UK employer guide

How much does a bonus cost an employer?

A cash bonus is often seen as a simple reward, but the business cost can be higher once payroll taxes and pension treatment are included.

In short

The bonus amount is the starting point, but employer National Insurance can add to the cost and some schemes also require pension contributions on bonus pay. That makes the final employer spend larger than the headline bonus alone.

Why the cost rises

If the bonus is paid through payroll, the employer may owe secondary Class 1 National Insurance on it. Some pension schemes also treat bonus pay as pensionable, which can increase the total cost again.

When to use this guide

This is helpful when you are planning performance rewards, retention payments or year-end discretionary bonuses and want a realistic budget before making the decision.

What it does not cover

It does not decide whether a bonus is taxable in a special way or whether payroll will split the payment across periods. It simply helps you plan the likely employer cost.

Use the bonus cost calculator to compare the numbers. HMRC's 2026/27 employer rates and thresholds and Employment Allowance guidance explain the main employer NI rules.