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Table of Contents
- Cost of hiring someone in the UK over one year
- What is the average salary in the UK?
- How much will I pay in National Insurance?
- How much will it cost me in pension contributions?
- How much does it cost to recruit an employee?
- What does it cost to train a new employee?
- How much business insurance will I need to take out?
- What are the costs of running a workplace?
- What will it cost to keep my employees happy?
- Other hiring costs to consider
As your company expands and positions open up, securing the right person for the job is crucial to getting the most out of your business. But hiring not only takes time – it also takes money.
While your first thought may be the cost of your new employee’s salary, you will need to consider far more than basic pay when it comes to budgeting for a new hire. In fact, the salary could represent just a third of the total cost of hiring a new employee once everything is totted up.
Below we take a look at the true cost of hiring someone in the UK, from National Insurance and pension contributions to how much to spend per head on a work event.
Cost of hiring someone in the UK over one year
If you wanted to hire a full-time office worker in the UK, this is how much it could end up costing you in the first year.
Please note that these figures are averages and are likely to vary depending on the circumstances of your business. Some figures may be slightly lower for businesses in Northern Ireland, where the median salary is slightly lower than the British average salary used in the table below.
| Expense | Annual cost |
|---|---|
| Median Salary | £34,944 |
| Office rent per desk (in London) | £45,900 |
| Recruitment | £6,988.80 |
| National Insurance | £3,566.47 |
| Business energy bill (for five-person office) | £3,103 |
| Training | £1,530 |
| Pension contributions | £861.12 |
| Work social function per head | £150 |
| Employers’ liability insurance (lowest estimate) | £33.12 |
| Total including London office costs | £97,076.51 |
| Total excluding all office costs | £48,073.51 |
Figures based on hiring a full-time employee at the median total weekly salary in Great Britain in January 2024, as detailed by the Office for National Statistics (ONS) and the National Insurance and pension contribution rates for 2024/25.
What is the average salary in the UK?
We should start with the big one: salary. What will you end up paying your new employee?
Of course, there are so many variables when it comes to remuneration. What industry are you in? What level of experience are you looking for? How much can you realistically afford? Salaries also vary by region, with London employees earning more, on average, than employees elsewhere in the UK.
Despite these variations, it’s worth considering the average salary as a benchmark of what prospective employees might be expecting.
According to data from the ONS, median weekly pay (including bonuses) for full-time employees in Great Britain in January 2024 was £672. This equates to a salary of £34,944 a year, including bonuses.
The Northern Ireland Statistics and Research Agency, meanwhile, conducts an Annual Survey of Hours and Earnings for Northern Irish employees. Their latest survey found that Median gross earnings for full-time employees in Northern Ireland stood at £641 per week in April 2023. This equated to a gross salary of £33, 332.
Since the median salary in Northern Ireland is slightly lower (and less recent) than the figure for Great Britain, bear in mind that it is likely to be slightly cheaper to hire an employee in Northern Ireland, based on these figures, compared to the UK-wide average.
While these average total weekly salaries can offer employers some helpful guidance, it isn’t a legal requirement to set salaries at this level. However, you will need to make sure you are abiding by the National Living Wage and National Minimum Wage rules when hiring staff.
The National Living Wage applies for employees aged 21 and over, while the National Minimum Wage applies for employees of at least school leaving age. The rates change on 1 April every year. The table below shows the hourly wage for each age group as of April 2024.
| 21 and over | 18 to 20 | Under 18 | Apprentice | |
| Wage per hour | £11.44 | £8.60 | £6.40 | £6.40 |
» MORE: What is an employee?
How much will I pay in National Insurance?
The cost of hiring someone in the UK doesn’t end at paying your employee’s basic salary. On top of their pay, you will also need to make National Insurance contributions (NICs). Note that employer NICs are separate from your employee’s own contributions.
Employers pay class 1 National Insurance contributions on all employee earnings above the secondary threshold (the point when employers start paying NICs), which for the 2024/25 tax year is frozen at £175 a week.
The rate of National Insurance for employers is 13.8% for the 2024/25 tax year.
Based on current rates, if you were to pay a 30-year-old employee the average salary of £34,994 using the most common Class 1A NIC category, you as an employer would pay roughly £3,566.47 in National Insurance contributions over a year for that one employee.
If you were to employ anyone under the age of 21, or an apprentice under the age of 25, however, the secondary threshold is £967 a week.
You will also need to pay National Insurance on any cash bonuses you give your employees.
From April 2025, employers’ NICs are set to rise to 15% – as announced in the 2024 Autumn Budget.
The secondary threshold is also set to be reduced, meaning employers will start paying NICs on employee earnings over £5,000 per year – rather than the current £9,100 per year.
To partly offset these costs, and in a bid to help the smallest businesses, the new tax year will also see an increase in the employment allowance – which currently allows eligible businesses to reduce their NIC bill by up to £5,000 per year. This figure is set to rise to £10,500 in April 2025.
» MORE: What is National Insurance?
How much will it cost me in pension contributions?
As well as National insurance, you may also need to make pension contributions on behalf of your employee.
If you automatically enrol an employee into a workplace pension scheme, then you must contribute a minimum of 3% of their qualifying earnings. If they voluntarily enrol into a workplace pension scheme, then you must contribute the 3% minimum if your employee earns more than £120 a week, £480 over four weeks, or £520 a month.
Qualifying earnings include your employee’s wages or salary, as well as any commission, bonus or overtime you pay them. For 2024/25, qualifying earnings fall between £6,240 and £50,270.
For an employee on Great Britain’s average salary (including bonuses) of £34,944 a year, after subtracting the lower threshold of £6,240 you would pay pension contributions on qualifying earnings worth £28,704. Therefore, if you automatically enrol this employee into a workplace pension scheme at the minimum requirement of 3%, you would pay £861.12 a year in pension contributions for that one employee.
How much does it cost to recruit an employee?
An employee won’t just appear overnight. Most of the time, you will need to recruit them. And this doesn’t just involve learning how to interview someone, or the best questions to ask in an interview.
No, you will need to actively search for applicants. And this isn’t always free. For that matter, it isn’t always even cheap.
Although there are some hiring sites where you can post a job advert for nothing, to cast the net wide enough, you may end up needing to pay to display. This could cost anywhere between £89 and £250 plus VAT.
Even then, most small businesses won’t have the luxury of an in-house recruitment team to create and post the ads, let alone follow up with each candidate. That’s where recruitment agencies come in, often charging fees between 10% and 30% of the employee’s first-year salary.
Let’s say a recruiter charges the midpoint of those percentages: 20%. If you were to employ someone at the average salary of £34,944 and use this recruiter to find them, this would cost you £6,988.80.
What does it cost to train a new employee?
The amount it will cost to get your new employee up to speed can vary greatly, depending on your organisation and the position you are hiring for.
Research by the Department for Education, published in November 2020, showed that, on average, businesses spent around £1,530 on training costs per employee in 2019.
That may sound like a lot of money, but it is worth seeing your employees as an investment. The more you put into them, the more they can bring to your business.
George Harrison, Lead Writer and Business Expert at NerdWallet
What our Nerds say…
“If you run a business and you’re planning to hire your first employee, you’ll need to register as an employer with HMRC before your employee’s first payday. It could take up to 30 working days before you receive your employer PAYE reference number, so make sure you leave plenty of time.”
How much business insurance will I need to take out?
The moment you hire an employee based in the UK who isn’t a family member, you are legally required to take out employers’ liability insurance worth £5 million from an authorised insurer. And if you are incorporated as a limited company, you are required to take out an employers’ liability policy even if you only employ family.
But don’t worry – you won’t be paying £5 million for your insurance. That’s just your level of cover. How much a policy will actually cost you depends on, among other things, how many employees you have, and the risks associated with your individual business.
This means there can be vast differences between the cost of the average employers’ liability insurance policy. Where one business might be looking at £10 a month, another might be paying well into the hundreds.
NerdWallet’s partner for employers’ liability insurance, Simply Business, states that prices can start from £2.76 per month, although most customers pay more than that. At that lower level, you would pay £33.12 a year for employers’ liability insurance. Again, however, it is important to stress that in reality the cost of your policy may be much higher.
You may also want to bundle employers’ liability with other types of business insurance, such as public liability insurance or professional indemnity insurance, in order to financially protect your organisation from a wider range of potentially adverse scenarios.
What are the costs of running a workplace?
While there has been an undoubted rise in remote or hybrid working since the Covid-19 pandemic, many businesses still need a dedicated workplace.
And from business electricity bills to rental costs and commercial mortgage payments, running a workplace can be expensive.
But what is the cost per employee? As with everything, it will depend on the exact type of business you run. An office building has different needs to a restaurant, for example. And again, there are major variations in cost depending on which part of the UK your business is based.
The average monthly rent for office space in London has been estimated at £76.50 per square foot. This works out at around £520 for a desk for a month.
And with a common rule of thumb recommending 50 square foot per desk, you could be looking at £45,900 a year in rent to accommodate one employee in an office – though this could be even more depending on the size of your office’s communal space.
Meanwhile, data firm Thermatic Energy estimates that the average annual energy bill for a five-person office in 2020 was £3,103.
What will it cost to keep my employees happy?
On the one hand, you could argue that you can’t put a price on keeping your employees happy. On the other, there’s no way to get around it: work perks cost money.
The value of creating a strong workplace culture can be invaluable. And one way to do that is through social functions and parties. It might be wise not to spend more than £150 per employee, however; if you do, you will have to pay National Insurance on the social event.
You should also think carefully about what your employees actually want. Our NerdWallet survey of 2,000 employed UK adults showed that workers are more interested in flexible hours and commuting time over team social events and office refreshments.
Other hiring costs to consider
On top of all the various costs and expenses mentioned above, there are a bunch of other factors that may come up for consideration once you’ve found your new employee. These include:
- bonuses
- new equipment
- software licences
- sick or holiday cover
- maternity or paternity pay
- company benefits
- business travel
- company vehicle
Given the number of financial elements you will need to juggle as an employer, it is strongly recommended that you consider opening a dedicated business bank account if you do not have one already.
Image source: Getty Images
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