How much does a £25,000 employee cost? (2026-27)

A £25,000 employee costs the employer £28,562.8 per year in the 2026-27 tax year (with minimum 3% pension). This includes £3,000 in employer NI and £562.8 in pension contributions — 14.2% above the gross salary. The cost per hour is £14.65.

At a glance

An employee on a £25,000 gross salary costs your business significantly more than their headline pay:

3% pension	5% pension	8% pension
Employer NI	£3,000	£3,000	£3,000
Pension	£562.8	£938	£1,500.8
Total cost	£28,562.8	£28,938	£29,500.8
Above salary	14.2%	15.8%	18.0%
Cost per hour	£14.65	£14.84	£15.13

At £25,000, this is a below-median salary, but employer on-costs still add a meaningful amount.

Employer National Insurance: £3,000

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

• Earnings above threshold: £25,000 - £5,000 = £20,000
• Employer NI: £20,000 x 15% = £3,000
• Monthly employer NI: £250

This is an effective rate of 12.0% 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: £562.8

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: £25,000 - £6,240 = £18,760
• 3% contribution: £18,760 x 3% = £562.8/year (£46.9/month)

At 5%, this would be £938/year. At 8%, it would be £1,500.8/year.

Monthly and hourly cost

Period	Salary	+ NI	+ Pension	Total cost
Annual	£25,000	£3,000	£562.8	£28,562.8
Monthly	£2,083.33	£250	£46.9	£2,380.23
Weekly	£480.77	£57.69	£10.82	£549.28

Based on 1,950 working hours per year (37.5 hours/week), the cost per hour is £14.65. This is the figure to use when pricing projects or comparing against contractor day rates.

What the employee actually receives

While you pay £28,562.8 in total, the employee's take-home pay (after income tax and employee NI) is:

• Take-home pay: £21,519.6/year (£1,793.3/month)
• Income tax: £2,486
• Employee NI: £994.4

The gap between what you pay (£28,562.8) and what the employee receives (£21,519.6) is £7,043.2 — you pay 33% more than the employee takes home. The difference goes to income tax, employee NI, employer NI, and pension.

See full £25,000 take-home pay breakdown

Frequently asked questions

How much does a £25,000 employee cost the employer?

With the minimum 3% pension, a £25,000 employee costs £28,562.8/year (£2,380.23/month). This is 14.2% above the gross salary.

How much employer NI do I pay on a £25,000 salary?

Employer NI on £25,000 is £3,000/year (£250/month). That's 15% on earnings above the £5,000 Secondary Threshold.

What is the cost per hour for a £25,000 employee?

Based on 1,950 working hours per year, the total cost per hour is £14.65. The gross salary alone works out to £12.82/hour, but employer on-costs add £1.83/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 £25,000 including employee NI, employer NI, and self-employed NI comparison.