Understanding true cost

The hourly rate on an employee's contract is not the real cost of employing them. On top of the base rate, you pay employer National Insurance, pension contributions, and accrue holiday pay - all of which add significantly to the actual cost per hour worked.

StaffBrik calculates the true cost automatically for every employee, giving you an accurate picture of your labour costs for rota planning, menu pricing, and budgeting.

What makes up true cost?

True cost = base rate + employer NI + pension + holiday accrual

StaffBrik shows this as two figures:

• Shift cost - the base rate plus employer NI and pension. This is what each rota hour costs.
• True cost - the shift cost plus holiday accrual: what you really pay for each hour worked, and the figure to use for pricing. An employee's Pay tab shows it as Cost per working hour, and the New Hire Calculator as True cost.

Contracted staff are paid for holiday when they take it, so their shift cost leaves it out. Zero-hours and casual staff accrue holiday on every shift, so by default it is added to their shift cost, and their two figures are the same.

Each component is explained below.

Base rate

The employee's contracted hourly rate. This is the starting point for the calculation. For salaried staff, it is their salary's hourly equivalent: the salary ÷ 52 ÷ the weekly hours it pays for.

Employer National Insurance

As an employer, you pay National Insurance on your employees' earnings above the secondary threshold.

• Rate: 15% of earnings above the secondary threshold.
• Secondary threshold: £96 per week (£5,000 per year).
• NI categories M, H, Z and V (employees under 21, apprentices under 25, and veterans in their first civilian job): no employer NI up to £967 per week (£50,270 per year), meaning most young or apprentice workers attract 0% employer NI.
• Freeport and investment zone categories F, I, L, S, N, E, D and K: no employer NI up to £481 per week (£25,000 per year), then 15% above that.
• NI category X (no NI to pay, typically under 16): no employer NI at all.
• NI category C (over State Pension age): employer NI is paid as standard. It is only the employee's own NI that stops.
• All other categories (A, B and J): the standard rate above.

info

The higher threshold for NI categories M and H can make a significant difference. A 19-year-old barista earning £12/hr and working 25 hours a week (£300/week) would attract zero employer NI under category M, saving you roughly £1.22/hr compared to a standard-category employee on the same rate.

These letters end with age: M and Z at 21 (to A and J), and H at 25 (to A). StaffBrik costs rota weeks at the letter that applies on the day, and reminds owners and admins six weeks before the birthday so they can update the rate (see Birthdays that change pay). The Pay Rise Planner also costs a planned rise at the letter that applies on the day it's planned for, so someone who turns 21 before April is costed with employer NI.

If you claim the Employment Allowance, up to £10,500 a tax year comes off your employer NI. See The Employment Allowance below.

Auto-enrolment pension

If your employee is auto-enrolled into a workplace pension, you must contribute a minimum of 3% of their qualifying earnings.

• Minimum employer contribution: 3% of qualifying earnings.
• Qualifying earnings band: £120 to £967 per week (£6,240 to £50,270 per year).
• Auto-enrolment covers staff aged 22 up to State Pension age. Staff on NI categories M and Z (under 21), X (typically under 16), and C, S and K (over State Pension age) are not auto-enrolled, so pension starts switched off for them. They can still choose to join, and a pension setting you or your payroll provider have already recorded is always kept.

tip

Some employers contribute more than the 3% minimum. If you do, update the pension rate in StaffBrik Settings so your true cost calculations reflect reality.

Holiday accrual

Every hour an employee works generates a holiday pay liability. The holiday pay itself is 12.07% of the base rate: the Holiday accrual line in an employee's cost breakdown. Holiday pay attracts employer NI and pension too, so in the true cost StaffBrik adds 12.07% of the whole shift cost, not just of the base rate.

Where does 12.07% come from?

An employee works 46.4 weeks per year (52 weeks minus 5.6 weeks of statutory holiday). Their 5.6 weeks of holiday pay must be funded from those 46.4 working weeks:

5.6 ÷ 46.4 = 12.07%

This means for every £1.00 you pay in wages, you are also accruing approximately £0.12 in holiday pay liability.

Worked example

Let's look at a real-world example for a hospitality business.

Employee: Line cook, standard NI category, auto-enrolled in pension. Base rate: £13.21/hr Typical week: 30 hours

Component	Calculation	Per hour
Base rate	-	£13.21
Employer NI	15% of (£396.30 - £96) = £45.05/week ÷ 30 hrs	£1.50
Pension (3%)	3% of (£396.30 - £120) = £8.29/week ÷ 30 hrs	£0.28
Shift cost	What each rota hour costs	£14.99
Holiday accrual, with NI and pension on it	12.07% of £14.99	£1.81
True cost		£16.80

caution

That £13.21/hr employee actually costs you £16.80 for every hour they work - a 27% uplift. If you are pricing your menu, setting labour budgets, or comparing job applicants based on the contract rate alone, your real costs are more than a quarter higher than that rate suggests.

What this means at scale

For that same line cook on 30 hours a week, paid for all 52 weeks of the year, including their holiday:

Metric	Contract rate only	True cost
Annual cost	£20,607.60	£23,384.40
Difference		£2,776.80

The true annual cost is the shift cost × 30 hours × 52 weeks: the Estimated annual cost the New Hire Calculator shows, to the nearest pound. The difference is the employer NI and pension, plus a few pounds from rounding the hourly shift cost to the penny. Across a team of 10, that is over £27,000 a year that does not appear in anyone's hourly rate but absolutely appears on your P&L.

As a share of the base rate, the annual gap is smaller than the hourly one, because the wage bill already includes paid holiday. The hourly true cost is higher because those 52 weeks of pay buy 46.4 weeks of work.

The Employment Allowance

Most UK employers can take up to £10,500 a tax year off their employer NI with the Employment Allowance. StaffBrik doesn't claim it for you: you claim it through your payroll. Tell StaffBrik you claim it, in StaffBrik > Settings > Pay & rates, and it comes off your labour costs pay day by pay day, the way payroll takes it, from the start of the tax year until it's used up.

• Period totals show two figures. The rota, the StaffBrik dashboard and the Weekly wage and Day analysis reports show the labour cost, the allowance and the cost after it, and the wage % on the rota, on Home and in the reports is worked out after it. A wage % on shifts, with holiday pay and SSP aside, takes off only the allowance on the shifts' own NI. Your budget is still judged on the shifts at their full cost. In the week the allowance runs out, the figure after it steps up to the full cost, because from then on you pay employer NI in full.
• Hourly costs keep employer NI in. Shift costs, cost per working hour and the New Hire Calculator stay as described on this page. Once the allowance has run out, the NI on every extra hour is real money, so an hourly figure without it would understate what the next hour costs.
• A second figure when it lasts the year. If StaffBrik projects your allowance will last until 5 April, the NI on an extra hour is covered too. Owners and admins then also see a figure With your Employment Allowance on each employee's Pay tab and on the team list. For the line cook above, that takes the £1.50 an hour of employer NI out of the shift cost.
• It starts again every April. The allowance resets on 6 April, and it has to be claimed again in your payroll every tax year. StaffBrik reminds owners and admins a week before, and again on the first pay day of the new tax year.

Where true cost appears in StaffBrik

True cost figures are used throughout StaffBrik:

• Rota costing - when you build a rota, each shift is costed at the person's shift cost, with employer NI and pension, not just the base rate. Employer NI and pension are worked out on each person's whole week across all your sites, with one £96 NI threshold and one £120 pension threshold a week, however many sites they work at. A new starter whose first day is mid-week is charged in that first week. For staff whose rate rolls holiday in, the 12.07% holiday pay, with the NI and pension on it, is in their shift costs (see Budgets and publishing). Salaried staff are costed up to their weekly hours, and the hours over them by their Extra hours setting, which can be nothing (see How a salaried week is costed).
• Employee profiles - each employee's profile shows their Base rate (or Salary) and Shift cost, and the Pay tab adds their Cost per working hour and a Cost breakdown. For a rate that rolls holiday in and has contracted hours, the cost per working hour counts holiday once, not twice.
• New Hire Calculator - the New Hire Calculator works out what a new hire would really cost, before you take them on.
• Reports - the Employee cost report shows what each person actually cost over a period, built from these shift costs plus any SSP and holiday pay.
• Minimum wage checks - the Pay Rise Planner and the team list check each person against the minimum wage for their age on the relevant date: today for the team list, and the day the next rate applies for the planner. Someone paid below a minimum wage rise that has been announced but not started yet gets a separate hint on the team list, saying the new minimum and the date it starts. Both check a salary on its hourly equivalent, and neither flags a company director with no employment contract. Salaried staff are also checked for each pay period on the hours they actually work: see The minimum wage check.
• Real Living Wage - the Pay Rise Planner's Real Living Wage (£14.10) and London Living Wage (£15.45) quick scenarios raise the staff you have selected who are paid less than that rate up to it, and never lower anyone. Apprentices (NI category H) and anyone under 18 keep their rate, because Living Wage accreditation does not cover them. Until 1 May 2027, the date accredited Living Wage employers must pay the new rates, StaffBrik counts anyone who will still be under 18 on that date. A message tells you how many people were raised, how many were already on the rate or more, and how many kept their rate.

Why this matters for hospitality

Hospitality businesses typically run on labour costs of 25-35% of revenue. If you only look at base rates, remember that each hour worked really costs a quarter or more above the base rate, so your actual labour percentage could be several points higher than you think.

Understanding true cost helps you:

• Price your menu accurately - know the real labour cost behind each dish or drink.
• Set realistic budgets - plan for the costs you will actually incur.
• Make informed hiring decisions - compare the true cost of a senior hire vs two junior hires.
• Evaluate pay rises properly - a £1/hr pay rise does not cost £1/hr when you factor in the NI and pension uplift.