Key takeaways
- A £35,000 salary costs your employer about 15% more than you are paid, once employer National Insurance and pension are counted.
- Employer National Insurance is 15% of pay above the £5,000 secondary threshold, and employer pension is 3% of qualifying earnings at the auto-enrolment minimum.
- For every £1 that lands in your bank account on £35,000, your employer spends about £1.46.
- Eligible employers get £10,500 a year off their employer NI bill through the Employment Allowance, which wipes out the employer NI on roughly the first £75,000 of payroll above the threshold.
A £35,000 salary costs your employer £40,362.80 — about 15% more than you are paid. The difference is employer National Insurance and pension, and it shapes every pay negotiation you will ever have.
Your salary is not what you cost. Between your gross pay and your employer's bank account sit two more charges — employer National Insurance and employer pension — plus, in larger businesses, the Apprenticeship Levy. None of it appears on your payslip. All of it affects what your employer can afford to pay you. Understanding the gap is the difference between negotiating a pay rise and negotiating a cost increase, and employers think in the second terms.
The breakdown
Employer National Insurance is 15% of your pay above the £5,000 secondary threshold. Employer pension, at the auto-enrolment minimum, is 3% of your qualifying earnings (£6,240–£50,270). Here is what that means at two salaries, from the engine:
| £35,000 salary | £50,000 salary | |
|---|---|---|
| Your gross pay | £35,000.00 | £50,000.00 |
| Employer National Insurance (15% above £5,000) | £4,500.00 | £6,750.00 |
| Employer pension (3% of qualifying earnings) | £862.80 | £1,312.80 |
| Total cost to your employer | £40,362.80 | £58,062.80 |
| Your take-home pay (AE pension, no loan) | £27,569.20 | £37,769.20 |
On £35,000, your employer pays £5,362.80 on top of your salary — and you take home £27,569.20. The ratio is the point: for every £1 that lands in your bank account, your employer spends about £1.46.
On £50,000 the ratio is similar: £58,062.80 of cost against £37,769.20 of take-home pay. Try your own salary in the take-home pay calculator — it shows the employer cost under every result.
Why this matters in a pay negotiation
When you ask for a £3,000 rise, your employer hears a bigger number. Employer NI alone adds 15% to most of the rise, and pension adds a little more — a £3,000 salary increase costs roughly £3,540 once employer NI (£450) and employer pension at 3% (£90) are counted. That does not mean you should not ask; it means you should frame the ask in cost terms, and understand why an employer might prefer a benefit that does not carry employer NI. Salary sacrifice is the mirror image: pension contributions made through sacrifice escape employer NI entirely, which is why employers often promote it — the NI saving can fund a higher pension contribution at no extra cost to them. (No NI cap applies to salary sacrifice in 2026/27 — the £2,000-a-year cap on the NI exemption starts on 6 April 2029.)
The Employment Allowance is the one relief in the system: eligible employers get £10,500 a year off their employer NI bill, which wipes out the employer NI on roughly the first £75,000 of payroll above the threshold. Small employers effectively pay far less than the headline 15% on their first hires. But the allowance is per employer, not per employee, so it does not change the marginal cost of your rise once the business is past the allowance — and it is a caveat, never something to assume in your own numbers.
The costs you do not see — and the levy
The Apprenticeship Levy deserves a closer look, because it is the cost most people have never heard of. It is 0.5% of an employer's annual pay bill above £3 million, with a £15,000 allowance — so a business with a £4 million pay bill pays 0.5% of £1 million, or £5,000, and a business under £3 million pays nothing. For most employers it is irrelevant; for large ones it is a real line in the budget, and it is why umbrella companies pass a 0.5% charge down the chain. The levy was renamed the Growth and Skills Levy in April 2026, but the mechanics did not change: same rate, same allowance, same threshold.
Holiday pay is the other hidden cost, and it is bigger than the levy for almost everyone. Statutory holiday is 5.6 weeks a year — 28 days for a full-time worker — and your employer pays you for those weeks while you produce nothing. That is effectively 12% on top of your salary, before NI and pension on the holiday pay itself: on a £35,000 salary, holiday pay alone adds about £4,200, taking the cost past £44,562.80 before training, recruitment or equipment are counted. None of this is an argument against fair pay. It is an argument for understanding what "the company can afford" actually means: the salary is the smallest part of the cost of employing you.
The small-employer view
Everything in this article looks different from the other side of the desk. For a business hiring its first employee on £35,000, the cost is not £40,362.80 — it is much less, because of the Employment Allowance. Eligible employers get £10,500 a year off their employer NI bill, which wipes out the employer NI on roughly the first £75,000 of payroll above the threshold. On a first hire at £35,000, the employer NI of £4,500.00 is covered entirely by the allowance, so the real first-year cost is the salary plus pension: £35,862.80 rather than £40,362.80. That is the number that decides whether a small business can afford to hire — and it is why the allowance exists. But the allowance is per employer, not per employee, so it does not change the marginal cost of the second or third hire once the business is past it. The first hire is cheap; the fifth is not.
The small-employer view also changes the pension maths. Auto-enrolment applies from the first employee, and the employer must contribute 3% of qualifying earnings — £862.80 a year on a £35,000 salary. That is not optional, and it is not negotiable, but it is also not the whole story: many small employers offer more than 3% because it is the cheapest benefit they can give — it carries no employer NI, it is deductible against corporation tax, and it is worth more to the employee than the same money as salary. And the hidden costs hit small employers hardest: a week of statutory sick pay is a bigger share of a five-person payroll than a five-hundred-person one, and there is no HR department to absorb the admin. If you are the employee, this is worth knowing not to feel sorry for your employer, but to understand the negotiation: a small employer who says "we cannot afford it" may be telling the truth about the marginal cost, and the answer is often a benefit that costs them less than the salary rise you asked for.
The reverse lesson
There is also the reverse lesson. If you are thinking of going self-employed or contracting, this table is your starting point: the employer costs you stop paying as an employee are the costs you start paying as a business — employer NI becomes your problem, pension becomes your choice, and the safety net (SSP, SMP, holiday pay) disappears. The self-employed tax calculator and the umbrella company calculator show both sides of that decision with the same rates.
Finally, remember that the employer's cost is not fixed: it moves with every policy change. Employer NI rose to 15% and the threshold fell to £5,000 in April 2025, the Employment Allowance rose to £10,500 at the same time, and the levy was renamed in April 2026. Each change moved the total by thousands of pounds per employee — and each one was announced months in advance. The employers who plan for the changes are the ones who can afford the rises; the ones who do not are the ones who freeze hiring. If you are negotiating a rise, timing matters: ask after the rates are known, not before.
The one thing to remember about what your job costs is that the salary is the smallest part of it. On £35,000, the employer pays £40,362.80 in total — and that is before holiday pay, sick pay, training, recruitment, and the office you sit in. That does not mean the salary is ungenerous; it means the negotiation is about more than the salary. A benefit that carries no employer NI — a pension contribution through salary sacrifice, for example — is worth more to you and costs your employer less than the same money as pay. And if you are the employer, the Employment Allowance means the first hire is far cheaper than the headline numbers suggest: £4,500.00 of employer NI, covered in full. Know the full cost, on whichever side of the desk you sit, and the negotiation gets easier for both of you.
Work out the full cost
Work out the employer cost on your own salary — employer National Insurance and pension, itemised.
Figures from the 2026/27 rates, last checked against GOV.UK on 5 November 2026. See all the rates on UK tax rates 2026/27. Next in this series: New tax year 2027/28: what changes on 6 April (draft — publishes February 2027).