Cost of Hiring an Employee in the UK: A Comprehensive Guide

Employer Social Contributions in the United Kingdom 

Employer Social Contributions in the United Kingdom (also known as Employer Payroll Contributions or Employer Payroll Taxes) are relatively simple compared to many other European countries. For SMEs, there are just two components of Employer Social Contributions, while large enterprises or corporations have three. The total contribution is 18% for SMEs and 18.5% for large businesses: 

• 15% National Insurance (NI) 

• 3% Workplace Pension 

• 0.5% Apprenticeship Levy (only applied for large enterprises/corporations). 
   

So, how does this work in practice? 
 

Let’s say you (an SME) are planning on hiring a Sales Manager in the UK with a gross base salary of 5,000 GBP per month (6,685 USD at the time of writing, 22 April 2025). You would have to take into consideration roughly 18% on top of it for employer contributions, having a (sub)total employment monthly cost of 5,900 GBP (7,889 USD).  

Work Place Pension in the UK (Benefit) 

It’s important to clarify that employees have the option to opt-out of the workplace pension. By default, employees are automatically enrolled/opted-in, but they can choose to remain enrolled or opt-oopt outut at any time. 

What is the workplace pension?

The workplace pension is a in theory a private pension scheme provided by the employer to help employees save for retirement. If an employee stays enrolled, the employer contributes a minimum of 3%, and the employee contributes 3%. In other words, the employee enjoys a total pension contribution of 8%.  

However, if the employee opts out, the employer's contribution drops by 3%, and the employee will receive a higher salary since he/she no longer has to contribute their own 5%. 

While the workplace pension is considered a benefit in the UK, employers are legally required to offer it. Employees, however, can choose to opt-out if they prefer. 

Other common benefits 

If you have white collar workers, other common benefits include: 

• Private healthcare: Costs can vary between 60 GBP to 125 GBP per month for individual cover. 
  

• It is important to note that employees are automatically entitled to healthcare through the National Health Services (NHS). However, many employers offer private healthcare or health insurance to help employees with medical costs outside the NHS. This can also include coverage for dental and optical care. 
  

• Work-From-Home-Allowance (if working from home / remotely): Allowances generally rang from 50 to 100 GBP per month.  
  

• Life Insurance: The average cost of life insurance in the UK in 2025 is £10 per month for a single life insurance policy and £20 per month for a joint life insurance policy.
  
   

Lastly, it is important to note that it is mandatory for every employer in the United Kingdom to have a liability insurance policy with coverage of at least £5 million from an authorised insurer, to covers legal fees and costs in the event that a worker is injured or becomes ill due to their work. Small businesses can expect to pay a monthly premium ranging between 30 to 150 GBP per month. Depending on the industry (risk level), claim history, and business size. 

If you are interested in other insights related to costs of hiring an employee in Europe, please read the blog about the Cost of Hiring a EU Employee.

EuroDev can help you! 

We support international employers like you with tailored HR solutions, so you can focus on growing your business while we handle the local complexity. 

With our extensive experience in European HR management, we help organizations not only navigate legal and regulatory frameworks but also bridge cultural gaps, ensuring that HR policies, benefits, and workplace practices are adapted effectively for each local market.

By partnering with EuroDev, businesses can build a strong, compliant, and culturally attuned presence in Germany and beyond, creating a foundation for sustainable growth and employee satisfaction across Europe. Contact EuroDev today to learn how our HR and legal experts can support your business across Europe, or explore our full range of HR Outsourcing services.