Total Compensation Cost Calculator UK 2025–26
See the full cost of a salary to an employer, and how much of that reaches the employee as take-home pay. Includes employer NI, income tax, and employee NI for 2025–26.
Understanding the gap between employer cost and employee take-home
When an employer pays a salary, multiple taxes reduce the amount that reaches the employee as take-home pay. Understanding this gap helps both employers budget accurately and employees appreciate the full picture of what they are worth to their employer.
The three taxes that create the gap
Three taxes extract value between the employer's total cost and the employee's take-home pay:
- Employer NI (15% above £5,000): Paid directly by the employer on top of the salary. This never appears in the employee's pay packet — it is a cost that exists before the salary is even paid.
- Income tax: Deducted from the employee's gross salary under PAYE. The effective rate for most workers is 15–30% of gross salary.
- Employee NI: Also deducted under PAYE. 8% on earnings between £12,576 and £50,270; 2% above that.
The overhead ratio in practice
For a typical £35,000 salary in 2025–26, the breakdown is approximately: employer pays £39,750 total (£35,000 salary + £4,750 employer NI); the employee receives around £27,000 net. The overhead ratio is roughly (£39,750 ÷ £27,000) − 1 ≈ 47%. In other words, for every £1 the employee takes home, the employer spends an additional 47p.
What is not included
This calculator shows the statutory employment cost. Employer pension contributions (minimum 3% of qualifying earnings under auto-enrolment), employer-provided benefits (private medical, life insurance, company car), and payroll administration costs are not included. For a complete total reward picture, add these figures to the employer cost shown.
Frequently asked questions
What is the total cost of employing someone?
The total cost to an employer is the gross salary plus employer National Insurance. For 2025–26, employer NI is 15% on earnings above the £5,000 secondary threshold. For a £50,000 salary, the total employment cost is approximately £57,200. This does not include other employment costs such as employer pension contributions, benefits, or recruitment costs.
What is the overhead ratio?
The overhead ratio shown is (total employer cost ÷ employee take-home) − 1, expressed as a percentage. It answers the question: for every £1 the employee takes home, how much extra does the employer pay? For a typical UK salary, this ratio is often between 80% and 120%, meaning the employer pays £1.80–£2.20 for every £1 the employee receives.
Why does so much of the employer cost not reach the employee?
Three taxes reduce the amount that reaches the employee: employer NI (paid directly by the employer, never reaches the employee), income tax (deducted from the employee's salary), and employee NI (also deducted). Together, these three taxes typically consume 40–50% of the total employer cost for a typical salary.
Does the total cost include pension contributions?
No — this calculator shows the statutory employment cost: salary plus employer NI only. Employer pension contributions (typically 3–8% of qualifying earnings under auto-enrolment) are additional. If you want to model the cost including pension, add your employer's contribution percentage to the total cost figure.
Is this useful for salary negotiation?
Yes — understanding total employment cost helps both sides. Employees can see how much of their package never appears in their pay packet, which can inform negotiations about benefits versus salary. Employers can see the true budget impact of a pay offer before confirming it.
Related calculators
This calculator provides estimates only. Results are based on the 2025–26 tax year. Credibrate is not a tax adviser. For personalised advice speak to a qualified accountant.