14 Aug 2025
6 MIN
READ
Growing your team is an exciting milestone. And while it’s natural to focus on the upfront costs like salaries, it’s equally important to consider the wider costs involved. Looking at the bigger picture can help you to plan wisely and protect your business’s future.
What is the average cost of hiring an employee in the UK?
What is the average cost of hiring an employee in the UK?
While there’s no one-size-fits-all answer, the Chartered Institute of Personnel and Development (CIPD) reports that the average hiring cost for an employee in the UK is around £6,125*.
This figure covers a range of expenses, including both direct costs like advertising and recruitment fees, and indirect costs such as time spent on interviews and onboarding. Planning for these costs can help you make confident, informed decisions as you grow your team.
Direct hiring costs
So, what are the direct hiring costs for a small business? Some are fairly straightforward, but there are others that may surprise you. Let’s take a closer look.
Job advertisements
Typically the first step you’ll take when hiring, job ads play a key role in attracting the right candidates and can be placed across different channels. Each one has its own benefits and costs. These may include:
- Online job platforms
- Social media and your website
- Local papers
It’s down to you to decide which form of advertisement works best for the vacancy you have, but keep in mind the varying costs between each.
Recruitment agencies
Your employees are at the heart of all you do, and so, you’ll want to get it just right when it comes to hiring. Using recruitment agencies can be a smart way to help you find the right talent, as they can help cast a wider net out when looking for candidates! Just keep in mind that this service comes at a cost, which should be included as part of your hiring budget.
Time as a resource
While not associated with a financial cost, your time is a valuable resource. It’s likely you’ll need to take time to conduct interviews, review job applications, and choose the right candidates for the role - and these things all add up! So, it’s worth considering your time as a resource when it comes to planning.
Ongoing employee costs
Salaries
Salaries are likely to be the biggest ongoing expense when it comes to hiring a new employee. And, while the amount may vary by role and industry, it’s important to plan for this investment. Remember, as an employer you are required, by law, to pay your employees a minimum amount for their hours worked under The National Living Wage.
Believe it or not, you may be able to claim back your staff salaries through employee allowable expenses. To find out more visit our handy guide to allowable expenses.
National Insurance Contributions (NICs)
In the UK, employers contribute to National Insurance for their employees. We’ve broken down what this means for your business, so you can budget with confidence:
As of April 2025, employers must pay 15% NIC on employee earnings above the new secondary threshold of £5,000 per year (this was previously £9,100).
For example, if you hire an employee with a salary of £22,000, the NICs payable by the employer would be calculated as follows:
Pensions
Providing a pension is a legal requirement and a great way to support your team. The minimum employer contribution is 3% of qualifying earnings.
For example, if you hire an employee with a salary of £22,000, the annual pension contributions payable by the employer would be calculated as follows:
Indirect hiring costs
While some costs, like job ads, are straightforward, some of the indirect costs may surprise you. Planning for these ‘hidden costs’ helps you build a resilient, motivated team.
Onboarding
When a new team member joins, it’s important to introduce them to your staff, policies, tools, and equipment. This process can take some time and may impact your daily operations, but it’s an important step in building a strong, confident team. Making a new employee feel welcomed and prepared to carry out their responsibilities will go a long way in ensuring your team morale stays high, and your employee turnover remains low!
Not sure where to start when developing an onboarding process? We’ve got you covered.
Low productivity
It can take some time for new employees to reach their full potential, which might slow things down initially. This can affect your overall business, as you or someone else may need to step in to keep things on track.
Keep in mind, that being supportive and available for any help or questions in this phase will be beneficial to employee/employer relationships. Everyone was once new, so ensure they feel comfortable in their new setting, role and around their new co-workers.
Training
The training your new hire may need will depend on their role. It might include:
- eLearning and online modules
- Hands-on training
- Role playing
- Coaching or mentoring
- Workshops
Investing in training helps your team grow and succeed.
Cost-saving ideas for small businesses
Use local job boards, social media, and word-of-mouth to cut advertising expenses.
Smart recruitment and onboarding can make a real difference. Take advantage of apprenticeship programs, grants, and subsidies available to small businesses.
Use your existing network - ask current employees, friends, or business contacts for recommendations.
Hold virtual interviews to save on travel and venue costs.
Budgeting and forecasting
Hiring a new staff member is an investment that requires careful financial planning. By understanding all associated costs, you’ll be able to set a realistic budget that supports sustainable growth. Here are some helpful tips that Future You will thank you for:
Calculate the total cost of hiring
Make sure to include direct costs, indirect costs, and ongoing expenses (salary, NICs, pensions).
Budget beyond initial costs
Allocate an extra 10-20% (if possible) of your estimated costs to cover unforeseen expenses like additional training or delays.
Think long-term
Remember that the initial hiring costs are just part of the total cost of employment. Consider the impact of the ongoing expenses on your business to make sustainable decisions.
Employee protection
Learn more about Employer’s Liability Insurance. This type of insurance is a legal requirement for most businesses with staff, so it’s a good idea to get to know the ins and outs.
Looking to the future
Growing your small business is an exciting step that brings fresh new opportunities!
By understanding and planning for the wider costs, you’re setting a strong foundation for the future.
And now that you’re more clued up on the true cost of hiring an employee in the UK, you can look to the future with confidence!
Protect the future of your business
Running a business is hard work, so you want to protect the work you put in to make your business a success. Do a little thing today that can make a big difference to your business tomorrow. Get AXA Business Insurance and Future You will thank you.
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