What's covered in this guide?
What are on-costs?
On-costs are employer costs that sit on top of an employee’s base wage. They represent the true cost of employing staff beyond what appears on a payslip.
Examples of on-costs include:
Employer National Insurance contributions
Employer Pension Contribution
Leave accrual provisions
Workforce allows you to configure on-costs so your labour cost reporting reflects your full employment costs, not just gross wages.
Default on-cost configurations
When you create a UK organisation in Workforce, the following on-cost configurations are created automatically:
Name | Rate | Applies to |
National Insurance | 15% | Everyone, Everywhere |
Employer Pension Contribution | 3% | Everyone, Everywhere |
If your organisation requires different on-cost rules, you can:
Delete the default configuration
Create a new on-cost configuration
Apply different rates to specific employee types or locations
Limit an on-cost to ordinary hours only
📝 Important to note: On-cost configurations cannot be edited. To make changes, delete the existing configuration and create a new one.
Types of on-costs
Employer National Insurance
Employer National Insurance (NI) contributions are calculated as a percentage of eligible employee earnings.
Region | Default Rate |
United Kingdom | 15% |
📝 Important to note: Employer NI contributions only apply to earnings above the government-defined monthly threshold (£417/month for the 2026–27 tax year). Workforce automatically applies these thresholds when calculating costs.
Employer Pension Contribution (Auto-enrolment)
UK organisations also include a default Employer Pension Contribution on-cost of 3%.
This represents the minimum employer contribution under UK workplace pension auto-enrolment rules.
Leave accrual costs
Leave accrual on-costs can be added as a custom on-cost if your organisation wants to account for the future cost of paid leave in labour cost reporting.
📝 Important to note: Leave accrual on-costs are not configured by default for UK organisations.
Custom on-costs
You can create custom percentage-based on-costs for additional employer costs, such as:
Training levies
Industry-specific contributions
Internal labour cost provisioning
Custom on-costs work the same way as built-in on-costs.
How on-costs are calculated
On-costs are calculated as a percentage of an employee’s wage cost.
Formula: On-cost Amount = Wage Cost × On-cost Rate
For example:
Employee wage cost = £500
Employer NI rate = 15%
Calculation:
£500 × 15% = £75
This means:
On-cost amount: £75
Total employment cost: £575
If multiple on-costs are configured, Workforce adds them together to calculate the total on-cost amount.
💡 Tip: Different on-costs can apply to different wage types depending on your configuration. For example, some on-costs may only apply to ordinary hours and not overtime.
Apply on-costs to ordinary hours only
Some on-costs only apply to ordinary (base) hours and not overtime or penalty rates.
To apply an on-cost to ordinary hours only:
Navigate to Settings > On-Cost Config
Open or create an on-cost configuration
Enable Only applies to ordinary hours
Save your changes
When enabled, the on-cost is calculated using:
Base wage costs
Allowances
Overtime costs are excluded from the calculation.
💡 Tip: This is useful when certain employer costs do not legally apply to overtime earnings.
Filter on-costs by employee or location
You can configure on-costs so they only apply to specific employees or locations.
Filter by employee type
Use employee tags to apply different on-cost rates to different employee groups.
For example:
Full-time employees
Part-time employees
Casual employees
Filter by location
Use location tags when different sites or regions have different employment costs or insurance rates.
📝 Important to note: If no employee or location tags are configured, the on-cost applies to all employees and locations automatically.
Configure on-costs
To manage on-cost configurations:
Navigate to Settings > On-Cost Config
Review your existing on-cost configurations
Click +New Config
Enter:
On-cost name
Percentage rate
Employee tags (optional)
Location tags (optional)
Click Save
National Insurance on-cost toggle
When creating an on-cost configuration, you can enable:
Is a National Insurance (NI) on-cost
This setting tells Workforce to apply UK National Insurance thresholds automatically during cost calculations.
📝 Important to note: If this toggle is not enabled, the configured percentage will apply to all eligible earnings without NI threshold calculations.
From this page, you can:
View existing on-cost configurations
Create a new on-cost configuration
Delete configurations that no longer apply
📝 Important to note: When a new organisation is created, Workforce automatically applies default on-costs based on the organisation’s region. On-cost configurations cannot be edited after creation. To make changes, delete the existing configuration and create a new one.
Enable on-costs in reports
To include on-costs in a report:
Open the relevant report (for example, Cost by Employee or Real Wage Cost)
In the report filters, locate Include on-costs
Select Yes
Run or refresh the report
On-cost columns will appear alongside base wage costs in the report results.
📝 Important to note: The Roster Overview uses a separate setting called Include on-costs in Roster Employee Costs.
Use on-costs in reports
Many Workforce reports include an Include on-costs option.
When enabled, reports display on-cost values alongside base wage costs for more accurate labour cost reporting.
Cost by Employee report
The Cost by Employee report includes:
Scheduled costs
Timesheet costs
Variance costs
Total on-costs
This gives you a complete view of the total employer cost per employee.
Real Wage Cost report
The Real Wage Cost report provides an itemised breakdown of labour costs, including each configured on-cost type.
For example:
National Insurance
Employer Pension Contribution
Custom on-costs
This is useful for understanding how total employment costs are made up.
Roster Overview
To include on-costs in roster cost calculations:
Open the Roster Overview
Locate Include on-costs in Roster Employee Costs
Toggle the setting on
This updates:
Total schedule costs
Wage percentage of revenue
to include configured on-costs.
FAQs and Troubleshooting
Do on-costs affect employee payslips?
Do on-costs affect employee payslips?
No. Oncosts are employer-only costs and do not affect employee pay or payslips.
Why does my Employer NI amount appear lower than the configured percentage?
Why does my Employer NI amount appear lower than the configured percentage?
Employer NI contributions only apply to earnings above the government threshold. Workforce automatically applies this threshold during calculations, which can reduce the effective percentage for lower earnings.
Can I configure different on-cost rates for different employees?
Can I configure different on-cost rates for different employees?
Yes. Create separate oncost configurations and apply employee tags to control which employees each configuration applies to.
Can I disable on-costs completely?
Can I disable on-costs completely?
Yes. If all oncosts are removed or set to 0%, oncost columns will display £0 and enabling Include oncosts in reports will not affect totals.
Can I create custom on-costs?
Can I create custom on-costs?
Yes. Workforce supports custom percentage-based oncosts for additional employment-related costs.