1. What is Total Cost Calculation?

The Total Cost Calculation determines the complete expense to an employer for an employee's salary, including gross pay, employer National Insurance contributions, and employer pension contributions.

2. How Does the Calculator Work?

The calculator uses the following equation:

Where:

• \( Gross\ Pay \) — Employee's annual salary before deductions
• \( Employer\ NI \) — Employer's National Insurance contributions
• \( Employer\ Pension\ Contributions \) — Employer's pension contributions

Explanation: The equation sums all employer costs associated with an employee's compensation package.

3. Importance of Total Cost Calculation

Details: Understanding the total employment cost is crucial for budgeting, financial planning, and comparing compensation packages. It represents the true cost of employment beyond just salary.

4. Using the Calculator

Tips: Enter gross pay in GBP/year, employer NI in GBP, and employer pension contributions in GBP. All values must be non-negative numbers.

5. Frequently Asked Questions (FAQ)

Q1: What's included in employer costs beyond these?
A: Additional costs may include benefits, bonuses, training, equipment, and office space, but these are not included in this basic calculation.

Q2: How do I calculate Employer NI?
A: Employer NI is typically 13.8% of earnings above £9,100 per year (2023/24 rates), but varies based on specific circumstances.

Q3: What's a typical employer pension contribution?
A: Under auto-enrolment, minimum is 3% of qualifying earnings, but many employers contribute more (typically 5-10%).

Q4: Why is total cost higher than salary?
A: Because it includes mandatory employer contributions (NI and pension) that are in addition to the employee's gross pay.

Q5: Does this include employee deductions?
A: No, this calculates the employer's costs only. Employee deductions (income tax, employee NI, etc.) are not included.