What a UK employee really costs an overseas company

When you budget for a UK hire, the salary is the headline, but it's not the bill. As the employer you also carry several "on-costs" on top of gross pay. Here's the full picture for 2026/27, with the numbers you'll actually use.

The costs on top of salary

1. Employer's National Insurance, 15%

For 2026/27 the employer National Insurance rate is 15%, charged on each employee's earnings above the Secondary Threshold of £5,000 a year. So for most salaries you can estimate employer NI as roughly 15% of the amount above £5,000.

Whether you owe it depends on who the employer is. A UK company, or an overseas company with a branch or place of business in the UK, pays it. So, usually, does an employer based in the EU, the EEA or Switzerland, through an NI-only scheme. An overseas employer elsewhere with no UK presence usually doesn't: the employee pays their own income tax and NI through a DPNI scheme, unless a UK business they provide services to is treated as the employer for NI. We will ask HMRC for the scheme that fits your facts, and they may suggest a different one once they have the full facts. Hire through an Employer of Record and the EOR is the UK employer, so it pays the 15% and passes it on to you.

2. Workplace pension, usually at least 3%

Under auto-enrolment, eligible workers must be put into a pension and the employer must contribute. The minimum total contribution is 8% of qualifying earnings, of which the employer must pay at least 3%. Qualifying earnings for 2026/27 run from £6,240 to £50,270.

3. The Apprenticeship Levy, only if you're large

This is 0.5% of your total pay bill, but only payable if your annual UK pay bill exceeds £3 million (there's a £15,000 allowance). Most overseas companies with a handful of UK staff won't pay it at all. If you're hiring an apprentice rather than paying the levy, note it works the other way for cost: apprentices under 25 usually carry no employer NI. See employing a UK apprentice.

4. The things that aren't a line item, until they are

Statutory holiday (5.6 weeks a year) is an employer obligation. Statutory sick, maternity, paternity and other parental pay are owed by whoever pays UK employer's (secondary) NI, so on a DPNI with no employer's NI you generally won't owe them. Where you do, you may reclaim some statutory payments, but they still need budgeting and administering.

A worked example: £40,000 salary

Here's a simplified illustration for a single employee on £40,000 in 2026/27, where employer NI is due:

*3% of (£40,000 capped at £50,270, less £6,240) ≈ £1,013. Figures rounded and illustrative; your exact cost depends on the employee's tax code, pension scheme and any benefits. The Employment Allowance can reduce employer NI for eligible UK employers.

Don't forget the Employment Allowance

Many smaller employers can claim the Employment Allowance, which for 2026/27 is £10,500 off your employer NI bill for the year. From 2025 the previous £100,000 NI-bill cap was removed, widening eligibility. Some employers still can't claim: if your company has only one director, they mustn't be the only employee you pay employer NI on, and only one company in a connected group can claim it. Whether an overseas employer qualifies depends on the specifics, so it's worth checking, it can wipe out the employer NI on your first employee or two entirely.

The bottom line

A UK employee costs meaningfully more than their salary, but it's predictable once you know the levers: 15% employer NI above £5,000 where it's due, a minimum 3% pension, and a handful of statutory obligations. Get those modelled correctly up front and there are no nasty surprises, and a good payroll provider will calculate every one of them on each run, and claim any allowance you're due.

How you actually run that payroll from overseas, your own PAYE, a DPNI scheme or an Employer of Record, is set out in our guide to hiring in the UK from overseas.

Related guides

• Hiring in the UK from overseas, PAYE vs DPNI vs EOR compared.
• How much an Employer of Record costs in the UK, and the cheaper route for staff you keep.
• What a DPNI scheme is, running your own UK payroll with no UK entity.
• Employer National Insurance explained, the 15% on-cost in detail.

General information, not tax advice. Figures reflect 2026/27 UK rates as at July 2026 and are illustrative. Confirm your position before relying on these numbers.