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 NI 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.

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.

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

Statutory holiday (5.6 weeks a year), and statutory sick, maternity, paternity and other parental pay, are all employer obligations. 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:

*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. 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, 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.

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