How much does it really cost to employ someone?


This calculator accounts for all the hidden costs that can easily be overlooked and reveals the true cost of an employee.

It will help you identify whether it could be more cost effective to outsource a job and reduce business costs.

As you enter the costs that are relevant to your business the true cost of an employee will be updated and shown in the results at the bottom.

You’ll probably be surprised at how much greater the true cost is compared with the basic salary.

We’ve included a useful pie chart to clearly show the breakdown of costs. 

Read our user guide for explanations of each step: 

True Cost of an Employee Calculator User Guide

STEP 1 :: ENTER BASIC ANNUAL SALARY & HOURS

Basic Annual Salary
£
Hours worked per week
Basic Salary Hourly Rate
£
Select NI Code Letter (Default code is 'A')

STEP 2 :: ENTER ADDITIONAL PAYMENTS

Basic Annual Salary
£
Annual Bonus / Commission
£
Total Annual Overtime
£
Other taxable payments
£
TOTAL BONUS/COMMISSION, ETC
£
TOTAL TAXABLE INCOME
£
Employer's Class 1A NICs
£
TOTAL SALARY COSTS
£
Running total £'s

STEP 3 :: ENTER OPTIONAL BENEFITS

Company car
£
Gym
£
Health care
£
Life assurance
£
Pension
£
Other
£
Benefits total for NICs calculation
£
Class 1A NICs (P11D)
£
TOTAL OPTIONAL BENEFITS COST
£
TOTAL EMPLOYER'S NI
£
TOTAL PAYROLL COSTS
£
Running total £'s

STEP 4 :: ENTER FACILITIES AND OTHER COSTS

Employee specific costs

Software licences
£
Training
£
Mobile phone
£
Computer & IT support
£
Other
£
TOTAL EMPLOYEE COSTS
£
Running total £'s

STEP 5 :: ENTER APPORTIONMENT OF OFFICE COSTS

Share of general overheads (rent, rates, building maintenance, water, heat & light, telephone, insurance, etc)
£
Consumables (stationery, toner, tea/coffee, toilet paper, etc)
£
Administrative overheads (HR, payroll, secretarial, appraisals, etc)a
£
Other
£
TOTAL EMPLOYEE COSTS
£
Running total £'s

STEP 6 :: ENTER OTHER COSTS AND POTENTIAL LIABILITIES

Maternity/paternity leave
£
Sick leave holiday pay
£
Jury service
£
Redundancy
£
Unfair dismissal claims
£
OFFICE COSTS
£
Running total £'s

STEP 7 :: ENTER HOLIDAYS & OTHER LOST TIME

Days
Weekdays in a year
Deduct:
Holidays (minimum is 28 days for Full Time employees)
Formal training
Other
Sick days
Wasted/unproductive time (allow 15 mins per working hour)
ACTUAL PRODUCTIVE WORKING DAYS PER YEAR
Running total £'s

THE TRUE COST OF AN EMPLOYEE

ACTUAL COST PER HOUR
£
ACTUAL COST PER DAY (total costs/working days)
£
ACTUAL COST PER YEAR
£
MULTIPLE OF BASIC SALARY
£


True Cost of an Employee calculator user guide 

Steps 1 to 3 allow you to enter the direct remuneration costs of an employee. The Calculator will show the total payroll cost at the end of Step 3.

Steps 4 to 7 will allow you to enter all of the additional hidden costs of an employee.

The True Cost section will show the actual cost per year, per day and per hour, and show the multiple of salary.

Step 1 : Basic Annual Salary and Hours

Enter the contractual Basic Gross Salary before deductions.

You’ll be able to enter bonuses and other payments in Step 2. You’ll also be able to enter Pension and Other benefits in Step 3.

For part-time employees, enter the annual pay and the number of hours worked per week.

The calculator will show the Hourly Rate of pay.

National Insurance (NI) Letter Code

Enter the employee’s NI Letter Code. The default NI Code Letter is ‘A’.

Change this if your employee’s Code Letter is different to see the Employer NI Contributions.

Step 2 : Enter Additional Payments

Enter the Annual Bonus / Commission, Overtime, other taxable payments.

The calculator will then show the Total Taxable Income.

The Employer’s (Secondary) NI Contribution is calculated using the threshold values for the NI Letter Code selected.

The calculator will then show the Total Salary Cost at this stage.

These are the current thresholds for Employer’s (Secondary) NI Contributions

Thresholds for NI contributions

Step 3 : Enter Optional Benefits

This is where you should enter other taxable benefits. We have illustrated some typical benefits.

Although a Workplace Pension might apply, there are different rates for employer contributions, depending on the type of scheme in place. For simplicity, enter the total employer’s contribution that will apply.

Where benefits are provided through a Salary Sacrifice Scheme, the NI Contribution will be reduced.

The Calculator shows the Benefit in Kind Class 1A NICs (P11D). The current rate is 13.8%.

It shows the Total Payroll Cost. This is the total direct cost of an employee’s remuneration and benefits plus the Employer’s NI Contributions.

The Hidden Costs

So far, you’ve entered all of the remuneration costs. But it’s easy to overlook many of the other costs of employing someone.

So from Step 4 onwards you can enter these hidden costs.

Step 4 : Enter Facilities and Other Costs

These are costs that are specific to the individual employee. We’ve illustrated some typical examples, such as software and IT resources, training, etc.

Step 5 : Enter Apportionment of Office Costs

These are the general business costs that are shared by all employees. You might decide to omit this section, but in reality it can be significant and shouldn’t be overlooked.

Try entering some values here to see the impact.

Step 6 : Enter Other Costs and Potential Liabilities

You might look at these costs and decide that they don’t apply just now. But whet would be the impact if circumstances changed?

You might want to test the impact, or you can always use this section in the future.

Step 7 : Enter Holidays and other lost time

A normal year (not a leap year) has 365 days less 52 weekends, so there are 261 working days.

Holidays

The minimum holiday entitlement for full time employees is 28 days, but that can include 8 days paid Bank Holidays. Enter your business holiday entitlement, including Bank Holidays.

Part time employees are entitled to the pro-rata number of days. So, if employee works 2 days per week the entitlement is 2/5 of the normal full time entitlement, ie 11.2 days

Sickness

This is pre-populated, based on the HM Government Office for National Statistics (ONS) latest figures.

The average employee has 4.4 days off sick a year. 12% of absences are not thought to be genuine.

NB: The figure in this box will change pro rata if the number of hours worked per week is changed from the reference figure of 35 hours used by ONS.

Wasted / Unproductive Time

Surveys have found that more than a third of time is wasted or unproductive. It can be time socialising with colleagues, taking a refreshment break, walking from one office to another in the same building, visiting the rest room, distractions, etc.

The figure we have used is a conservative estimate of 25%.

The True Cost of an Employee

The True Cost section shows the actual cost per year, per day and per hour.

It will also show the multiple of salary. The True Cost of and Employee is unlikely to be less than 1.7 times basic salary.

So, if you thought you were going to pay an hourly rate of about £18, the true hourly rate will be over £30.