Guide
National Minimum Wage 2026/27 — Employer Cost at Each Band
Written by EmployerCalculator Editorial · Reviewed against official UK sources · Last updated: June 2026
NMW rates for 2026/27: NLW £12.21/hr (21+), £10.00/hr (18-20), £7.55/hr (under-18 and apprentice). This guide shows total employer cost at each rate including NI and pension.
The 2026/27 NMW rates
The National Minimum Wage rates that apply from April 2026 are: the National Living Wage for workers aged 21 and over is £12.21 per hour; the rate for workers aged 18 to 20 is £10.00 per hour; the rate for workers under 18 (who are above compulsory school age) is £7.55 per hour; and the apprentice rate is £7.55 per hour. The apprentice rate applies to apprentices aged under 19, or to those aged 19 and over who are in the first year of their apprenticeship.
Note that these are the statutory minimum rates — employers are free to pay more, and many do. The Real Living Wage, calculated independently by the Living Wage Foundation, is higher than the NLW and is voluntarily adopted by accredited employers. For payroll planning, use the statutory NMW rates as the floor and consider whether your sector and location benchmarks require you to pay above the minimum to attract and retain staff.
The rates increase each April. For multi-year headcount planning, build in an assumption for NMW increases rather than holding rates fixed. Over the past five years, the NLW has increased by roughly 8–10% per year on average. A workforce predominantly on NMW therefore faces compounding payroll cost increases — both the higher wage and the higher employer NI that follows from a larger NIable salary.
How NMW is checked against pay
HMRC enforces NMW compliance through an averaging calculation. Pay is totalled for a reference period (normally the pay period), then divided by the hours worked in that period. The resulting hourly rate must equal or exceed the relevant NMW rate for the worker's age. This sounds simple but the detail is where errors occur.
What counts as pay for NMW purposes is defined carefully in the regulations. Regular basic pay counts, as do most bonuses, incentive payments and tips paid through the payroll. What does not count includes employer pension contributions, benefits-in-kind, expenses, and — critically — salary sacrifice amounts. If an employee on NMW participates in a salary sacrifice pension scheme, the reduction in gross cash pay can push their effective hourly rate below NMW. HMRC has issued specific guidance on this: salary sacrifice cannot take workers below NMW, so employers must top up the cash wage to the NMW floor before applying the sacrifice.
Unpaid work time is another common compliance failure. If a worker is required to attend training, wait for equipment, travel between sites, or complete unpaid administrative tasks, that time counts as working time for NMW purposes even if it is not treated as paid hours. HMRC enforcement notices regularly cite unpaid travel time and mandatory unpaid training as violations. For any role where workers perform activity outside core contracted hours, review whether that activity is being counted and paid correctly.
Employer NI cost at NMW levels
At the NLW of £12.21 per hour for a full-time 37.5-hour week, annual salary is approximately £23,810. Employer NI on that salary is approximately £2,822 per year (15% of £23,810 minus £5,000 = £18,810). Minimum pension on qualifying earnings of £17,570 (£23,810 minus £6,240) is approximately £527 per year. Total employer cost: approximately £27,159 before overheads.
At the 18–20 rate of £10.00 per hour, full-time annual salary is approximately £19,500. Employer NI: 15% of £14,500 = £2,175 per year. Pension: 3% of £13,260 = approximately £398 per year. Total employer cost: approximately £22,073. At the under-18 and apprentice rate of £7.55 per hour, full-time annual salary is approximately £14,723. Employer NI: 15% of £9,723 = approximately £1,458 per year. Pension: 3% of £8,483 = approximately £255 per year. Total employer cost: approximately £16,436.
These figures use full-time hours (37.5 per week, 52 weeks). For part-time workers, the same NMW rate applies per hour but annual salary and therefore NI and pension costs are lower in proportion to hours. The NI secondary threshold (£5,000) and the pension lower earnings limit (£6,240) are annual figures that do not reduce for part-time hours — so part-time workers generate proportionally more NI and pension overhead per pound of wage cost than full-time staff.
Common compliance mistakes
The accommodation offset is a legal deduction that employers can apply where they provide accommodation to employees — up to a set daily rate per day of accommodation provided. The offset for 2026/27 is £10.66 per day. Employers sometimes apply this offset incorrectly: calculating it at a higher rate than permitted, applying it to workers for whom accommodation is not provided, or failing to ensure that after the offset the worker's pay still meets NMW. HMRC treats incorrect accommodation offset as non-payment of NMW.
Deductions for uniforms, equipment, or tools can also push workers below NMW where those items are required for the job. Deductions for the employer's benefit that reduce take-home pay below NMW are not permitted. Some employers handle this by requiring uniforms but absorbing the cost themselves rather than deducting it. If your contracts or HR policies include deductions for workplace requirements, review whether those deductions could create NMW compliance risk.
HMRC publishes a quarterly naming scheme for employers found to have underpaid NMW. Appearing on that list creates reputational damage that is disproportionate to the financial penalty in many cases, particularly for consumer-facing businesses where employment practices affect customer perception. The most effective protection is a regular NMW audit — checking that pay records, hours, deductions and overtime arrangements produce a compliant hourly rate for every worker in every pay period.
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 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.
Tools
Tools worth considering
UK payroll and HR tools. Editorial summary only — not endorsements.
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.