What does it cost to employ someone in the UK?

What sits on top of salary

• Employer National Insurance at 15% of everything each employee earns above £5,000 a year. There is no upper limit, so it keeps applying on the whole salary of a senior hire.
• The workplace pension. Employees must be enrolled automatically and the employer must contribute at least 3% of earnings between £6,240 and £50,270, with the employee contributing enough to bring the total to 8%. Many groups pay more than the minimum to match what they offer elsewhere, which the calculator allows for.
• The Employment Allowance reduces the employer National Insurance bill by up to £10,500 a year. Two conditions apply: it can be claimed only once across all the connected UK companies under common control, and it cannot be claimed at all by a company whose only employee earning above the threshold is a director. A new subsidiary whose first hire is the country manager, appointed to the board, often cannot claim it in year one.

What the calculator leaves out

These are real costs and they vary too much to guess at, so they are not in the figure:

• Employers' liability insurance, at least £5 million of cover, legally required from the first employee.
• Paid holiday of 5.6 weeks a year including bank holidays. It is not an extra cash cost, but it is roughly a tenth of the working year and it changes what one person can deliver.
• Statutory sick pay from the fourth day of absence, and statutory maternity, paternity and shared parental pay, some of which is recoverable from HMRC.
• Sponsorship, where the hire needs permission to work: a licence fee of £611 or £1,682 and the immigration skills charge of £480 or £1,320 a year for each sponsored worker.
• Recruitment, equipment, software and anywhere they might sit.

Notice periods

There is no at-will employment in the UK. Notice periods are set by statute and by the contract, and contractual notice of one to three months is normal for senior hires. Ending someone's employment needs a fair reason and a fair process. That does not make hiring here difficult, but it does mean a UK hire is a longer commitment than the same hire in some other markets, and it belongs in the plan alongside the salary.