UK employer guide
How much does a pay rise cost an employer?
A raise is not just the difference between two salaries. The employer may also pay extra National Insurance and pension contributions, so the real cost is often higher than it first appears.
In short
The salary increase is the starting point, but the extra payroll cost usually includes employer National Insurance and employer pension contributions too. That makes the full annual impact larger than the gross pay rise alone.
What changes when salary goes up
Once pay rises, employer National Insurance can also rise because a larger part of the salary sits above the secondary threshold. Pension costs may rise too if the contribution is a percentage of salary.
Why this matters for budgets
A modest-looking pay increase can become a much larger annual payroll commitment once the extra employer costs are included. This is especially useful when comparing retention with hiring someone new.
What this guide does not decide
It does not tell you whether a raise is justified, but it does help you estimate what it means for the budget before you commit to it.
Use the pay rise cost calculator to compare the numbers. HMRC's 2026/27 employer rates and thresholds and Employment Allowance guidance explain the main employer NI rules.