UK household employer cost guide
Total cost of employing domestic staff
The total employer cost is more than gross salary. A household may also need employer National Insurance, workplace-pension contributions, Employers’ Liability insurance, payroll administration and any optional cover used while the employee is on paid leave. Calculate these separately from agency fees and from the employee's PAYE deductions.
What does it cost to employ a nanny, housekeeper or other domestic worker?
Start with the agreed gross salary, then add employer National Insurance where due, the employer pension contribution where automatic enrolment or the chosen scheme requires it, Employers’ Liability insurance and payroll administration. Add agency placement fees separately and budget for optional temporary cover if the household needs someone else while the employee takes paid leave.
Tax, pension and insurance rules depend on the actual employment. The worked examples below use stated 2026/27 assumptions for illustration only and are not personalised tax or payroll advice.
Build the employer cost in separate layers.
The contractual pay before employee deductions.
Use the role-specific London market evidence and the actual duties, hours and arrangement. Gross salary is the starting point, not the complete employer budget.
The employer's National Insurance liability.
For 2026/27 the general employer Class 1 rate is 15% above the applicable secondary threshold; the annual secondary threshold is £5,000. Payroll determines the exact liability from the pay period and category.
Employer workplace-pension contributions where applicable.
For the common qualifying-earnings basis, minimum total contributions are 8% with at least 3% from the employer. The 2026/27 qualifying-earnings band is £6,240 to £50,270.
Employers’ Liability cover.
A household employer will usually need at least £5 million of Employers’ Liability insurance, subject to the statutory exceptions. The premium depends on the insurer and policy.
Software or bureau administration.
Use the actual provider fee. This page does not invent a universal household-payroll price.
Replacement staffing while the employee is on paid leave.
Paid statutory holiday is already part of the employee's salary. A separate additional cost arises only if the household chooses to pay another worker or service during that absence.
Worked example: £40,000 gross salary in 2026/27.
This simplified example shows the employer-cost build-up before insurance, payroll service fees, agency fees or optional holiday cover.
Do not add the employee's deductions to the employer cost twice.
PAYE income tax and employee National Insurance are normally deductions from the employee's gross pay; they are not extra employer costs on top of that same gross salary. Employer National Insurance is a separate employer liability. Pension contributions also have employee and employer components depending on the scheme.
The dedicated nanny-tax guide explains who pays what and how PAYE concepts fit together. This page owns the employer's total-budget view.
Where do agency fees sit in the total cost?
Agency placement fees are a separate acquisition cost, not part of the employee's gross salary or HMRC payroll calculation. Use the current domestic staffing fees page for FDS's applicable commercial terms.
For nanny-specific salary evidence, use the Filipino nanny cost guide. Keeping salary evidence and the total employer-cost calculation on separate pages prevents one broad “cost” answer from obscuring which figure a household is actually comparing.
From our work: we split the staffing budget into salary, employment on-costs and the agency charge before households compare options.
Filipino Domestic Services' cost architecture deliberately gives different pages to different questions. The nanny, housekeeper and nanny-housekeeper cost guides benchmark the role itself. The nanny-tax and payroll guides explain PAYE and employer administration. The fees page owns the agency charge. This total-cost page brings those layers together without changing who owns the underlying figures.
That separation matters during a household brief because a candidate's requested gross salary is not the same as the household's annual cash budget. Once the household chooses a gross figure, employer National Insurance and pension contributions can materially change the total. Insurance and payroll administration add their own costs, while an agency placement fee belongs to the recruitment transaction rather than monthly payroll.
We also separate paid holiday from holiday cover. A salaried employee's paid statutory leave is not an extra salary payment on top of the annual gross figure. The additional household cost appears only if continuity is needed and the household chooses to pay another worker or service during the employee's absence.
For budgeting, our recommendation is therefore to keep a visible line for every layer and mark whether the figure is statutory, provider-specific or optional. That makes later changes easier to understand and prevents a household from calling every cost “nanny tax”.
How does the total change at higher salaries?
Employer National Insurance generally rises as earnings above the applicable threshold rise. On the common qualifying-earnings pension basis, pensionable earnings are capped at the upper qualifying-earnings limit, so the minimum employer contribution does not keep rising indefinitely with salary. Payroll should calculate the actual amounts rather than using an annual shortcut for payslips.
The correct next step is to set the role-specific gross salary first, then run that figure through current payroll rules. If the household is still choosing the role rather than the salary, return to the domestic-help role chooser before budgeting.
Total employment-cost questions.
What costs are on top of a nanny's gross salary?
Depending on the employment, the household may have employer National Insurance, employer pension contributions, Employers’ Liability insurance, payroll administration, agency fees and optional cover costs. Calculate each layer separately.
What is the employer National Insurance rate in 2026/27?
The general Class 1 secondary rate is 15% above the applicable secondary threshold, which is £5,000 a year for 2026/27. Payroll rules and category letters can affect the actual liability, so use current HMRC calculations for the employee.
How much does the employer pay into a workplace pension?
For the common statutory minimum on qualifying earnings, the employer contributes at least 3% and total minimum contributions are 8%. Scheme basis and employee eligibility matter, so use the actual pension setup.
Is paid holiday an extra cost on top of annual salary?
For a salaried employee, paid statutory holiday is normally paid from the agreed annual salary rather than added as another annual salary amount. Extra cost can arise if the household pays separate cover while the employee is away.
Are agency fees included in nanny payroll?
No. Agency placement fees are separate from the employee's gross pay and PAYE calculation. Keep the recruitment fee on its own budget line and use the current FDS fees page for the applicable terms.
Is the £40,000 example a tax quote?
No. It is a simplified annual illustration using stated 2026/27 assumptions. Actual National Insurance and pension amounts depend on payroll periods, employee circumstances, category and pension scheme basis.
Official 2026/27 sources.
Rates and thresholds are time-sensitive. The page should be reviewed each tax year and signed off by a qualified UK household-employment/payroll reviewer before production.
Set the gross salary first, then add every employer layer visibly.
Keep recruitment fees, payroll on-costs and optional household cover separate so the budget remains auditable.