When a UK or European company decides to hire its first US employee, one of the first questions the finance team asks is: how much is this actually going to cost?
The answer is almost always more than expected, not because the US is dramatically more expensive than the UK, but because the cost structure is completely different. The line items are different. The systems are different. The rules for what is mandatory versus discretionary are different. And a company that maps UK employment cost assumptions onto a US hire will get the numbers badly wrong.
This guide goes through every major category of employer cost, comparing what you pay in the UK with what you pay in the US, using verified 2025 and 2026 figures. Every number here is sourced. Nothing is estimated.
A note before you start: this is a comparison of employer costs, not employee take-home pay. It is also a comparison of the statutory and market-norm costs you will face. Individual costs will vary by state, role, salary level, and the benefits package you offer.
The Headline Number: What Employers Actually Pay
Before getting into the detail, here is the benchmark that helps frame everything else.
According to the US Bureau of Labor Statistics, in December 2025, total employer compensation costs for private industry workers averaged $46.15 per hour. Of that, wages and salaries accounted for 70.1% and benefit costs accounted for 29.9%.
Put differently: for every $1.00 you pay a US employee in wages, you are paying approximately $0.43 on top in benefits and employer taxes. For a $100,000 salary, total employer cost runs to roughly $143,000 when you include all mandatory and standard voluntary costs.
In the UK, the equivalent calculation produces a broadly similar headline number, but the composition is completely different. Understanding that composition is what allows you to budget correctly.
Category 1: Payroll Taxes
In the UK: National Insurance Contributions
UK employers pay Class 1 secondary National Insurance Contributions (NICs) on employee earnings above the Secondary Threshold.
From 6 April 2025, following the changes announced in the Autumn 2024 Budget:
- Rate: 15% (increased from 13.8%)
- Secondary Threshold: £5,000 per year (reduced from £9,100)
- Upper limit: None. Employer NI applies to all earnings above £5,000 with no cap
Confirmed by HMRC: the rate from 6 April 2026 to 5 April 2027 on expenses and benefits is 15%.
For a UK employee on a £60,000 salary:
- Employer NI = 15% x (£60,000 – £5,000) = 15% x £55,000 = £8,250 per year
For a UK employee on a £40,000 salary:
- Employer NI = 15% x (£40,000 – £5,000) = 15% x £35,000 = £5,250 per year
There is no equivalent of UK employer NI that applies to all employee earnings above a low threshold in the US system. The US equivalent is FICA, which works very differently.
In the US: FICA and FUTA
US employers pay two federal payroll taxes on top of employee wages.
FICA (Federal Insurance Contributions Act):
FICA funds Social Security and Medicare. Employers match employee contributions dollar for dollar.
- Social Security: 6.2% of wages, up to the wage base limit of $184,500 in 2026 (confirmed by IRS Publication 926, 2026 edition)
- Medicare: 1.45% of all wages, with no upper limit
- Combined employer FICA rate: 7.65%
For a US employee earning $100,000 per year:
- Social Security (employer): 6.2% x $100,000 = $6,200
- Medicare (employer): 1.45% x $100,000 = $1,450
- Total FICA (employer): $7,650 per year
For a US employee earning $200,000 per year (above the Social Security wage base):
- Social Security (employer): 6.2% x $184,500 = $11,439
- Medicare (employer): 1.45% x $200,000 = $2,900
- Total FICA (employer): $14,339 per year
FUTA (Federal Unemployment Tax Act):
Employers pay federal unemployment tax on the first $7,000 of each employee’s wages. The headline rate is 6.0%, but employers in compliant states receive a 5.4% credit, reducing the effective rate to 0.6%.
- Effective FUTA cost per employee: 0.6% x $7,000 = $42 per year
State Unemployment Insurance (SUTA):
Every US state also charges state unemployment insurance. Rates vary significantly by state and by employer experience rating (your claims history). New employers typically pay a standard rate for the first few years. Most rates fall between 1% and 5% on a wage base that varies by state (ranging from $7,000 to over $50,000 depending on the state).
The key point: SUTA is an additional employer cost that has no direct UK equivalent. It is not visible in salary negotiations. It is entirely invisible to the employee. And it catches many international employers by surprise.
Direct Comparison: Payroll Taxes
UK | US | |
Main payroll tax | Employer NIC: 15% above £5,000 | Employer FICA: 7.65% |
Upper limit | No cap | Social Security capped at $184,500 wage base |
Unemployment tax | Employer NIC funds national benefits (NHS, state pension, welfare) | FUTA (0.6% up to $7,000) + SUTA (1-5% varies by state) |
Administration | HMRC via PAYE | IRS (federal) + state agencies separately |
The practical implication: On a mid-range salary, UK employer NI contributions are proportionally higher than US FICA for most professionals. But US employers face more administrative complexity (multiple agencies, state-by-state unemployment filings) and the additional SUTA cost that has no UK equivalent.
Category 2: Health Insurance
This is the biggest structural difference between US and UK employer costs, and the one that surprises international companies most.
In the UK: NHS
UK employers do not fund employee healthcare. The NHS provides universal coverage funded through general taxation, which includes National Insurance contributions. Employees are covered whether or not they are employed. Employers pay nothing directly toward healthcare coverage.
Some UK employers offer private medical insurance (PMI) as a benefit. This is discretionary, generally used for access to faster treatment, and typically costs £500 to £2,000 per employee per year depending on the level of cover and the employee’s age.
In the US: Employer-Sponsored Health Insurance
In the US, there is no universal healthcare. Employer-sponsored health insurance is the primary healthcare coverage for the vast majority of working Americans. It is not optional in any practical sense.
According to KFF’s 2025 Employer Health Benefits Survey, the authoritative annual benchmark of US employer health costs:
- Average annual premium for single coverage: $9,325
- Average annual premium for family coverage: $26,993
- Employees contribute an average of 16% toward single coverage ($1,368 per year) and 26% toward family coverage ($6,850 per year)
- Employers pay the remaining portion: approximately $7,957 per employee for single coverage and $20,143 per employee for family coverage on average
For a team of five US employees (all on single coverage), you are looking at approximately $39,785 in annual employer health insurance premiums before any other benefits are factored in.
Why this matters for international companies:
The quality of your health plan is one of the most important factors in your ability to attract and retain US employees. US candidates will ask specifically about the plan network, the deductible levels, and the employer contribution. A bare-minimum plan or a plan with a very high employee deductible will put you at a disadvantage against established US employers.
One of the practical advantages of using an Employer of Record or PEO is access to group health plans at rates that small international employers could not access independently. Your employees benefit from the purchasing power of a much larger pool.
Direct Comparison: Healthcare
UK | US | |
Employer obligation | None (NHS funded through taxation) | Employer-sponsored health insurance expected and largely mandatory for competitiveness |
Average employer cost per employee | Minimal (optional PMI £500-£2,000) | ~$7,957 per year for single coverage (KFF 2025) |
Employee expectation | NHS as baseline, PMI as a perk | Health insurance as a core compensation element |
Regulatory complexity | Low | High (ACA, ERISA, COBRA, HIPAA all apply) |
Category 3: Pension and Retirement Savings
In the UK: Auto-Enrolment
Under the UK’s workplace pension auto-enrolment scheme, employers must automatically enrol eligible workers into a qualifying pension scheme and contribute a minimum amount.
Current rates for 2025/26 and 2026/27 (confirmed by The Pensions Regulator):
- Employer minimum contribution: 3% of qualifying earnings
- Total minimum contribution: 8% (employer 3% + employee 5%)
- Qualifying earnings band 2025/26: £6,240 to £50,270 per year
For an employee on a £40,000 salary:
- Qualifying earnings: £40,000 – £6,240 = £33,760
- Employer contribution (3%): £1,013 per year
For an employee on a £60,000 salary:
- Qualifying earnings: £50,270 – £6,240 = £44,030 (contribution calculated only up to the upper limit)
- Employer contribution (3%): £1,321 per year
Many UK employers contribute more than the 3% minimum as a competitive benefit, with 5% to 6% employer contribution being common among professional employers.
In the US: 401(k) Plans
The US retirement savings vehicle is the 401(k) plan. Unlike UK auto-enrolment, there is no statutory obligation for employers to offer a 401(k) or to match employee contributions. In practice, however, offering a 401(k) with an employer match is expected by US candidates and is a standard part of a competitive compensation package.
According to Fidelity and multiple market sources:
- Average employer match: 4% to 6% of employee compensation
- Most common structure: 50% match on the first 6% of salary the employee contributes
- Overall average employer contribution: approximately 4.8% of employee pay
For an employee on a $100,000 salary with a 50% match on the first 6%:
- Employee contributes 6% = $6,000
- Employer matches 50% = $3,000
- Employer cost: $3,000 per year for a $100,000 employee
For a $150,000 employee with the same structure:
- Employer cost: $4,500 per year
The 401(k) contribution also requires plan setup, administration, and ERISA compliance. If you are setting up a 401(k) plan independently, you need a plan administrator, a trustee, and annual compliance filings. Through a PEO or EOR, your employees access an existing plan structure with administration already in place.
Direct Comparison: Pension and Retirement
UK | US | |
Statutory obligation | Yes. 3% minimum employer contribution | No statutory requirement to offer or match |
Market norm | 3-6% employer contribution | 3-6% employer match on 401(k) |
Calculation basis | On qualifying earnings (£6,240-£50,270) | On full salary |
Administration overhead | Low via payroll | Higher: plan setup, ERISA compliance, annual filings |
Employee expectation | Pension contribution as standard | 401(k) with match as standard |
Category 4: Sick Pay
In the UK: Statutory Sick Pay
UK employers are legally required to pay Statutory Sick Pay (SSP) to eligible employees who are unable to work due to illness.
From 6 April 2026, following the Employment Rights Act 2025 changes (confirmed by Acas):
- SSP rate: £123.25 per week (or 80% of average weekly earnings if lower)
- Payable from: Day one of absence (the previous three waiting days were removed in April 2026)
- Duration: Up to 28 weeks
- Employer bears the full cost. The SSP recovery scheme ended in 2014
For most professional roles, employers offer contractual sick pay that exceeds SSP. Offering full pay for the first one to four weeks of absence is common practice among professional employers.
In the US: No Federal Sick Pay Mandate
There is no federal statutory sick pay in the US. Employers are not required under federal law to provide paid sick leave.
However, many states and cities have enacted their own paid sick leave mandates. California, New York, New Jersey, Illinois, Massachusetts, and a growing number of other states require paid sick leave, with different accrual rates, caps, and qualifying conditions.
In practice, most professional US employers offer between five and ten days of paid sick leave per year, either as a standalone entitlement or as part of a combined PTO (paid time off) policy. A PTO policy that pools vacation, sick, and personal days is common in the US and is often presented to employees as a total annual leave entitlement of 15 to 20 days.
The absence of a federal floor means your obligations vary significantly depending on the state where your employee works. This is another area where state-specific compliance expertise matters.
Direct Comparison: Sick Pay
UK | US | |
Statutory requirement | Yes: SSP £123.25/week from day one | No federal requirement; state mandates vary |
Market norm | Contractual sick pay above SSP, typically 1-4 weeks full pay | 5-10 days paid sick leave or combined PTO |
Employer cost visibility | Predictable floor via SSP | Variable; depends on state, policy, and absence rates |
State complexity | Uniform across UK | Varies state by state. California and New York particularly prescriptive |
Category 5: Paid Annual Leave
In the UK: Statutory Minimum
UK employees are legally entitled to a minimum of 28 days of paid annual leave per year (including bank holidays), under the Working Time Regulations. Most professional employers offer 25 days plus bank holidays as standard.
In the US: No Federal Minimum
There is no federal minimum paid annual leave entitlement in the United States. Employers are not legally required to provide any paid vacation.
In practice, market norms apply. Professional and tech employers typically offer:
- Entry to mid-level roles: 10 to 15 days of paid vacation
- Senior roles: 15 to 20 days
- Unlimited PTO policies: Growing but less common than media coverage suggests
For a company hiring UK employees and US employees simultaneously, the gap in leave entitlements is a cultural flashpoint. US employees do not expect 25 days of holiday. Setting your US policy at your UK standard may over-cost you; setting it too low relative to US market norms may hurt your ability to attract talent.
Category 6: Workers’ Compensation Insurance
In the UK: Employer’s Liability Insurance
UK employers are legally required to hold Employer’s Liability (EL) insurance, covering employees who suffer illness or injury caused by their work. The minimum cover is £5 million per claim. Annual premiums are relatively modest for most office-based roles.
In the US: Workers’ Compensation
US employers must carry workers’ compensation insurance in almost every state. This is not optional and is not provided through a federal scheme. Each state has its own workers’ compensation system, rules, and rate structures.
Workers’ compensation premiums are calculated based on payroll and vary by industry classification code. According to 2025 data, the national average workers’ compensation rate is approximately $1.03 per $100 of payroll. Office and clerical workers (NCCI code 8810) carry a much lower rate, typically around $0.35 per $100 of payroll, reflecting the lower risk of injury.
For a $100,000 salary office worker:
- Workers’ comp at $0.35 per $100: $350 per year
For the same employee in a higher-risk role or state, the cost is significantly higher.
Workers’ compensation through an EOR or PEO is included in the service structure, meaning you do not need to source and maintain your own policy.
Category 7: Parental Leave
This is one of the most striking differences between the two systems, and one that frequently surprises US companies operating with UK teams and vice versa.
In the UK: Statutory Maternity and Paternity Pay
UK employers are legally required to fund statutory maternity pay (SMP) for eligible employees. For 2025/26:
- First 6 weeks: 90% of the employee’s average weekly earnings
- Remaining 33 weeks: £194.32 per week (the 2026/27 statutory rate, up from £187.18 in 2025/26) or 90% of average weekly earnings, whichever is lower
- Total duration: Up to 52 weeks, with the final 13 weeks unpaid
- Employers can reclaim 92% of SMP from HMRC (or 103% for smaller employers)
Statutory paternity pay is two weeks at £194.32 per week (2026/27 rate). Many professional employers offer enhanced maternity and paternity pay above the statutory minimum, which is an additional employer cost.
In the US: No Federal Paid Parental Leave
There is no federal statutory paid parental leave in the US. The Family and Medical Leave Act (FMLA) provides up to 12 weeks of unpaid, job-protected leave for eligible employees, but the employer does not pay the employee during this time.
Some states have introduced their own paid family leave schemes. California, New York, New Jersey, Massachusetts, Washington, and Connecticut all have mandatory paid family leave programmes funded through employee payroll contributions. In most of these states the employer administers the contributions but does not directly fund the benefit from its own costs.
In practice, most professional US employers offer some form of paid parental leave as a competitive benefit, typically six to twelve weeks for the primary caregiver. This is entirely discretionary under federal law and comes directly from the employer’s budget.
Direct Comparison: Parental Leave
UK | US | |
Statutory paid leave | Yes: SMP up to 39 weeks; employer funds but can reclaim most | No federal requirement: FMLA provides 12 weeks unpaid only |
Cost to employer | SMP funding (reclaimed from HMRC) plus administrative overhead | Market norm is 6-12 weeks paid, funded entirely by the employer |
State obligations | Uniform across UK | California, New York and others have state paid family leave schemes |
Employer can reclaim | Yes: 92% of SMP for most employers | No reclaim mechanism |
Putting It Together: A Side-by-Side Cost Model
The table below illustrates the total employer cost for a comparable professional hire in the UK at £70,000 and in the US at $120,000 (broadly equivalent in purchasing power for a mid-level professional role). All figures are 2025/2026 and are based on verified rates.
UK employer, £70,000 salary:
Cost item | Calculation | Annual cost |
Base salary | £70,000 | |
Employer NI | 15% x (£70,000 – £5,000) | £9,750 |
Auto-enrolment pension | 3% x (£50,270 – £6,240) | £1,321 |
Private medical insurance | Optional, varies | £800-£2,000 |
Total employer cost | ~£82,000-£83,000 |
US employer, $120,000 salary:
Cost item | Calculation | Annual cost |
Base salary | $120,000 | |
Employer FICA | 7.65% x $120,000 | $9,180 |
FUTA | 0.6% x $7,000 | $42 |
SUTA | ~2% x state wage base (varies) | ~$500-$1,500 |
Health insurance (employer share, single) | KFF 2025 average | ~$7,957 |
401(k) match | 50% match on first 6% = 3% | $3,600 |
Workers’ compensation (office role) | $0.35 per $100 | $420 |
Total employer cost | ~$141,700-$143,000 |
The percentage uplift on base salary is broadly similar in both markets: roughly 15-16% in the UK on mandatory costs alone (dominated by NI and pension), or 17-18% if you include a typical PMI benefit. In the US, the equivalent uplift runs to 18-20% (dominated by health insurance and FICA combined). The composition is very different but the headline numbers are closer than most people expect. But the composition is fundamentally different, and the items the US system requires you to manage independently: health insurance procurement, 401(k) administration, workers’ comp policy, state-specific unemployment registration. These create significantly more operational overhead.
What This Means for Your US Expansion
Two conclusions stand out from this comparison.
First, the total employer cost of a US hire is not dramatically higher than a comparable UK hire on a percentage basis. The commonly repeated fear that the US is prohibitively expensive often overstates the case. What is true is that the cost composition requires careful modelling, particularly around health insurance, which is both a larger absolute cost and a more variable one than any UK equivalent.
Second, the operational complexity of US employment costs is substantially higher than in the UK. You are dealing with federal and state agencies separately, with health insurance procurement and administration as a major undertaking, with state-by-state unemployment and workers’ compensation registrations, and with a retirement savings framework that requires plan setup and ongoing ERISA compliance.
This is why most international companies entering the US work with a partner who manages these obligations on their behalf, either through an Employer of Record before they have a US entity, or through a PEO+ model once their entity is in place.
Our guides to how employer of record works and PEO vs payroll service explain both models in detail. And if you are at the stage of planning your US entity structure alongside your hiring, our full guide to expanding to the USA from the UK covers the full picture.
At Foothold America, we work with finance directors and CFOs at UK and European companies every week, building out US employment cost models for board presentations and investment cases. We understand both systems, and we bring that dual perspective to every conversation.
If you are building your US business case and want to work through the numbers for your specific headcount plan and target states, speak to our team. Real people, with real expertise, who can give you real numbers.
Frequently Asked Questions: US vs UK Employment Costs
Get answers to all your questions and take the first step towards a US business expansion.
The structural gap is significant. UK employers pay 15% employer NI, a mandatory pension minimum, and statutory sick pay. On the US side, FICA is 7.65%, but employers also fund health insurance averaging $7,957 per employee annually. The true cost of hiring differs by system, though the total cost to employ in the US and UK is closer than most companies expect.
US salaries are generally higher, particularly in tech and professional services. The average cost of talent varies widely across US cities: New York and San Francisco command significantly higher local market salaries than Nashville or Dallas. Always benchmark local market rates in your specific target city, not national averages. The salary difference between US cities alone can exceed the US-UK gap.
Higher US salaries reflect several factors: employers fund healthcare and 401(k) with higher employer contributions than UK equivalents; competition is intense in most US cities; and the scale of the domestic market drives up local salary. Gross salary expectations on the US side are also shaped by the absence of an NHS or equivalent, which employees factor into their compensation expectations.
Federal income tax, state income tax, and employee FICA reduce gross salary to net pay on the US side. UK employees pay income tax and employee NI. Worth flagging: nine US states have no state income tax, which boosts net pay significantly. US employees also contribute to health insurance premiums. Professional advice is recommended when modelling net pay differences across locations.
In the UK: employer NI, pension, and statutory entitlements. In the US: FICA, health insurance, state unemployment tax, workers' comp, and 401(k) match. Location drives variation on the US side. The cheapest US option is not always right when local market salaries and talent are factored in. Model total US costs in full before you make an offer.
The cost of living in the most expensive US cities exceeds the priciest European cities. A lower salary in Austin has very different purchasing power from the same figure in San Francisco. Use local market salaries for your specific target city. Local market differences within the US can be larger than the overall US-UK salary difference.
This depends what you measure. The UK employee experience includes NHS coverage, statutory annual leave, and auto-enrolment pension as a baseline. Family allowances and statutory parental leave are stronger in the UK. US benefits can be generous, but the average cost to the employee is higher. For a complete comparison, consider the entire set of entitlements in each market, not just headline salary.
UK employer NI at 15% above £5,000 is proportionally higher than US FICA at 7.65%. Total US employer costs and total cost of the employer burden rise once health insurance is added. The employment cost system differs fundamentally in each European country and in the US. The Foothold America team provides professional advice and line-by-line cost models for your specific hire.
The most expensive city for US hiring is San Francisco, followed closely by New York. These form the core US cluster where salaries and total employer costs peak. In a Europe comparison, only London comes close as the only European city matching that cost level. In lower-cost US markets, a lower local salary can make hiring more cost-effective than London equivalents.
The right time to model this is before you benchmark salary. Higher net pay in the US is most achievable in states with no state income tax, at senior salary levels. That is not the only way the US compares favourably: employer-funded health insurance adds real value that does not appear in the gross salary figure at all.
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