There are no published benchmarks for what UK SMEs pay agencies. Not from the ONS, not from HMRC, not from any trade body with a method you can inspect. Every “average retainer” figure in circulation is somebody’s client list, unweighted, with a commercial interest in the number.
So this piece does the arithmetic in the other direction. Every input below is a published government figure, and what comes out is the cost floor: the number an agency has to clear on your account before it has made a penny. Once you have that, you can test any quote you are given, which is more useful than a benchmark you cannot verify.
The number that decides everything: what a person costs
An agency sells hours. The cost of an hour starts with the cost of a person, and salary is not that cost.
For 2026 to 2027, an employer pays Class 1 secondary National Insurance at 15% on earnings above a secondary threshold of £5,000 a year, and a minimum 3% pension contribution on qualifying earnings between £6,240 and £50,270.
| Salary | Employer NIC | Employer pension | Total cost | On top of salary |
|---|---|---|---|---|
| £32,000 | £4,050.00 | £772.80 | £36,822.80 | 15.1% |
| £45,000 | £6,000.00 | £1,162.80 | £52,162.80 | 15.9% |
| £60,000 | £8,250.00 | £1,320.90 | £69,570.90 | 16.0% |
Two things to hold on to. The secondary threshold is £5,000, which is low enough that it barely shelters anything; almost the whole salary is exposed to the 15%. And the pension contribution stops rising at £50,270, which is why the percentage flattens out rather than climbing.
Eligible employers can offset up to £10,500 of that NIC through the Employment Allowance, which on a small agency payroll is real money and is the single most commonly missed item on this list.
Then subtract the hours nobody can sell
A year has 52 weeks. An employee does not work 52 weeks.
Statutory holiday is 5.6 weeks including bank holidays. Allow roughly another week and a half for sickness, training and the days that disappear. That leaves about 44.8 working weeks, or 1,680 hours at 37.5 a week.
Then apply utilisation: the share of paid hours that are actually billable. Everything else is pitching, admin, internal meetings, line management and the work that wins the next client.
| Utilisation | Chargeable hours a year | Break-even on a £45,000 employee |
|---|---|---|
| 60% | 1,008 | £51.75 an hour |
| 70% | 1,176 | £44.36 an hour |
| 80% | 1,344 | £38.81 an hour |
Those figures are the floor before overhead. They cover the person and nothing else: no rent, no software, no finance function, no new business cost, no profit.
Overhead, and what a rate has to be
Agencies typically carry overhead at somewhere between a half and four fifths of direct salary cost again. Applying that to the same £45,000 employee:
| Utilisation | 1.5x overhead | 1.8x overhead |
|---|---|---|
| 60% | £77.62 an hour | £93.15 an hour |
| 70% | £66.53 an hour | £79.84 an hour |
| 80% | £58.22 an hour | £69.86 an hour |
Still no profit in any of those numbers.
The operational consequence for a buyer: if you are quoted a blended rate materially below the bottom of that table, one of three things is true. The work is being done by someone paid considerably less than £45,000, the agency is running utilisation it cannot sustain, or the account is being priced as a loss leader. All three are worth knowing, and none of them is necessarily a reason to walk away. They are reasons to ask who is actually doing the work.
Turning a rate into a retainer
A retainer is an hours commitment with a smoother invoice. Convert it back:
Monthly retainer divided by the blended hourly rate equals the hours you are buying.
A £3,200 monthly retainer at £70 an hour is 45.7 hours a month, or about 10.5 hours a week. Against a senior person at 1.8x and 70% utilisation, £79.84, the same £3,200 buys 40.1 hours.
That difference, five and a half hours a month, is the entire distinction between a retainer staffed by someone experienced and one staffed by someone cheap. It is also the question most retainer conversations never reach, because they are conducted in deliverables rather than hours.
Ask for the hours figure and the seniority split. An agency running a sane model can produce both in a minute.
Three costs on your side of the table
VAT. The registration threshold is £90,000 of taxable turnover in any rolling 12 months, and you must register within 30 days of the end of the month you crossed it. If you are not registered, agency VAT is a real 20% cost to you rather than something you reclaim, and that belongs in the comparison.
The minimum wage floor under everything. From 1 April 2026 the National Living Wage is £12.71 an hour for 21 and over, £10.85 for 18 to 20, and £8.00 for under 18s and apprentices. Any agency quoting junior-heavy delivery is building from that floor plus 15% NIC plus pension.
Late payment, which runs both ways. Statutory interest on late commercial debts is 8% plus the Bank of England base rate. Bank Rate has been 3.75% since 30 July 2026, so the statutory rate is currently 11.75%, and the Monetary Policy Committee reviews it on 17 September 2026. Your agency can charge you that without it being in the contract, and you can charge your own late payers the same.
The counterweight
The case against this whole approach, stated properly.
Cost-plus is not what you are buying. An agency that produces a campaign worth £400,000 to you has not delivered £70 an hour of value, and pricing the relationship off their payroll is a category error. Some of the best money an SME spends is on work where the hours are irrelevant to the outcome, and a buyer who treats every quote as a cost-recovery exercise will systematically select for the cheapest delivery rather than the best.
And utilisation is not a virtue. An agency running at 85% is an agency with no slack to think, and the thinking is usually the part you wanted. The table above rewards high utilisation with a lower floor, which is arithmetically true and operationally a warning sign at the top end.
The floor is a test for whether a number is plausible. It is not a valuation of the work.
Frequently asked questions
Is there an official benchmark for agency retainers? No. No government body or trade association publishes one with an inspectable method, which is why this piece builds the cost floor instead.
What does an employee really cost in 2026 to 2027? Salary plus 15% employer National Insurance above a £5,000 secondary threshold, plus a minimum 3% pension on qualifying earnings from £6,240 to £50,270. On £45,000 that is £52,162.80.
What is the Employment Allowance? Up to £10,500 off an eligible employer’s National Insurance bill for the year.
What hourly rate should I expect? On the arithmetic above, a £45,000 employee at 70% utilisation and 1.8x overhead breaks even at £79.84 an hour before any profit. Treat quotes well below that as a question about staffing, not a bargain.
Can I charge my agency interest if I pay late? They can charge you: statutory interest is 8% plus Bank Rate, currently 11.75%, and it applies whether or not the contract mentions it.
Updated on 15 September 2026.
Sources
- Gov.uk, rates and thresholds for employers 2026 to 2027
- Gov.uk, National Insurance rates and categories
- Gov.uk, review of the automatic enrolment earnings trigger and qualifying earnings band for 2026/27
- Gov.uk, VAT registration: when to register
- Gov.uk, charging interest on a commercial debt
- Bank of England, the interest rate (Bank Rate)
ADSK Media writes about marketing finance for SME owners. It is not accounting or financial advice.…