How much does a £20,000 employee cost? (2026-27)

A £20,000 employee costs the employer £22,662.8 per year in the 2026-27 tax year (with minimum 3% pension). This includes £2,250 in employer NI and £412.8 in pension contributions — 13.3% above the gross salary. The cost per hour is £11.62.

At a glance

An employee on a £20,000 gross salary costs your business significantly more than their headline pay:

3% pension	5% pension	8% pension
Employer NI	£2,250	£2,250	£2,250
Pension	£412.8	£688	£1,100.8
Total cost	£22,662.8	£22,938	£23,350.8
Above salary	13.3%	14.7%	16.8%
Cost per hour	£11.62	£11.76	£11.97

At £20,000, this is a below-median salary, but employer on-costs still add a meaningful amount.

Employer National Insurance: £2,250

Employer NI is charged at 15% on all earnings above the Secondary Threshold of £5,000:

• Earnings above threshold: £20,000 - £5,000 = £15,000
• Employer NI: £15,000 x 15% = £2,250
• Monthly employer NI: £187.5

This is an effective rate of 11.3% on the gross salary. Unlike employee NI, there is no upper earnings limit for employer NI — it's a flat 15% on everything above £5,000.

Pension auto-enrollment: £412.8

UK employers must auto-enroll eligible workers into a workplace pension. The minimum employer contribution is 3% of qualifying earnings.

Qualifying earnings are the portion of salary between £6,240 and £50,270:

• Qualifying earnings: £20,000 - £6,240 = £13,760
• 3% contribution: £13,760 x 3% = £412.8/year (£34.4/month)

At 5%, this would be £688/year. At 8%, it would be £1,100.8/year.

Monthly and hourly cost

Period	Salary	+ NI	+ Pension	Total cost
Annual	£20,000	£2,250	£412.8	£22,662.8
Monthly	£1,666.67	£187.5	£34.4	£1,888.57
Weekly	£384.62	£43.27	£7.94	£435.82

Based on 1,950 working hours per year (37.5 hours/week), the cost per hour is £11.62. This is the figure to use when pricing projects or comparing against contractor day rates.

What the employee actually receives

While you pay £22,662.8 in total, the employee's take-home pay (after income tax and employee NI) is:

• Take-home pay: £17,919.6/year (£1,493.3/month)
• Income tax: £1,486
• Employee NI: £594.4

The gap between what you pay (£22,662.8) and what the employee receives (£17,919.6) is £4,743.2 — you pay 26% more than the employee takes home. The difference goes to income tax, employee NI, employer NI, and pension.

See full £20,000 take-home pay breakdown

Frequently asked questions

How much does a £20,000 employee cost the employer?

With the minimum 3% pension, a £20,000 employee costs £22,662.8/year (£1,888.57/month). This is 13.3% above the gross salary.

How much employer NI do I pay on a £20,000 salary?

Employer NI on £20,000 is £2,250/year (£187.5/month). That's 15% on earnings above the £5,000 Secondary Threshold.

What is the cost per hour for a £20,000 employee?

Based on 1,950 working hours per year, the total cost per hour is £11.62. The gross salary alone works out to £10.26/hour, but employer on-costs add £1.37/hour.

Can I reduce employer costs?

Yes. Salary sacrifice arrangements reduce both the employee's tax and your employer NI. For example, pension contributions via salary sacrifice save 15% in employer NI on the sacrificed amount. You can also claim the Employment Allowance (£10,500 off employer NI) if eligible.

Where can I see the full NI breakdown?

See the detailed NI calculation for £20,000 including employee NI, employer NI, and self-employed NI comparison.