True Cost of a Hire Calculator

How the true cost of a hire is worked out

A salary is only the starting point. When you take someone on, the business also pays employer National Insurance on their earnings and, for most staff, a workplace pension contribution. Add the software, equipment and training the role needs and a typical hire costs 15–20% more than the number in the job advert.

The calculator uses the 2026/27 rates that apply from 6 April 2026 to 5 April 2027:

• Employer National Insurance: 15% on each employee’s earnings above the £5,000-a-year secondary threshold.
• Under 21s and apprentices under 25: 0% employer NI on earnings up to £50,270, then 15% above that.
• Employment Allowance: eligible employers can cut their total employer NI bill by up to £10,500 a year. It is one allowance for the whole business, not per employee.
• Pension: the auto-enrolment minimum employer contribution is 3% of “qualifying earnings” – pay between £6,240 and £50,270. Many employers pay on full salary instead; pick whichever matches your scheme.

It then turns the annual cost into the figure that actually matters for cash flow: how much money you need in the bank to carry the hire until they start paying for themselves.

Worked example

Priya runs a six-person design studio in Manchester and is hiring a junior designer on £28,000. Her pension scheme pays 3% on qualifying earnings, and the studio’s Employment Allowance is already used up by her existing team.

• Employer NI: 15% × (£28,000 − £5,000) = £3,450
• Pension: 3% × (£28,000 − £6,240) = £653
• True cost: £32,103 a year, or £2,675 a month – £4,103 (14.7%) more than the salary

Priya expects the new designer to take three months to bill enough work to cover their cost, and the recruitment agency charges a £4,200 fee. Three months at £2,675 plus the fee means she needs about £12,226 of cash set aside before the start date – not just the first month’s wages.

If the same role went to a 20-year-old, the employer NI would be £0, because their whole salary sits below the £50,270 upper secondary threshold – a saving of £3,450 a year.

Frequently asked questions

How much does an employee cost on top of their salary in 2026/27?

For most roles, employer National Insurance adds 15% of pay above £5,000 and pension adds at least 3% of qualifying earnings. On a £30,000 salary that is about £4,460 a year before equipment, software and training – around 15% on top.

Can I use the Employment Allowance for every new hire?

No. It is a single allowance of up to £10,500 a year for the whole business. If your existing payroll already generates that much employer NI, a new hire gets no benefit from it. Businesses where the only employee is a director can’t claim it.

Do I pay employer National Insurance for under-21s and apprentices?

Not on earnings up to £50,270 a year. Employees under 21, and apprentices under 25 on a government-recognised apprenticeship, carry a 0% employer rate up to that threshold, so most of these hires cost no employer NI at all.

Is the pension contribution worked out on the whole salary?

The legal minimum is calculated on qualifying earnings – the slice of pay between £6,240 and £50,270 – and only applies automatically once someone earns over £10,000 a year. Many schemes pay on full salary, which costs more, so check yours.

Why does the calculator ask how long the role takes to pay its way?

Because the risk with hiring is usually cash, not profit. You pay wages from the first month, but a new salesperson, fee-earner or technician typically takes weeks or months to generate the income that covers them. That gap has to be funded from working capital – see how much working capital a new hire really requires.

Related tools and guides

• Working Capital Calculator – check you can cover short-term obligations before adding payroll.
• 13-week cash flow forecast – with a free template to slot the new salary into.
• Profitable but always short of cash? – why growth and hiring eat cash.
• Early Payment Discount Calculator – is paying a supplier early worth it?

Sources

• GOV.UK: Rates and thresholds for employers 2026 to 2027 (NI thresholds, 15% rate, £10,500 Employment Allowance, upper secondary thresholds)
• GOV.UK: Claim Employment Allowance (eligibility)
• The Pensions Regulator: automatic enrolment earnings thresholds (£10,000 trigger, £6,240–£50,270 band)
• GOV.UK: National Minimum Wage and National Living Wage rates (£12.71 from 1 April 2026)

For guidance only – not tax, legal or financial advice. Rates are for the 2026/27 tax year and are reviewed each April. Last updated 2 November 2026.