 salary?

At £35,000 salary, employer NI for 2026/27 is £4,500 per year — 15% on £30,000 of earnings above the £5,000 threshold. That is £375 per month. In 2024/25, the same salary produced £3,585 in employer NI. The April 2025 changes therefore add £915 per year on this salary alone.

What is Employment Allowance and who can claim it?

Employment Allowance lets eligible employers reduce their annual employer NI bill by up to £10,500 in 2026/27, increased from £5,000 in 2024/25. The previous £100,000 NI bill eligibility cap has been removed, so more businesses qualify. Companies where the only paid employee is also a director cannot claim. Apply through payroll software via the Employer Payment Summary indicator.

What is the total employer cost above salary?

Beyond salary, employer cost includes: employer NI (15% on earnings above £5,000), employer pension (minimum 3% of qualifying earnings between £6,240 and £50,270), and overheads such as equipment, software and workspace. For most UK salaries this adds 12–20% above headline pay. Use the inputs above to set your exact pension rate and overhead figure.

What changed for employers in April 2025?

Three changes took effect from 6 April 2025: the employer NI rate rose from 13.8% to 15%, the secondary threshold was cut from £9,100 to £5,000, and Employment Allowance increased from £5,000 to £10,500 with the eligibility cap removed. For a £30,000 salary, annual employer NI increased from approximately £2,884 to £3,750 — a rise of £866 per year.

How is employer NI different from employee NI?

Employer NI is a cost paid by the employer on top of gross salary — it does not reduce take-home pay. Employee NI is deducted from the employee's wages instead. For 2026/27, employees pay 8% on earnings between £12,570 and £50,270, then 2% above that. Employers pay 15% on all earnings above £5,000 with no upper cap. This calculator covers the employer side; for employee take-home pay see AfterTaxSalary.co.uk.

What are employer costs in the UK?

UK employer costs in 2026/27 are: gross salary, employer NI at 15% on earnings above £5,000, employer pension at minimum 3% of qualifying earnings (£6,240–£50,270), and any operational overheads such as equipment or software. For a £35,000 salary, statutory employer costs (NI + pension) add approximately £5,363/year before overheads.

How much do I cost my employer in the UK?

If you earn £35,000, you cost your employer roughly £40,363/year — your salary plus £4,500 employer NI and £863 minimum pension. At £50,000, the total is approximately £58,063. Your employer pays these on top of your salary; they are not deducted from your pay. Use this calculator to see the exact figure for your salary.

Is this a PAYE cost calculator for employers?

Yes. PAYE employer costs include employer NI — calculated at 15% above £5,000 for 2026/27 — plus the employer's auto-enrolment pension contribution. The full calculator models both alongside any overhead assumptions to give a total PAYE-basis employer spend per employee.

What is a cost to company (CTC) salary in the UK?

Cost to company (CTC) in the UK refers to the total annual cost of an employee to their employer — salary, employer NI, pension, and overheads combined. A £35,000 CTC salary typically means a gross salary of roughly £30,000–£32,000 once the employer's NI and pension obligations are included in the total. Use this calculator to work backwards from a CTC budget to a gross salary.