True Cost of an Employee Calculator

Understanding the full financial commitment of hiring an employee goes far beyond just their gross salary. There are numerous hidden and indirect costs that contribute to the "true cost" of employing someone. Accurately accounting for these helps you budget effectively and understand the real investment you're making in your team.

Use our calculator below to get an estimate of the annual true cost of an employee, taking into account common expenses like National Insurance, pensions, benefits, and overheads.

When we talk about the 'true cost' of an employee, we're looking beyond the gross salary paid directly to them. Here are some of the key components that contribute to the overall expense:

• Gross Annual Salary: The employee's agreed annual wage before any deductions. This is the most obvious cost.
• Employer National Insurance Contributions (NICs): As an employer in the UK, you typically pay NICs on your employee's earnings above a certain threshold. This is a significant mandatory cost often overlooked when only considering gross salary.
• Employer Pension Contributions: Under auto-enrolment rules, employers must contribute to an employee's pension scheme if they meet eligibility criteria. While the minimum is currently 3%, many employers contribute more.
• Employee Benefits: This includes costs for things like private health insurance, dental plans, life assurance, gym memberships, or cycle-to-work schemes. These add significant value for employees but come at a direct cost to the employer.
• Training and Development: Investing in your employees' skills through courses, workshops, or certifications improves their capability but adds to your expenditure.
• Equipment and Software: Providing necessary tools like laptops, monitors, software licenses, mobile phones, or even a portion of home office setup costs are part of enabling an employee to do their job. These costs often need to be annualised over the expected lifespan of the equipment.
• Recruitment Costs: The process of finding and hiring a new employee involves costs like job adverts, agency fees, time spent interviewing, and onboarding. While not annual *per se*, it's helpful to annualise this cost over the expected tenure of an employee for a realistic picture.
• Office Space & Overheads: If you have physical office space, a portion of the rent, utilities, broadband, and communal facilities cost should be attributed to each employee using the space. Even for remote teams, there can be shared costs (e.g., collaboration tools).

By considering all these factors, you gain a much clearer picture of the total investment required for each member of your team.