Guide
Cost of Hiring Your First Employee in the UK (2025/26)
Written by EmployerCalculator Editorial · Reviewed against official UK sources · Last updated: April 2026
What does it actually cost to hire your first employee in the UK? This guide covers employer NI at 15%, pension auto-enrolment, Employment Allowance and total true cost for 2025/26.
What does hiring your first employee actually cost?
Many first-time employers focus on the salary figure and miss the mandatory add-ons. In 2025/26, every UK employer must pay employer National Insurance on top of gross salary — 15% on earnings above £5,000 — and once your employee is eligible, you must also make auto-enrolment pension contributions of at least 3% of their qualifying earnings. These two items alone typically add 14–17% on top of the headline salary.
At a £28,000 starting salary, the true employer cost before overheads is approximately £32,153 per year: £28,000 salary, £3,450 employer NI and £653 employer pension. If you are hiring at £35,000, the total reaches approximately £39,501 before any equipment, software or workspace costs. Use the employer cost calculator to model your specific salary.
Beyond the statutory costs, factor in one-off hiring costs that do not appear in the recurring model: job board fees (typically £100–£600 per post), any recruitment agency fees (often 10–20% of first-year salary for specialist roles), and the time cost of onboarding. The statutory costs on this page are the recurring floor — the true cost of hiring your first employee is higher when setup costs are included.
Employment Allowance — your key relief as a first employer
Good news for first-time employers: most new businesses can claim Employment Allowance in 2025/26, which reduces your employer NI bill by up to £10,500. If your first employee is on a salary below approximately £75,000, the allowance will cover your entire employer NI liability for the year.
The main exception is sole-director companies with no other employees. If you are the only director and have no other employees, you cannot claim. Once you hire your first employee (who is not a fellow director), the allowance becomes available. Check HMRC's guidance or confirm with your accountant before the first payroll run.
To claim Employment Allowance, select 'Yes' in the Employment Allowance field within your payroll software at the start of the tax year. Most UK payroll software — Xero, QuickBooks, Sage, FreeAgent — handles this automatically once you indicate eligibility. The allowance is applied against your employer NI liability each pay period until used.
Auto-enrolment: your pension duties from day one
If your first employee is aged 22 or over and earns more than £10,000 per year, you must automatically enrol them into a workplace pension within six weeks of their start date. You must make a minimum employer contribution of 3% on qualifying earnings between £6,240 and £50,270. There is no opt-out for the employer — only the employee can choose to opt out.
For a £30,000 salary, qualifying earnings are £30,000 minus £6,240 = £23,760. Your minimum employer pension contribution is 3% of £23,760 = £712.80 per year, or approximately £59 per month. This is paid into the employee's pension pot in addition to their employee contribution (minimum 5% of qualifying earnings under auto-enrolment rules).
Most payroll software handles auto-enrolment automatically once you set it up, but you need to register with a pension provider first. NEST (the National Employment Savings Trust) is a government-backed option available to all UK employers. You can use any authorised pension provider. Set this up before your first payroll run rather than scrambling to catch up.
True first-employee cost by salary: worked examples
At a £25,000 salary with Employment Allowance: employer NI is £3,000 but fully offset by allowance, so net NI = £0. Pension = £563. True recurring cost = £25,563 per year. This is the best-case scenario for a first employer who qualifies for the allowance.
At a £30,000 salary with Employment Allowance: NI of £3,750 fully offset. Pension = £714. Recurring cost = £30,714. Without Employment Allowance, the figure rises to £34,464. The difference — £3,750 — is the value of claiming the allowance at this salary.
At a £45,000 salary, the employer NI is £6,000 per year. Employment Allowance offsets £6,000 fully. Pension on qualifying earnings: (£45,000 − £6,240) × 3% = £1,162.80 per year. Recurring cost with allowance: £46,163. Without allowance: £52,163. Beyond £75,000 salary, NI will exceed the £10,500 allowance and a residual NI liability applies. Use the calculator to model the exact figure.
Use the calculator
Put the figures from this guide into practice with the live calculator tools below.
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 2025/26?
For 2025/26, 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 2025/26 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 2025/26, 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 2025/26, 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 2025/26 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 2025/26 — 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.
Tools
Tools worth considering
If you are moving from estimating employer costs to actually running payroll, accounting or staff administration, these are types of tools commonly used by UK employers. We do not endorse any specific product — this is an editorial summary only.
Xero Payroll
Cloud payroll bundled with Xero accounting. Handles RTI submissions, auto-enrolment and payslip generation. Commonly used by UK small businesses already on Xero for bookkeeping.
See Xero Payroll →
QuickBooks Payroll
Payroll add-on for QuickBooks. Used by UK small employers for PAYE, NI, pension and HMRC RTI. Integrates with QuickBooks accounting.
See QuickBooks Payroll →
Sage Payroll
Long-established UK payroll software with HMRC recognition. Works standalone (without Sage accounting) and is widely used in small businesses and accountancy practices.
See Sage Payroll →
Employment Hero
HR and payroll platform used by growing UK teams. Combines contracts, onboarding, leave management and payroll in one system. HMRC RTI integrated.
See Employment Hero →
Once you know the cost — what next?
Running payroll correctly after you have calculated employer cost is the next practical step. The tools below handle HMRC RTI submissions, auto-enrolment pension and payslip generation automatically.