TL;DR, Hiring in United Kingdom
- Fully-loaded employer cost: ~16% on top of gross salary
- Employer National Insurance: 15% above £5,000/yr threshold (2025+ rate after Oct 2024 Budget)
- Pension auto-enrolment: 3% employer minimum on qualifying earnings (£6,240–£50,270)
- Statutory minimum 28 days holiday including bank holidays for full-time staff
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Statutory employer costs in United Kingdom
In the UK, employers pay 15% Employer National Insurance on salary above £5,000/year (rate raised in the October 2024 Budget, effective April 2025), plus 3% minimum auto-enrolment pension on qualifying earnings between £6,240 and £50,270, plus 0.5% Apprenticeship Levy for employers with payroll over £3M. Total employer cost typically runs 15–18% above gross.
| Contribution | Employer rate | Notes |
|---|---|---|
| Employer National Insurance (Class 1 secondary) | 15% | Applied to earnings above £5,000/year (Secondary Threshold). Rate effective April 2025. |
| Pension auto-enrolment (minimum) | 3% | On qualifying earnings band £6,240–£50,270 (2026/27 limits, unchanged); included in the calculator; many employers contribute 5–8% |
| Apprenticeship Levy | 0.5% | Only employers with annual payroll > £3M; £15K allowance |
Mandatory employee benefits
Beyond statutory contributions, United Kingdom law requires the following benefits the employer must fund.
- Holiday entitlement
- 5.6 weeks (28 days) per year including bank holidays for full-time staff. Pro-rated for part-time.
- Statutory Sick Pay (SSP)
- Current law (2026/27): £123.25/week for up to 28 weeks, payable from the first day of sickness absence. The three waiting days and the Lower Earnings Limit qualifying condition were removed on 6 April 2026 by sections 10–11 of the Employment Rights Act 2025 (SI 2026/373).
- Statutory Maternity Pay (SMP)
- Current law (2026/27): 90% of salary for the first 6 weeks, then £194.32/week for 33 weeks. Employer recovers 92% (or 103% for small employers) from HMRC.
- Statutory Paternity Pay
- Current law (2026/27): up to 2 weeks at £194.32/week or 90% of salary if lower.
Termination, notice and severance
Probation
Typically 3–6 months by contract; no statutory probation period. Current law: unfair dismissal protection begins at 2 years' service. Future confirmed change: section 25 of the Employment Rights Act 2025 cuts the qualifying period to 6 months (not day one) from 1 January 2027 (SI 2026/559).
Notice period
Statutory minimum: 1 week after 1 month, then 1 week per year of service up to 12 weeks. Contracts often specify longer.
Severance
Statutory redundancy pay (after 2 years' service): 0.5/1/1.5 weeks' pay per year of service (under 22 / 22–40 / 41+), capped at £751/week (the week's-pay limit from 6 April 2026, SI 2026/310) and 20 years. Often supplemented with enhanced redundancy.
Common compliance pitfalls
- IR35 / off-payroll working rules, if you engage a UK contractor through their own limited company, the EOR or client may be liable for PAYE if the engagement looks like employment.
- Pension auto-enrolment is opt-out, not opt-in. Eligible employees (age 22+, earning £10K+) must be enrolled by day 1, the EOR handles this, but you fund the 3% employer minimum.
- Right-to-work checks must be completed before the first day of employment. Failure carries up to £60K penalty per illegal worker (post-Feb 2024 increase).
- Future confirmed change: from 1 January 2027 the unfair-dismissal qualifying period falls from 2 years to 6 months (Employment Rights Act 2025 s.25, commenced by SI 2026/559). It is not a day-one right, but the 2-year cliff disappears, so factor it into long-term hiring plans.
Frequently asked questions
EOR platform fees for the UK range from $199–$699 per employee per month. On top, employer National Insurance adds 15% on salary above £5,000/year, plus 3% pension auto-enrolment minimum, for a typical total of 17–20% above gross.
The Employer National Insurance rate increased from 13.8% to 15% effective 6 April 2025, announced in the October 2024 Autumn Budget. The Secondary Threshold also dropped from £9,100 to £5,000, increasing the contribution base. Net effect: ~£900 extra per £45K hire annually.
Yes. IR35 / off-payroll working rules apply to UK engagements regardless of EU membership. If you hire a UK contractor through their personal service company (PSC) and the engagement is 'inside IR35,' the fee-payer (EOR or client) is responsible for PAYE deductions.
In the UK, 'PEO' is rarely used, the standard term is Employer of Record. Some providers offer a 'compliance-only' or 'AOR' (Agent of Record) variant where the client retains employment liability and the provider only runs payroll. EOR is the cleanest option for foreign companies without a UK entity.
No, the NHS covers all UK residents. However, private medical insurance (BUPA, Vitality, AXA) is a common perk at £40–£120/month per employee. Treat as a P11D benefit-in-kind for tax purposes.
Sources
Statutory rates and rules verified against the following authorities. We update this page when rates change.