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Configure On-costs

Understand what on-costs are, how they’re calculated, and how to set them up in Workforce so your labour cost reports reflect the true cost of employment.

What's covered in this guide?

What are on-costs?

On-costs are employer costs on top of an employee’s wages. They show the true cost of employing staff, beyond what appears on a payslip.

Examples of on-costs include:

  • Employer National Insurance contributions

  • Employer pension contributions

  • Holiday pay provisions

Workforce lets you set up on-costs so your labour cost reports show your full employment costs, not just gross wages.

Default on-cost configurations

When a UK organisation is created in Workforce, these on-costs are set up automatically:

Name

Rate

Applies to

National Insurance

15%

Everyone, Everywhere. Ordinary hours only, with the NI threshold applied

Employer Pension Contribution

3%

Everyone, Everywhere. All hours

If your organisation needs different on-cost rules, you can:

  • Delete a default on-cost

  • Create a new on-cost

  • Apply different rates to specific employee groups or locations

  • Limit an on-cost to ordinary hours only

📝 Important to note: On-costs can’t be edited after they’re created. To change one, create a new on-cost with the right settings, then delete the old one.

Types of on-costs

Employer National Insurance

Employer National Insurance (NI) is calculated as a percentage of the employee’s earnings.

Region

Default rate

United Kingdom

15%

📝 Important to note: Employer NI only applies when an employee earns above the government threshold. Workforce takes the employee’s earnings for the period, works out what they’d earn over 28 days, and checks that against the threshold before adding NI.

The threshold depends on the employee’s age:

  • Employees aged 21 and over: £417 over 28 days

  • Employees under 21: £4,189 over 28 days

If an employee doesn’t have a date of birth on their profile, Workforce uses the 21 and over threshold.

For example:

  • An employee earns £500 over 7 days.

  • Workforce works this out as £2,000 over 28 days.

  • £2,000 is above the threshold, so Employer NI is added to all of their earnings for the period.

The 28-day figure is only used to check the threshold. It doesn’t change the amount NI is charged on.

📝 Important to note: The threshold is only applied if Is a National Insurance (NI) on-cost is turned on for the on-cost. See National Insurance on-cost toggle below.

Employer Pension Contribution (Auto-enrolment)

UK organisations also get a default Employer Pension Contribution on-cost of 3%. This is the minimum employer contribution under UK workplace pension auto-enrolment rules.

📝 Important to note: Workforce adds the pension on-cost to everyone the on-cost applies to. It doesn’t know who has opted out of your pension scheme or who earns too little to be enrolled, and it doesn’t use qualifying earnings. Because of this, the pension on-cost is an estimate and is usually a little higher than what your payroll pays. To bring it closer, lower the percentage, or use Tags so it only applies to enrolled staff.

Holiday pay costs

You can add holiday pay as a custom on-cost if you want to include the future cost of paid leave in your labour cost reports.

📝 Important to note: Holiday pay on-costs are not set up by default for UK organisations.

Custom on-costs

You can create custom percentage on-costs for other employer costs, such as:

  • Training levies

  • Industry-specific contributions

  • Internal labour cost provisions

Custom on-costs work the same way as the default ones.

How on-costs are calculated

On-costs are 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%

£500 × 15% = £75

This means:

  • On-cost amount: £75

  • Total employment cost: £575

If more than one on-cost applies to an employee, Workforce adds them together. For example, 15% NI and 3% pension add 18% to that employee’s wage cost.

💡 Tip: Each on-cost can apply to different earnings depending on how it’s set up. For example, one on-cost might only apply to ordinary hours, while another applies to all hours.

Apply on-costs to ordinary hours only

Some on-costs should only apply to ordinary hours, not overtime.

To do this, turn on Only apply on-cost to ordinary hours when you create the on-cost (see Configure on-costs below).

When this is on, the on-cost is calculated on:

  • Earnings from earnings rules set to Ordinary hours

  • Allowances

Earnings from rules set to Overtime hours aren’t included.

  1. Go to Settings > On-Cost Config.

  2. Click + New config.

  3. Turn on Only apply on-cost to ordinary hours.

  4. Fill in the other details, then click Create on-cost config.

Important: To add this to an existing on-cost, create a new one with the setting turned on, then delete the old one.

💡 Tip: Whether a rule counts as ordinary or overtime is set on each earnings rule, under Time & Attendance > Compliance > Earnings Rules, in the Type section.

Filter on-costs by employee or location

You can set an on-cost to apply only to certain employees or locations.

Filter by employee type

Use Tags to apply different on-cost rates to different groups of employees. These are the classification tags on employees’ profiles, for example:

  • Full Time

  • Part Time

  • Casual

  • Salaried

An employee only gets the on-cost if they have at least one of the tags you choose.

Filter by location

Use Location when different sites have different employment costs.

📝 Important to note: If Tags and Location are left empty, they show as Everyone and Everywhere, and the on-cost applies to all employees at all locations, including any you add later.

Configure on-costs

To create an on-cost:

  1. Go to Settings > On-Cost Config.

  2. Click + New config.

  3. Fill in:

    • Name

    • Tags (optional): leave empty for everyone

    • Location (optional): leave empty for everywhere

    • Value (%)

    • Only apply on-cost to ordinary hours (optional)

    • Is a National Insurance (NI) on-cost (optional)

  4. Click Create on-cost config.

National Insurance on-cost toggle

Turn on Is a National Insurance (NI) on-cost for your Employer NI on-cost. Workforce then applies the UK NI thresholds automatically, as described in Employer National Insurance above.

📝 Important to note: Workforce takes the employee’s earnings for the dates in the report, works out what they’d earn over 28 days, and checks that against the threshold. If they’re above it, NI is added to all of their earnings. If they’re below it, no NI is added. This is a simplified estimate, so Employer NI in Workforce won’t exactly match payroll, which only charges NI on earnings above the threshold.

From this page, you can:

  • View your existing on-costs

  • Delete on-costs you no longer need, using Delete on-cost config

📝 Important to note: On-costs can’t be edited after they’re created. To change one, create a new on-cost with the right settings, then delete the old one. Don’t keep both, or the on-cost will be counted twice.

Enable on-costs in reports

To include on-costs in a report:

  1. Open the report, for example Costs by Employee or Real Wage Cost.

  2. In the filters, set Include on-costs to Yes.

  3. Click Generate.

When Include on-costs is set to Yes, the cost columns, such as Timesheet Cost, already include on-costs, even though the column name doesn’t say so. The on-cost rows, such as National Insurance and Employer Pension Contribution, show how much of the total is on-costs. They aren’t added on top. To see wage costs before on-costs, set Include on-costs to No.

💡 Tip: To check your on-costs are working, run the same report with Include on-costs set to No, then Yes, and compare the totals. For example, with 15% NI and 3% pension, staff above the NI threshold should cost about 18% more.

📝 Important to note: Turning on Include on-costs doesn’t add holiday pay to your costs. Holiday pay is only included if you choose a cost column marked (inc. leave), such as Timesheet Cost (inc. leave, inc. allowances). To see holiday pay on its own, add the Leave Cost column.

📝 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 have an Include on-costs option. When it’s turned on, costs include your on-costs, so you see the full cost of employment.

On-costs are worked out each time a report runs, using your current on-cost settings. If you change your on-costs, rerun reports for past dates to see the updated figures. Reports you’ve already saved or exported won’t change.

Costs by Employee report

The Costs by Employee report includes:

  • Scheduled costs

  • Timesheet costs

  • Variance costs

  • Total on-costs

This gives you the total employer cost for each employee.

Real Wage Cost report

The Real Wage Cost report gives an itemised breakdown of labour costs, with a row for each on-cost.

For example:

  1. National Insurance

  2. Employer Pension Contribution

  3. Custom on-costs

This is useful for seeing how total employment costs are made up.

Roster Overview

To include on-costs in rota costs:

  1. Open the Roster Overview.

  2. Find Include on-costs in Roster Employee Costs.

  3. Turn the setting on.

This updates:

  • Total schedule costs

  • Wage percentage of revenue

to include your on-costs.

FAQs and Troubleshooting

Do on-costs affect employee payslips?

No. On-costs are employer-only costs and do not affect employee pay or payslips.

Why does my Employer NI amount appear lower than the configured percentage?

Workforce only adds NI for staff whose projected earnings are above the threshold (£417 over 28 days, or £4,189 for under-21s). Staff below it, including most under-21s, have no NI added, so the overall NI amount can be lower than the configured percentage of total pay.

Can I configure different on-cost rates for different employees?

Yes. Create separate on-cost configurations and apply employee tags to control which employees each configuration applies to.

Can I disable on-costs completely?

Yes. If all on-costs are removed or set to 0%, on-cost columns will display £0 and enabling Include on-costs in reports will not affect totals.

Can I create custom on-costs?

Yes. Workforce supports custom percentage-based on-costs for additional employment-related costs.

What can I set on an on-cost?

A Name and Value (%), and optionally Tags, Location, Only apply on-cost to ordinary hours and Is a National Insurance (NI) on-cost. The NI option means the on-cost is only added for staff above the NI threshold.

What are the UK defaults?

  • National Insurance: 15%, ordinary hours only.

  • Employer Pension Contribution: 3%, all hours.

Which reports include on-costs?

Reports with an Include on-costs toggle:

  • Costs by Location and Team, Date, Team Group, Shift Tag and Employee

  • Real Wage Cost

  • Overtime

  • Live Costs

  • Weekly Planner

  • Forecast & budget

Costs by Wage Rate and Costs by Activity Code don't include on-costs. In the rota, choose the "with On-Costs" view options.

Why isn’t NI being added at all?

Check the NI on-cost in Settings > On-Cost Config:

  • Location: if locations are selected, check their names exactly match your current location names. If a location has been renamed, the on-cost no longer applies there. Create a new on-cost with Location left empty and delete the old one.

  • Tags: if tags are selected, check your staff have at least one of them.

  • Ordinary hours: if Only apply on-cost to ordinary hours is on, check your earnings rules are set to Ordinary hours.

  • Earnings: staff below the NI threshold for the period correctly get no NI.

Why are my Workforce costs different from my payroll?

Workforce cost reports are an estimate of employment costs, so they won’t always match payroll exactly. Common reasons:

  • Leavers: reports set to Employee status: Active leave out staff who’ve since been deactivated. Set Employee status to All to include them.

  • Statutory pay: statutory payments such as SSP aren’t included in reports that exclude leave.

  • Manual payroll changes: back pay or adjustments added directly in payroll aren’t in Workforce.

  • Pension: the pension on-cost is added for everyone it applies to, so it’s usually higher than what payroll pays.

  • Salaried staff: how salaries are counted depends on your salary allocation setting. See Salary allocation methods explained.

  • On-cost settings: check your on-costs apply to the right staff and locations (see Why isn’t NI being added at all? above).

Can I edit an on-cost?

No. On-costs can’t be edited after they’re created. Create a new on-cost with the right settings, then delete the old one.

What happens if two on-costs apply to the same employee?

Both are added. For example, if you create a new NI on-cost but don’t delete the old one, staff covered by both get NI twice.

Why are my on-costs lower than the rate multiplied by my total cost?

If Include oncosts is set to Yes, your total cost already includes on-costs, so multiplying it by the rate counts the on-costs twice. Set Include oncosts to No to see the wage cost the on-costs are worked out from. For NI, staff below the NI threshold also have no NI added.

Workforce Cost Reports
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