What does a temp really cost you per hour?

A temp's true cost is the pay rate plus 12.07% holiday pay accrual, employer National Insurance at 15% on weekly earnings above £96, 3% pension on earnings between £120 and £967 a week, and the 0.5% levy only if your pay bill is over £3 million. Margin is the charge rate minus that cost.

Last checked 26 October 2026. General information, not legal or tax advice.

Temp margin calculator

Pay rate (£ an hour)

Charge rate (£ an hour)

Hours in the week

Worker's age band

Sets the legal minimum and the NI relief for under 21s and apprentices.

In the workplace pension

Employer pays 3% of weekly earnings between £120 and £967.

Pay bill over £3m (Apprenticeship Levy)

Most small agencies leave this off: below a £3 million pay bill the levy is nil.

Result

True cost £16.36 an hour. Margin £1.64 an hour (9.1%), £65.68 a week.

True cost per hour£16.36

Margin per hour£1.64

Margin9.1%

Margin per week£65.68

Breakdown for 40 hours in one week
Cost	Per hour	Per week
Pay	£12.71	£508.40
Holiday pay accrual at 12.07%	£1.53	£61.36
Employer NI, 15% above £96 a week	£1.78	£71.06
Pension, 3% of earnings from £120 to £967 a week	£0.34	£13.49
True cost	£16.36	£654.32
Charge to the client	£18.00	£720.00
Margin	£1.64	£65.68

Charge minus pay alone would show £5.29 an hour. Employer NI is worked on the whole week, so the per-hour figure changes with the hours.

Rates for 2026/27, checked 26 October 2026. This is an estimate, not payroll or tax advice.

Sources: GOV.UK employer rates 2026 to 2027, GOV.UK holiday pay reforms, TPR earnings thresholds.

What goes into the true cost

The gap between the pay rate and the charge rate is not your margin. Before you see a penny, the worker's holiday has to be paid for and the employer's taxes and pension go on top. The calculator adds these for one worker for one week, then divides by the hours.

Sources: GOV.UK rates and thresholds for employers 2026 to 2027, GOV.UK holiday pay reforms, The Pensions Regulator. Checked 26 October 2026.
Cost	Rate for 2026/27	How it is applied
Holiday pay accrual	12.07%	Of pay, for irregular-hours and part-year workers. It is 5.6 weeks of leave against 46.4 weeks worked.
Employer Class 1 NI	15%	On weekly earnings above the secondary threshold of £96 (£417 a month). Holiday pay counts as earnings.
Under 21s and apprentices under 25	0% then 15%	0% up to the upper secondary threshold of £967 a week, then 15%.
Workplace pension (employer minimum)	3%	Of qualifying earnings: weekly pay between £120 and £967.
Apprenticeship Levy	0.5%	Of the annual pay bill, less a £15,000 allowance. Only a pay bill over £3 million pays anything.

Worked example: National Living Wage, 40 hours

A warehouse operative aged 21 or over is paid the National Living Wage of £12.71 an hour for 40 hours, is in the pension, and is charged to the client at £18.00 an hour. Your pay bill is under £3 million, so there is no levy.

Line	Per week	Per hour
Pay	£508.40	£12.71
Holiday accrual (£508.40 x 12.07%)	£61.36	£1.53
Employer NI ((£569.76 - £96) x 15%)	£71.06	£1.78
Pension ((£569.76 - £120) x 3%)	£13.49	£0.34
True cost	£654.32	£16.36
Charge	£720.00	£18.00
Margin	£65.68	£1.64

Charge minus pay looks like £5.29 an hour. The true margin is £1.64 an hour, or 9.1% of the charge. Change the age band to 18 to 20 at £10.85, charged at £16.00, and the employer NI falls to £0.00, because under-21 earnings up to £967 a week carry 0% employer NI.

Why employer NI is worked per week, not per hour

Employer NI is charged on each worker's earnings for each pay period, above a threshold. For 2026/27 the secondary threshold is £96 a week, £417 a month or £5,000 a year, and the rate above it is 15%. Because the first £96 is free of employer NI, the cost per hour depends on how many hours the worker does that week. A 16-hour week costs less NI per hour than a 50-hour week at the same rate.

That is why a flat "add 15%" on-cost overstates NI on short weeks. This calculator assumes a weekly payroll, which is common for temps. If you pay monthly, the threshold is £417 a month and the result is close but not identical.

Employment Allowance. Eligible employers can take up to £10,500 a year off their employer NI bill for 2026/27. It is a yearly amount for the business, so it is not in the per-hour maths. A company whose only director is also its only employee paid above the secondary threshold cannot claim it.

Pension and the apprenticeship levy

For auto-enrolment, The Pensions Regulator treats whichever of the agency or the hirer pays the worker as the employer. For most temp desks that is the agency. Workers aged 22 to State Pension age earning over £192 a week (£10,000 a year) must be enrolled. Others earning over £120 a week can opt in and then get the employer contribution.

The employer minimum is 3% of qualifying earnings: pay between £120 and £967 a week (£6,240 to £50,270 a year). Some schemes use a different earnings basis, so check yours.

The Apprenticeship Levy is 0.5% of the annual pay bill, but every employer gets a £15,000 allowance, and 0.5% of £3 million is exactly £15,000. So an agency with a pay bill of £3 million or less pays nothing. Above that, each extra pound of pay costs another 0.5p, which is what the checkbox adds.

What the calculator leaves out

Statutory Sick Pay. Since 6 April 2026 SSP has no waiting days and no lower earnings limit, and it applies to agency workers who qualify. It is paid at £123.25 a week or 80% of average weekly earnings, whichever is lower.
Insurance, such as employer's liability, and your own overheads: rent, software, job boards and staff.
Equal pay after 12 weeks under the Agency Workers Regulations, which may raise the pay rate. See the AWR 12-week tracker.
Monthly or four-weekly pay periods, overtime premiums and bank holiday rates.

Questions people ask

How is employer National Insurance worked out for a temp?

For 2026/27 the employer pays 15% on each worker's earnings above the secondary threshold of £96 a week, or £417 a month. It is worked per worker per pay period, so a worker on few hours may cost no NI at all. Holiday pay counts as earnings, so NI applies to it as well.

Do I pay employer NI on workers under 21?

Not below the upper secondary threshold. For workers under 21, and apprentices under 25, the employer rate is 0% on earnings up to £967 a week, then 15% above it. You still run them through payroll and report them to HMRC; the relief simply removes the employer charge on most temp pay.

Does a small temp agency pay the apprenticeship levy?

Only if its annual pay bill is over £3 million. The levy is 0.5% of the pay bill, but every employer gets a £15,000 allowance, which covers the whole levy on a £3 million pay bill. Connected companies share one allowance. Leave the levy box unticked unless your pay bill is over £3 million.

Can I take the Employment Allowance off the cost of each hour?

Not in this calculator. The Employment Allowance cuts your employer NI bill by up to £10,500 for 2026/27, but it is a yearly amount for the whole business, not a per-hour saving, and some employers cannot claim it, such as a one-director company where the director is the only employee paid above the threshold.

Why does the margin per hour change when I change the hours?

Because employer NI and pension have weekly thresholds. The first £96 a week carries no employer NI and the first £120 carries no pension contribution, so those allowances are spread over the hours worked. On a shorter week a bigger share of pay is free of them, so the cost per hour falls slightly.

Sources

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