The salary is not the cost. Add employer’s National Insurance, the pension, the kit and the recruitment fee and the monthly figure is usually a fifth higher than the one in your head. See yours before you make the offer.
This is the employer cost, not the employee's take-home.
It covers gross salary, secondary Class 1 National Insurance at 15% above the £5,000 threshold, employer pension contributions, equipment and recruitment. It does not attempt to price holiday cover, sick pay, employer’s liability insurance or the management time a new role absorbs — all real, all specific to you. Talk to Buzz before you commit to a hire.
The role you're considering
Enter a salary, then click Calculate to see the full employer cost.
The basics
Why the salary is never the cost
Ask an owner what a £32,000 hire costs and most say £2,667 a month. The real figure is closer to £3,184 — about £6,200 a year more than assumed. Nothing here is exotic; it is simply that none of it appears in the salary you advertised.
Employer’s National Insurance. Secondary Class 1 NI runs at 15% on everything above a £5,000 secondary threshold. On a £32,000 salary that is £4,050 a year. The threshold is low enough that even a modest part-time salary attracts it.
The pension. Auto-enrolment sets a minimum employer contribution of 3% of qualifying earnings. Many employers pay more, and on total salary rather than qualifying earnings, which costs more again.
The Employment Allowance, and the trap in it. Eligible employers knock up to £10,500 off their secondary NI bill, which for a first hire can wipe it out entirely. But a company whose only employee paid above the secondary threshold is a sole director cannot claim it. That is the single most commonly missed rule when a one-person company takes on its first member of staff — and it is worth thousands.
What this still leaves out. Holiday is already in the salary, but cover for it is not. Nor is sick pay, employer’s liability insurance, the desk, or the fortnight of your own time it takes to get someone productive. Treat the figure here as the floor.
And there is a third option. The choice is not only "hire" or "carry on struggling". For finance work specifically, a Virtual Finance Team gives you bookkeeping, management accounts and financial direction at the level you actually need each month, without the headcount, the recruitment risk or the fixed cost.
Frequently asked questions
Common questions about the cost of employing someone
How much does an employee cost on top of their salary?
For most roles, budget 15% to 25% above gross salary before you count anything discretionary. On a £32,000 salary the mandatory additions — employer's National Insurance at 15% above £5,000, and a 3% pension — come to just over £5,000. Equipment, software and a phone typically add £1,000 to £1,500. Recruitment, if you use an agency, is usually 15% to 20% of the first year's salary as a one-off. The figure people quote as "about a third on top" is roughly right once you include the things this calculator deliberately leaves out, like cover and insurance.
What is employer's National Insurance in 2026/27?
Secondary Class 1 National Insurance is charged at 15% on earnings above a secondary threshold of £5,000 a year. That threshold is low, which is the part that surprises people: a part-time role on £12,000 still attracts around £1,050 of employer's NI. It is paid by the business on top of the salary, not deducted from it.
What is the Employment Allowance, and can I claim it?
It lets eligible employers reduce their annual secondary National Insurance bill by up to £10,500. For a first hire it often removes the employer's NI cost entirely. The catch that catches almost everybody: if your company has only one director and that director is the only employee paid above the secondary threshold, you cannot claim it. Businesses doing more than half their work in the public sector, and people employing a nanny or gardener, are also excluded.
How much do I have to pay into an employee's pension?
Under auto-enrolment the minimum total contribution is 8% of qualifying earnings, of which the employer must fund at least 3%. Many employers pay more than the minimum, and many calculate it on full salary rather than the narrower band of qualifying earnings — both are more generous and both cost more. You must enrol eligible staff automatically; they can opt out afterwards, but you cannot ask them to before they are enrolled.
Is it cheaper to use a contractor or freelancer instead?
On paper, often — there is no employer's NI, no pension and no holiday pay. In practice the day rate is usually higher, and the arrangement has to be genuine. If you control what they do, when and how, HMRC may treat them as employed for tax regardless of what the contract says, and the off-payroll working rules can put the liability on you. A contractor is a good answer for defined project work and a poor answer for a role you were going to advertise.
Does a part-time hire avoid most of these costs?
It reduces them proportionally but does not avoid them. The £5,000 secondary threshold is annual, so almost any regular part-time salary attracts employer's NI. Auto-enrolment duties apply to anyone earning over £10,000 a year aged 22 to state pension age. Equipment and software often cost the same regardless of hours. Part-time is genuinely cheaper; it is not the step change owners sometimes expect.
Can I afford this hire?
The honest answer needs a cashflow forecast, not a salary figure. A hire is a fixed monthly commitment paid from a variable income, and the cost lands from month one while the productivity usually takes three to six months. The question worth answering is not whether you can afford the annual cost but whether you can cover the monthly cost in your worst forecast month, not your average one.
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From a £32,000 salary to what actually leaves the bank
An owner is considering an operations coordinator on £32,000. The figure in their head is £2,667 a month. Here is the build-up.
Gross salary£32,000
Employer's NI — (£32,000 − £5,000) × 15%£4,050
Employer pension at 3%£960
Equipment, software, phone and training£1,200
Total annual cost£38,210
Cost per month£3,184
So £3,184 a month, not £2,667 — £6,210 a year more than assumed. That is not a reason to abandon the hire. It is a reason to make the decision on the real number.
If this is the company's first employee and the Employment Allowance is available, the £4,050 of NI comes off entirely and the monthly figure drops to £2,847. If the only other person on the payroll is a sole director, it does not — and that single rule is worth £4,050 a year.
Add a recruitment agency at 15% and year one carries another £4,800, taking the first twelve months to £43,010.
What to do with the answer
Before you make the offer
Budget the monthly figure, not the salary. The gap between £2,667 and £3,184 is the difference between a hire that works and one that quietly strains the business every month.
Check the Employment Allowance properly. If you are a one-person company taking on your first employee, confirm whether the sole-director restriction applies to you before you count £10,500 you may not get.
Forecast it against your worst month, not your average one. Salaries are paid monthly regardless of what your income did that month.
Allow for the ramp. Most roles cost full price from day one and deliver full value somewhere around month three. Plan the cash for that gap.
Ask whether it has to be a hire at all. If the work you are trying to cover is finance — bookkeeping, chasing payment, month-end, reporting — a Virtual Finance Team covers it without the fixed cost, the recruitment risk or the management load.
Weighing up a hire? Let's run the numbers together.
