When owners weigh up a hire, the number in their head is almost always the salary. "Can I afford £30k?" is the wrong question — because £30k is not what a £30k employee costs. By the time the true costs land, the real figure is meaningfully higher, and the businesses that get caught out are the ones that only budgeted for the payslip. Here's the full list, in plain English.
The costs that land on every payslip
Employer's National Insurance. On top of the gross salary, you pay employer's NI on most of what you pay them. This is the big one people forget — it's a genuine percentage of the wage bill, it's gone up in recent years, and it comes out of your account, not theirs. Rates and thresholds change at Budgets, so check the current figures on gov.uk — or ask us and we'll tell you exactly what your hire will cost.
Workplace pension. Auto-enrolment isn't optional. If your new hire qualifies — and most employees do — you must enrol them into a workplace pension and pay a minimum employer contribution on top of their pay. Miss it and The Pensions Regulator does follow up.
Holiday pay and cover. Full-time employees get at least 5.6 weeks of paid holiday a year. The pay itself is already in the salary — what's not is the cost of covering the work while they're away, which for a small team usually means your time or someone's overtime.
The costs around the edges
Getting them in the door. Job ads, a recruiter's fee if you use one, and your own hours spent sifting CVs and interviewing. None of it shows up on a payroll report; all of it is real money and real time.
Kit and licences. A laptop, software seats, a phone, tools, PPE, a desk — whatever your trade's version is. Plus the boring-but-mandatory bits: employers' liability insurance (a legal requirement the day you employ someone) and possibly payroll software or a payroll bureau.
Ramp-up time. Nobody is fully productive in month one. Budget for a stretch where you're paying full cost for partial output, and for the hours you or a senior person spend training them. It's normal — but it belongs in the plan, not in the surprise column.
A simple way to budget it
The exact multiplier depends on the role and the rates in force, but the principle doesn't change: take the salary, add the statutory on-costs (employer's NI and pension), then add a realistic allowance for kit, cover and ramp-up. If the business case only works when the hire costs exactly their salary, it doesn't work. If it still works at the full figure — and holds up on a cautious cashflow forecast — you can hire with confidence, whatever the headlines are doing.
This is exactly the sum we run for clients before they commit. Our Payroll & Pensions service handles the mechanics from the first payslip onwards, and if you're growing past the point where ad-hoc sums cut it, a Virtual Finance Team gives you the numbers on every decision like this — before you make it. If a hire is on your mind, book a discovery call and we'll put a real number on it together.