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Payroll Cost Calculator

Updated for tax year 2026/27 Last reviewed 10 August 2026 Business & Self-Employed GOV.UK employment & payroll

Hiring someone costs more than their salary. On top of gross pay you pay employer National Insurance (15% above £5,000), an employer pension (at least 3% under auto-enrolment), Class 1A NIC on taxable benefits, and possibly the apprenticeship levy.

Choose the mode that matches what you need: the cost of an employee, or the true cost of paying a bonus. NI is calculated per pay period, so a bonus in one month spikes NI exactly as it does on a real payslip.

Your details

Mode

Salary & working pattern

New starter or leaver: reduce this for part-year working
Used for the National Minimum Wage check

Pension

Auto-enrolment minimum: 5%
Auto-enrolment minimum: 3%
Salary sacrifice reduces the tax and NI bases

Tax & National Insurance

e.g. 1257L, K497, BR
NI on the annual (cumulative) basis

Employer costs

Takes up to £5,000 off employer NI
0.5% of earnings once the paybill is over £3m
Company car, private medical, etc. — Class 1A NIC at 13.8%

Results

Total employment cost
£41,450.00
£3,454.17 a month
Employee take-home pay
£30,319.60
£2,526.63 per month
Employer National Insurance
£250.00
£5,000.00 Employment Allowance applied
Employer pension
£1,200.00
3% of gross salary
Class 1A NIC (benefits)
£0.00
No benefits entered
Apprenticeship levy
£0.00
Not applicable
Income Tax
£5,486.00
Employee National Insurance
£2,194.40
Student loan
£0.00
National Minimum Wage
Compliant
£20.51/hr vs £12.71/hr required

Each month (12 periods a year)

Gross pay£3,333.33
Income Tax− £457.17
National Insurance− £182.87
Pension (employee)− £166.67
Student loan− £0.00
Take-home pay£2,526.63

Who pays what (per year)

Gross salary£40,000.00
Employer NI£250.00
Employer pension£1,200.00
Class 1A NIC on benefits£0.00
Apprenticeship levy£0.00
Total employment cost£41,450.00

National Minimum Wage check

Implied hourly rate£20.51
Required rate£12.71
Compliant✓

Where the employment cost goes

How the calculation works

We believe numbers should be transparent. Here is the formula behind this calculator.

Cost = salary + employer NI (15% above £5,000 − Employment Allowance) + employer pension + Class 1A (13.8% on benefits) + levy (0.5%) · NI is charged per pay period

Worked example

Worked example: a £40,000 employee with a £5,000 bonus in 2026/27

Employee: £40,000 a year, paid monthly, 5%/3% pension (relief at source), no student loan, Employment Allowance claimed.
Each month: gross £3,333.33, Income Tax £457, NI £182.87, pension £166.67 — take-home £2,526.80, about £30,321 a year.
The business pays employer NI of £437.50 a month plus £100 pension — £3,870.83 a month, £46,450 a year. The £5,000 Employment Allowance cuts the employer NI bill to £250.
A £5,000 bonus in June is taxed at the marginal rate and pushes that month over the NI upper limit, so part of it is hit at 2% NI — the bonus impact mode shows the exact split.

Important assumptions

  • Uses the 2026/27 rates: employer NI 15% on earnings above £5,000; employee NI 8% between £12,570 and £50,270, 2% above.
  • Income tax uses the cumulative-code model, so the annual allowance is spread evenly across periods.
  • The Employment Allowance of £5,000 a year applies to most employers in a single claim.
  • Auto-enrolment minimums are 5% employee and 3% employer on qualifying earnings — many schemes pay more.
  • Class 1A NIC of 13.8% is payable on taxable benefits in kind (company cars, private medical cover).
  • Directors pay NI on the annual earnings basis rather than per period.
  • Statutory payments (SSP, SMP) are employer costs; family payments (SMP, SPP and similar) can be recovered from HMRC — 92%, or 109% for small employers.
  • The apprenticeship levy is 0.5% of a paybill over £3m; the calculator attributes 0.5% of this employee's earnings when the levy is flagged.

Rates & official sources

Every calculation is based on the official rates and rules published by GOV.UK and HMRC.

GOV.UK employment & payroll gov.uk

Frequently asked questions

What does an employee really cost my business?

Roughly 8-10% above gross salary for employer NI and pension at typical rates, plus 13.8% Class 1A if you provide taxable benefits. Use this calculator to see the exact figure for any salary and pay frequency.

Why is NI different in a bonus month?

Employee and employer NI are charged per pay period against that period's thresholds. A bonus in one month can push that month's pay over the Upper Earnings Limit, so part of the bonus is charged at 2% NI — the bonus impact mode reproduces this.

What is Class 1A National Insurance?

A 13.8% tax the employer pays on the value of taxable benefits in kind such as a company car or private medical insurance. It is reported and paid on form P11D(b) after the tax year end.

What is the Employment Allowance?

A £5,000 a year reduction in employer National Insurance for most businesses, claimed on your payroll. It is how many small employers pay no employer NI at all.

Can I reclaim statutory payments from HMRC?

Statutory Maternity, Paternity, Adoption, Shared Parental and similar payments can be recovered — 92%, or 100% plus compensation (109% in 2026/27) if your Class 1 NI was £45,000 or less in the previous year. Statutory Sick Pay can no longer be recovered.

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These calculations are estimates for guidance only and are not professional financial, tax or legal advice. UK rates and rules change, so always verify important figures with official GOV.UK / HMRC information or speak to a qualified professional. See our full disclaimer.