A UK employee costs a lot more than their salary. On top of pay, you have employer National Insurance, pension contributions, recruitment, equipment, desk space and the time it takes to manage them. Before you compare a local hire with any alternative, add all of these up.
This guide walks through each cost for the 2026/27 tax year, works through an example, and shows how to compare it fairly with a managed offshore team.
Employer National Insurance
Employers pay National Insurance at 15% on each employee's earnings above the secondary threshold of £5,000 a year. Both the rate and the threshold changed in April 2025: the rate went up from 13.8% and the threshold came down from £9,100, so every hire now costs noticeably more than it did. Check the current rates on GOV.UK before you budget.
Many smaller employers can claim the Employment Allowance, which reduces the National Insurance bill each year. It helps the first few hires most; once your payroll grows, the full 15% applies to every new person.
Workplace pension
Under auto-enrolment, you must put eligible employees into a workplace pension and contribute at least 3% of their qualifying earnings. Many employers pay more to attract and keep good staff.
The costs that don't appear on a payslip
- Recruitment: job board adverts, or a recruitment agency fee that is often a percentage of the first year's salary.
- Time to hire: weeks of interviews, and lost output while the role is empty.
- Equipment and software: a laptop, phone, headset and a licence for each tool they use.
- Office space: a desk, utilities and everything that comes with it, or a home-working allowance.
- Holiday and sickness: 5.6 weeks of paid holiday a year, plus cover when someone is off.
- Management and HR: payroll, contracts, appraisals and the hours a manager spends supervising.
A worked example
| Cost | Amount | How it's worked out |
|---|---|---|
| Salary | £30,000 | Gross pay |
| Employer National Insurance | £3,750 | 15% of £25,000 (pay above the £5,000 threshold) |
| Pension (minimum) | About £700 | 3% of qualifying earnings |
| Total before overheads | About £34,450 | Salary plus on-costs |
That total still leaves out recruitment, equipment, office space and management time, which can add thousands more in the first year. The example ignores the Employment Allowance, which smaller employers should factor in.
How an offshore team compares
A managed offshore team member is usually one monthly fee. With Chishty Global, that fee covers recruitment, payroll, HR, a supervised office, company equipment, internet and power backup, and day-to-day management. There is no employer National Insurance or UK pension to pay, because we employ the team, and no desk to find.
To compare fairly, put your full yearly cost of a local hire next to twelve months of the offshore fee, and check exactly what that fee includes. Our guide to what a managed team includes is a useful checklist.
When hiring locally still makes sense
Some roles belong in your own office: anything that needs to be physically on site, senior leadership, and roles where face-to-face client contact is the job. Offshore works best for roles done on a laptop during set hours, such as customer support, sales and lead generation, admin and back office, design and software development.
Tell us which role you are thinking of hiring and we will send you a clear monthly price to compare with your local numbers.