Employer Payroll Costs 2026/27 — The Complete Guide

Employer NI is paid on top of gross salary — it does not come out of the employee's pay. For 2026/27, the rate is 15% on earnings above the Secondary Threshold of £5,000/year.

Employer NI = (Annual Salary − £5,000) × 15%

Salary	Employer NI (annual)	Employer NI (monthly)
£20,000	£2,250	£188
£25,000	£3,000	£250
£30,000	£3,750	£313
£40,000	£5,250	£438
£50,000	£6,750	£563

Employment Allowance: Most employers can claim up to £10,500 off their annual employer NI bill. Single-director companies with no other employees cannot claim. See our Employment Allowance guide for eligibility. Use the Employer NI Calculator for exact figures.

Under auto-enrolment, you must contribute at least 3% of qualifying earnings to a workplace pension for eligible employees. Qualifying earnings in 2026/27 are between £6,240 and £50,270.

Employer pension = (Salary − £6,240) × 3% (for salaries below £50,270)

For a £30,000 salary: (£30,000 − £6,240) × 3% = £712/year. Use the Workplace Pension Calculator for any salary and contribution rate. Salary sacrifice pension arrangements save both employer and employee NI — see the Salary Sacrifice Pension Calculator.

All employees must be paid at least the National Minimum Wage for their age group. For 2026/27:

Age Group	Hourly Rate	Annual equivalent (40hr week)
21 and over (National Living Wage)	£12.71/hour	£26,437
18–20	£10.85/hour	£22,568
Under 18 / Apprentice	£8.00/hour	£16,640

NMW applies to gross pay before deductions. Salary sacrifice arrangements that take pay below NMW are unlawful.

When an employee is off sick, you pay SSP at £123.25/week from day one of absence. You cannot reclaim SSP from HMRC. SSP runs for up to 28 weeks per period of incapacity.

For budgeting: the UK average is 4.4 sick days per employee per year (CIPD 2024). At £24.65/day (5-day week), that's approximately £108/employee/year in direct SSP cost. Use the SSP Calculator for any absence period.

When an employee goes on maternity leave, you pay SMP for up to 39 weeks:

• First 6 weeks: 90% of average weekly earnings (no cap)
• Weeks 7–39: £194.32/week (or 90% of AWE if lower)

The good news: You can reclaim 92% of SMP paid from HMRC (103% if you qualify as a small employer). SMP is largely cost-neutral. Use the SMP Calculator to see the exact cost and reclaim amount.

All employees are entitled to 5.6 weeks paid holiday (28 days for a full-time 5-day week). Holiday pay must reflect normal earnings — including regular overtime and commission, not just basic salary.

Holiday is a fixed cost built into the employment relationship. For budgeting, factor in cover costs for the 28 days — temporary or agency staff if needed. Use the Holiday Entitlement Calculator for any working pattern.

Beyond the recurring payroll costs, first-time employers face one-off and setup costs:

Cost	Typical range	Notes
Recruitment	£500–£5,000	Job boards, agency fees (10–25% of salary)
Employer liability insurance	£60–£600/year	Legally required once you have employees
Payroll software	£0–£600/year	Free options exist (HMRC Basic PAYE Tools)
Workplace pension setup	£0–£500	NEST is free to use
Equipment and workspace	£500–£3,000	Laptop, desk, software licences
Training and onboarding	£200–£2,000	Varies by role

For a typical first hire at £25,000–£30,000, total first-year cost including setup is often £32,000–£40,000. Use the Employee Cost Calculator for your specific salary.

• Claim Employment Allowance — up to £10,500 off your employer NI bill. Most employers qualify. See the Employment Allowance guide.
• Hire under-21s or apprentices — zero employer NI on most earnings up to £50,270.
• Use salary sacrifice for pensions — saves both employer and employee NI. See the Salary Sacrifice Pension Calculator.
• Consider a pro-rata hire — part-time roles cost proportionally less. Use the Pro Rata Calculator to model costs.

• Employee Cost Calculator — total employer cost including NI, pension, and on-costs
• Employer NI Calculator — employer National Insurance for any salary
• Workplace Pension Calculator — auto-enrolment contributions
• Salary Sacrifice Pension Calculator — NI savings via salary sacrifice
• SSP Calculator — Statutory Sick Pay for any absence
• SMP Calculator — Statutory Maternity Pay across all 39 weeks
• Pro Rata Calculator — part-time salary from full-time equivalent
• Holiday Entitlement Calculator — annual leave for any working pattern