Part of our complete guide to employer payroll.
Why the salary figure is never the real cost
Offer a £30,000 salary, and the actual cost to the business is meaningfully higher than £30,000. Employer National Insurance and auto-enrolment pension contributions are both mandatory on top, and there are usually real, if smaller, costs beyond that too. Budgeting for a new hire based on salary alone understates what you're actually committing to.
What stacks on top of salary
- Employer National Insurance, charged on salary above the secondary threshold, verify the current rate directly, as it's reviewed periodically
- Minimum auto-enrolment pension contributions, a legally required percentage of qualifying earnings paid into a workplace pension
- Recruitment costs, job adverts, agency fees if used, and the time cost of interviewing
- Onboarding and equipment, a laptop, software licences, desk space, training time
- Payroll administration, running PAYE correctly every month, whether done in-house or through a payroll service
Use our employee cost calculator to see the real total cost for a specific salary figure, rather than estimating.
Key point: Employer National Insurance and pension contributions aren't optional extras you can choose to skip, they're legal obligations on top of salary. Any hiring budget that doesn't include them is an underestimate from day one.
Why this matters for hiring decisions
Knowing the real cost before you hire changes the maths on whether a role is affordable, and can also change how you think about alternatives, a contractor, overtime for existing staff, or part-time hours, which carry a different cost structure entirely.
Thinking about your first hire? Book a free consultation and we'll work out the real cost and set up compliant payroll from day one, see our payroll service.
Frequently asked questions
What's included in the true cost of an employee beyond salary?
Employer National Insurance, minimum auto-enrolment pension contributions, and often recruitment, onboarding, equipment and payroll admin costs, all on top of the headline salary figure.
What is the employer National Insurance rate?
A percentage charged on salary above the secondary threshold, verify the current rate and threshold with us or gov.uk directly, as these figures are reviewed and can change.
Is auto-enrolment pension compulsory?
Yes, employers must automatically enrol eligible staff into a workplace pension and contribute a minimum percentage of qualifying earnings, this is a legal obligation, not optional.
How much higher is the real cost compared to the salary alone?
It varies by salary level and other factors, but employer NI and pension contributions typically add a meaningful percentage on top of salary, use a true-cost calculator with your specific figures rather than a rule of thumb.