9 costs to consider when hiring staff

A salary isn’t the only cost to consider when hiring staff. There are plenty of other expenses to factor in, such as recruitment fees, insurance, and overheads.

And since the Autumn Budget announcement, the cost of hiring staff in the UK is about to get even higher, with employers’ National Insurance (NI) and National Minimum Wage (NMW) going up from April 2025.

According to research from Nerdwallet, the estimated cost of hiring one staff member on a median salary of £34,994 is £48,073.51—and that excludes office costs. If we add rough London office costs into the mix, that number is estimated to reach a whopping £97,076.51.

Understanding all the costs involved in hiring staff is crucial when considering internal hiring versus outsourcing. We break them all down in the post below.

1. Salaries

Salaries are one of the first things to think about when preparing to hire staff. How much an employer pays someone depends on a variety of factors, such as the individual role, their experience, location, and how much they can afford to pay.

We mentioned earlier that the average annual salary in Great Britain is currently £34,994 (or £672 per week). In Northern Ireland, these figures are slightly lower, at £33,332 a year, or £641 per week.

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While it’s not essential to offer new staff a competitive salary, it is essential to pay them at least the legal minimum. From April 2025, the National Living Wage (NLW) for employees aged 21 and over will rise by 6.7%, from £11.44 to £12.21 per hour.

For workers aged 18-20, the NWM will increase from £8.60 to £10 per hour, and for 16-17-year-olds, the hourly rate will remain at £6.40. If you’re considering hiring an apprentice, their pay entitlement is also going up by 18%, from £6.40 to £7.55 per hour.

2. National Insurance

Employers’ National Insurance contributions (NICs) are another key expenditure associated with hiring staff. The impending rise in NICs will make hiring staff considerably more expensive, which is currently a major concern for employers, particularly small businesses.

For the current tax year, employers pay 13.8% in NICs per employee over the age of 21 earning more than £175 a week (£9,100 a year). NICs are also payable on any benefits or other expenses provided to employees.

However, from April 2025, the NIC rate will rise to 15%. The threshold at which you start paying NICs will also drop to £96.15 per week (£5,000 a year).

3. Recruitment agency fees

Choosing to work with a recruitment agency will raise the cost of hiring staff considerably. Their fees, based on research by Caroo, are 15-30% of the candidate’s first-year salary. So, on a median salary of £34k, that’s at least £5k in agency fees.

There is no requirement to use an agency to hire staff. However, many businesses choose them for convenience. They eliminate the need to sift through hundreds of CVs, screen potential candidates, or manage the administration side of things.

Instead, a recruiter does the hard work for you and connects you with high-quality contenders. For many managers, this is a huge relief and makes recruitment considerably easier.

But if we focus purely on costs, they are substantial. So, job boards like Indeed might be a more suitable option. However, these aren’t necessarily free.

For instance, it doesn’t cost anything to post a vacancy on Indeed, but fees apply for sponsored posts. Albeit considerably smaller, this is still a potential cost to keep in mind when hiring staff—on top of the internal time required to start, manage, and complete the hiring process.

4. Overhead costs

Hiring staff will make a difference to your overhead costs. This includes providing them with the necessary equipment they need to do their job (like laptops), desk space, and safe and comfortable office furniture.

And, of course, more employees mean higher utility bills. The Nerdwallet research we mentioned earlier estimates the energy bill of a small business with just five staff members to be £3,103.

5. Workplace pension

Workplace pension schemes are a legal requirement, and employers must automatically enrol new eligible staff within three months of joining. Employees are eligible to join a pension scheme if they:

• Work in the UK
• Are over 22 years old but under the state pension age (currently 66)
• Earn at least £10,000 a year
• Are not already part of another workplace pension scheme

The minimum total pension contribution is 8% of the employee’s earnings. The employer must pay at least 3%, and the employee pays the remaining 5%.

Both parties can choose to pay more if they want to—higher pension contributions can certainly help businesses attract new staff. However, this also means higher costs for the employer.

Having said that, by increasing employees’ pension contributions via a salary sacrifice (deduction before tax), both will pay lower NICs. So, this is a great tax-efficient option to reduce costs when hiring staff.

Note that under the Pensions (Extention of Automatic Enrolment) Act 2024, the minimum age at which staff members are eligible to join a workplace pension scheme will soon drop from 22 to 18.

The legislation will also remove the £10,000 a year threshold, meaning that employees will be entitled to a pension no matter their earnings. The government has not yet confirmed when these changes will come into force, so for the time being, the existing rules apply.

6. Annual leave

Workers are legally entitled to a minimum of 5.6 weeks paid annual leave a year (or 28 days for those working five days a week). This applies to new hires, who start to build up holiday entitlement at a rate of one day per month as soon as they start working.

For example, if a full-time, Monday-to-Friday employee joins a company halfway through the leave year, they’d have 14 days of holiday to take. This is calculated as follows:

28 (total annual entitlement) / 12 = 2.33 x 6 (remaining months) = 14

During annual leave, employees must receive the same pay as they would if they were working.

For instance, if a full-time employee who works 37 hours a week, Monday to Friday, earns £1,500 a month and takes a week off, they must still be paid £1,500 for the month in which they took annual leave.

For irregular or part-year staff members, their holiday pay entitlement is based on 12.07% of the hours worked in a paid period.

Employers can choose to offer staff more annual leave than the statutory requirement. Many businesses offer the minimum amount plus Bank Holidays.

Like paying higher pension contributions, offering more annual leave is a workplace benefit that many recruits value and find attractive in a prospective role. However, depending on the employee’s salary, this can be a high expense for a business. Therefore, it’s vital to calculate these figures before hiring staff.

7. Sick pay

Eligible staff must receive £116.75 a week in Statutory Sick Pay (SSP) for up to 28 weeks if they’re too sick to work. Again, companies can offer more, but this is the minimum requirement.

Employees qualify for SSP if they:

• Have been ill for more than three consecutive days (including non-working days)
• Earn an average of at least £123 per week
• Have provided notice (as per their contract) and proof of illness (if they’re off work for more than seven days in a row)

To work out how much SSP you’d have to pay if you hire a new staff member, use the government’s SSP calculator.

8. Parental leave

Eligible employees are entitled to receive statutory maternity (SMP) and paternity pay. SMP is payable for staff who have been continuously employed by the organisation for at least 26 weeks and earn at least £123 in an 8-week period.

SMP is split into two sets of 26 weeks. The first is known as Ordinary Maternity Leave, and the second is Additional Maternity Leave.

In the first six weeks, SMP is paid at 90% of their average weekly earnings before tax, and for the remaining 33 weeks, it’s 184.03 or 90% of their average weekly earnings—whichever is lower.

The eligibility requirements for Statutory Paternity Pay are the same as SMP. The length of leave is two weeks, paid at either £184.03 a week or 90% of the employee’s average weekly earnings.

9. Employers’ liability insurance

Businesses hiring staff for the first time need to take out employers’ liability insurance. Sole traders need at least £5 million worth of cover when they hire staff who aren’t family members, and private limited companies need an active policy even if they only employ relatives.

Prices start from £4.74 with insurance provider, Simply Business. However, the premium depends on various factors, including the number of employees.

A possible way to reduce this cost is to pair employers’ liability insurance with other types of business insurance, like public liability or professional indemnity. These are not legally required but could be beneficial to protecting the organisation and reducing the cost of hiring new staff.

Other potential costs when hiring staff

So, we’ve covered the fundamental costs involved when hiring staff, but there could be several other expenses depending on the employer’s circumstances. For instance, company benefits, such as bonuses or private health insurance.

There are also equipment upgrades and maintenance to think about, training, business travel, company cars, uniforms, software licenses, and even social events like Christmas parties.

Reduce hiring costs with Bizik

The expenses associated with hiring staff quickly add up, potentially costing businesses double (or more) the employee’s salary. However, we have a cost-effective and practical solution: choose Bizik.

If you’re looking for a new PA, receptionist, or customer support agent, we have a team of experts ready to support you from the get-go. With transparent pricing and customisable packages, you’ll know exactly what you’ll be paying.

By partnering with us, there’s no need to worry about paying for staff holidays, sick days, or anything else. With our per-second pricing, you’ll simply pay for what you need as long as you need it.

Reach out to our sales team to redeem a 7-day free trial and get your personalised quote.