1. What is the Employer Cost Calculation?

The employer cost calculation determines the total cost to a business for employing someone in the UK, including salary, employer National Insurance contributions, and mandatory pension contributions.

2. How Does the Calculator Work?

The calculator uses the following equation:

Where:

• \( \text{Gross Pay} \) — Annual salary before deductions
• \( \text{Employer NI} \) — 13.8% on earnings above £9,100/year
• \( \text{Employer Pension Contributions} \) — Typically 3% minimum of qualifying earnings

Explanation: The calculation accounts for mandatory employer contributions beyond just the employee's salary.

3. Importance of Employer Cost Calculation

Details: Understanding total employment costs is crucial for business budgeting, financial planning, and determining true cost of hiring.

4. Using the Calculator

Tips: Enter gross annual salary in GBP and employer pension contribution percentage (minimum 3% for auto-enrollment). The calculator will show all employer costs.

5. Frequently Asked Questions (FAQ)

Q1: What is the current NI threshold for employers?
A: For 2023/24, employers pay 13.8% NI on earnings above £9,100 per year (Secondary Threshold).

Q2: What's the minimum employer pension contribution?
A: Under auto-enrollment, minimum is 3% of qualifying earnings, though many employers contribute more.

Q3: Are there other employer costs not included here?
A: Yes, this doesn't include benefits, bonuses, apprenticeship levy (if applicable), or other optional benefits.

Q4: Does this calculator work for contractors?
A: No, this is for PAYE employees. Contractors have different tax and NI rules.

Q5: How often do these rates change?
A: NI thresholds and rates typically change annually with the UK budget announcement.