Growing
How much does it cost to employ someone? The full figure and how to fund it
How much does it cost to employ someone? Salary, 15% employer National Insurance and pension, then the months before the hire pays back. How to fund that gap.
How much does it cost to employ someone? More than the salary. On a £30,000 salary, employer National Insurance and the minimum pension contribution add about £4,460 a year. That is before recruitment, training or kit. Then come the months before the new person pays for themselves, and that gap is what needs funding.
More firms are weighing it up. According to the KPMG and REC Report on Jobs, published on 8 October, permanent placements rose in September at the strongest rate in four years. The rise was small, but it was the second month in a row.
Section 01
How much does it cost to employ someone?
Start with the salary. Then add the costs the law sets for every employer. These are the 2026 to 2027 figures from GOV.UK.
15%
3%
£10,500
£12.71
Take a £30,000 salary. Employer National Insurance is 15% of the pay above £5,000. That comes to £3,750 a year.
The pension is at least 3% of pay between £6,240 and £50,270 for most schemes. That comes to about £713 a year. So the hire costs about £34,460 before anything else.
Employment Allowance can cut your employer National Insurance bill by up to £10,500 a year. A company whose only employee is its sole director cannot claim it. Taking on someone else can change that, so ask your accountant.
Then add the costs only you can estimate. That means advertising the role or a recruiter's fee, time spent training, and any tools or software the person needs. Use your own figures, because they vary too much between trades to guess.
Section 02
The payback gap
A new hire costs you from their first payday. The extra work they do usually takes longer to bring in cash.
A second fitter may bill within weeks. A new salesperson may take months to build a pipeline. The months in between are the gap, and it is the gap you need to fund.
Cost the hire month by month
Put salary, National Insurance, pension and set-up costs into your cash flow forecast from the start date.
Be cautious about the income
Estimate when the extra work turns into cash in the bank. Allow for the time your customers take to pay.
Add up the shortfall
Total the months where the hire costs more than it brings in. That total is the amount to plan for.
Section 03
Funding options that fit a hire
Match the funding to the gap, not to the salary. A hire is a cost that runs for years, so the funding should not vanish in weeks.
A term loan or working capital facility gives you a fixed sum, repaid over a set term. It can cover the months before the hire pays back, and you know the repayments from the start.
An overdraft is useful for a few weeks of uneven cash. It is a poor fit for months of wages, because the bank can reduce it at short notice. Our guide on what to do when your bank cuts your overdraft shows how that can play out.
If the role needs a van or machinery, hire purchase or leasing can spread that cost separately.
Lenders will want your trading history and a forecast that shows how the hire pays back. For business growth loans arranged through us, you need at least 12 months of trading. Two years is preferred for unsecured options. A broker can look at your forecast and the facilities that fit it, so start with our page on business growth finance.
On advisory deals we take no commission from lenders. You pay us nothing unless a lender issues an agreement in principle.
Section 04
Planning around the 28 October Budget
The Budget is on 28 October. It could change what employing someone costs, or it could leave things as they are.
So plan for both. Cost the hire at today's rates, then run the forecast again with a higher employer cost. If the hire still works in the tougher case, it is a safer decision.
According to Jon Holt of KPMG, businesses will be looking to the Budget for greater certainty in tax policy. You do not have to wait for it to start the sums.
This guide is general information, not financial advice. Applications are subject to status, affordability and lender criteria.
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