Payroll Calculator
What an employee costs on top of the salary, and what an hour of their work costs once the days that are paid and not worked are taken out.
Salary £72,000.00
On top of it
employer contributions £8,680.20, 12.1% of the pay
employer pension £3,600.00 at 5%
insurance and benefits £1,200.00
equipment £1,500.00
software and licences £900.00
everything else £600.00
Total cost £88,480.20
a month £7,373.35
as a multiple of the salary 1.229×
the part that is not salary £16,480.20, 18.6% of the cost
Days
in the contract year 260
paid and not worked 41: 25 holiday, 8 public, 5 sick, 3 training
actually available 219, 84.2% of the year
Cost an hour
salary over contract hours £34.62 across 2,080 hours
total cost over contract hours £42.54
total cost over hours worked £50.50 across 1,752 hours
which is 1.46× the figure a salary divided by the hours in a year would give
a day worked £404.02
What that means for a rate
at 100% of hours billable £50.50 an hour to break even
at 80% of hours billable £63.13 an hour to break even
at 60% of hours billable £84.17 an hour to break even
At other salaries
£54,000 £67,096.20 total, £38.30 an hour worked
£72,000 £88,480.20 total, £50.50 an hour worked ← yours
£93,600 £114,141.00 total, £65.15 an hour worked
A £72,000.00 salary costs £88,480.20, which is 1.229 times it. The part
that is not salary is £16,480.20, and a hire budgeted at the salary is
short by that much before the first pay run.
An hour of work costs £50.50 rather than the £34.62 a salary divided by
the hours in a year suggests. 41 days are paid and not worked, so the
larger number is divided by the smaller one and the two corrections
compound.
Employer contributions are charged above a threshold in most systems,
which is why they are entered as bands here. It also means the employer
cost of a raise is higher than the raise, and higher again once a
pension percentage is applied to it.
Holiday is a cost that does not appear in a salary line. Paid leave
means the work has to be done in fewer days at the same cost, and adding
a day of leave raises the cost per hour worked without changing
anybody's pay.
Sick days belong in this calculation as an expected value rather than a
plan. Somebody who is never ill has not saved you money; the average
across a team is what a budget should carry.
Recruitment, onboarding and the months before someone is fully
productive are real costs and are not here. Spread over a first year
they are usually worth more than the equipment line.
The break-even rate is a floor, not a price. A billable rate has to
carry sales, admin, unbilled time, profit and the periods between
contracts, which is why the rate a contractor charges is a multiple of
the cost of an employee rather than equal to it.
Output is valid and updates as you type.
Fix the highlighted fields to update the output.
Two corrections between a salary and what somebody actually costs an hour, and they compound.
The first is on the money. Employer social contributions, pension, insurance, equipment and software sit on top of the salary, and the total is typically 1.2 to 1.4 times it. A hire budgeted at the salary is short by a quarter before the first pay run.
The second is on the hours. Holiday, public holidays, sick days and training are paid and not worked, so the cost of an hour that is available divides a larger number by a smaller one. On the example a £34.62 salary rate becomes £50.50, which is 1.46 times the figure a salary divided by the hours in a year gives.
That £50.50 is what a billable rate, a build-versus-buy comparison or an outsourcing quote has to be measured against.
How to use
- Put in the salary and any bonus, then the employer contribution bands and pension percentage.
- Add insurance, equipment, software and anything else you pay because this person exists.
- Put in the days: the contract year, then holiday, public holidays, expected sick days and training.
Example
A £72,000 salary with UK-shaped employer contributions, 5 percent pension and 41 days away:
On top of it
employer contributions £8,680.20, 12.1% of the pay
employer pension £3,600.00 at 5%
insurance and benefits £1,200.00
equipment £1,500.00
software and licences £900.00
everything else £600.00
Total cost £88,480.20
a month £7,373.35
as a multiple of the salary 1.229×
the part that is not salary £16,480.20, 18.6% of the cost
Days
in the contract year 260
paid and not worked 41: 25 holiday, 8 public, 5 sick, 3 training
actually available 219, 84.2% of the year
Cost an hour
salary over contract hours £34.62 across 2,080 hours
total cost over contract hours £42.54
total cost over hours worked £50.50 across 1,752 hours
a day worked £404.02
What that means for a rate
at 100% of hours billable £50.50 an hour to break even
at 80% of hours billable £63.13 an hour to break even
at 60% of hours billable £84.17 an hour to break evenThe 80 percent line is the honest one for most teams, and £63.13 is a long way from £34.62.
Pitfalls
Budgeting a hire at the salary is short by a fifth or more. The contributions alone are usually a tenth to a sixth of the pay, before anything else.
Employer contributions are charged above a threshold. Which means the employer cost of a raise is more than the raise, and more again once a pension percentage applies to it.
Holiday is a cost that appears in no salary line. Adding a day of leave raises the cost per hour worked without changing anybody’s pay, because the same work has to happen in fewer days at the same cost.
Sick days belong here as an expected value. Somebody who is never ill has not saved money. Use the average across the team, which is what a budget has to carry.
Recruitment and ramp-up are missing. Agency fees, interview time and the months before somebody is fully productive are real, and over a first year they usually cost more than the equipment line.
The break-even rate is a floor, not a price. A billable rate carries sales, admin, unbilled time, profit and gaps between contracts. That is why a contractor’s rate is a multiple of an employee’s cost rather than equal to it.
Cost per hour is not value per hour. This says what an hour costs. What it produces is a separate question, and the two are unrelated in most knowledge work.
Compatibility
Arithmetic in the browser: nothing is uploaded and nothing is stored.
Employer contributions are entered as bands, because almost every system charges them above a threshold rather than from the first unit of pay. That also means a country with a contribution ceiling models correctly: a top band of zero above a limit stops the charge where it should stop.
The bonus is included in the contribution base, since employer contributions are normally charged on it, and the test suite asserts that rather than leaving it to inspection.
Days away are validated so they cannot consume the whole contract year, and every on-cost row is left out when it is zero, so a contractor with no benefits produces a cost multiple of exactly 1.000 rather than a page of zeros.
Frequently asked questions
What multiple of salary should I budget?
Why divide by hours worked rather than contract hours?
What utilisation should I assume?
Does this work for a contractor comparison?
What about employer contribution ceilings?
above:0 row stops the charge cleanly.