How much does it cost to employ someone?

Many employers begin the hiring process with a clear idea of the salary they want to offer. However, salary is only one part of the total cost of employment. From recruitment and onboarding to statutory contributions and day-to-day operational needs, several additional expenses can apply - some of them less immediately obvious.

As a result, the actual cost of employing someone for the first year can be considerably higher than expected. A role advertised at £30,000, for example, may end up costing the business over £60,000 once all associated costs are taken into account.

These costs can vary depending on the role, sector, and internal processes, but they begin as early as the job advertisement stage and continue well into the employee's first year. Understanding the full cost of employment can help employers plan more accurately and manage team growth more sustainably.

Summary

• Total first-year employment cost often exceeds the base salary by 50-110%, with estimates reaching £62,890 for a role paying £27,600 [1].
• Recruitment costs include advertising, internal time, screening, and optional agency fees. As per CIPD, these range from £600 to £1,750 for standard roles and £1,800 to £2,500 for senior or executive positions [2].
• Equipment and setup expenses vary by role type. For office-based employees, total setup may range from £560 to £2750 per person, factoring in furniture, IT hardware, and software [3]. Technical roles requiring specialised equipment or environments can increase this substantially.
• Statutory costs, including Employer National Insurance and pension contributions, apply to all employees and scale with salary. These create permanent obligations in addition to one-time onboarding costs.
• Hidden expenses, such as HR processing, system access, insurance adjustments, and management time, often go unbudgeted but materially affect total employment cost.
• Training and onboarding costs averaged £1,530 per employee per year in 2019, based on UK-wide employer-reported spend. Spend per trainee was higher in sectors like construction, reaching £4,400 annually [4].
• Hiring risks can lead to substantial financial losses. Failed hires result in lost investment, productivity disruption, and increased replacement costs, particularly when recruitment is rushed.

Recruitment costs per hire

Employment-related costs often start before the hiring decision is made. Writing a job description, preparing internal approval, and setting up the recruitment process all require time and resources. These early activities may not always be budgeted for, but they form part of the overall cost of bringing someone into the organisation.

Job advertising is typically the first direct expense. Different platforms use different pricing models, and costs can vary depending on the role, location, and competitiveness of the sector:

• LinkedIn promoted job listings may cost $200 and above for campaign-style visibility;
• Indeed uses a pay-per-click model, starting at $5 per day or $150 a month for basic postings, but rising considerably in competitive markets;
• UK job boards such as TotalJobs charge £89-£379 per listing, while sector-specific platforms may charge more given their niche audience.

Platform choice can influence both cost and reach. Some platforms may be more effective for particular roles, but may also require longer campaign durations or additional screening effort.

In addition to advertising fees, there’s usually a time cost associated with internal recruitment. For example, an in-house recruiter earning between £25,000 and £37,000 per year (as per the national average) may spend approximately 30 hours managing a single hire. This includes time spent developing the job specification, reviewing applications, scheduling interviews, and conducting reference checks. Based on a standard 1,950-hour work year, this may result in a direct cost of £385 - £570 per hire.

Some businesses choose to work with external recruitment agencies to reduce the internal time burden or access a wider talent pool. Agency fees for permanent hires typically range from 15% to 30% of the first-year salary [5]. For a £35,000 role, this may result in a fee of £5,250 - £10,500. Executive search services for senior positions may carry higher fees.

These often include services such as market research, candidate pre-assessment, interview coordination, negotiation support, and replacement guarantees, which may help reduce time-to-hire and improve candidate fit, particularly when recruiting for specialist or senior roles. Agencies typically maintain established networks and have insight into market trends, which can support a more efficient hiring process.

However, successful outcomes depend on clear communication. Agencies require accurate role specifications and realistic expectations to match candidates effectively. Inadequate briefing may result in unsuitable applicants and increased recruitment costs.

Screening and compliance checks

Once suitable candidates have been identified, the screening stage introduces further costs that may not be accounted for in early-stage budgeting. These checks help employers meet regulatory obligations, reduce risk, and support informed hiring decisions.

A basic Disclosure and Barring Service (DBS) check costs £21.50, with enhanced checks priced at £49.50. While DBS checks are required for certain regulated roles, many employers also invest in additional screening measures.

Professional reference-checking services typically range from £7 to £21 per candidate, depending on volume and provider. For example, RefNow credits cost £6.99 - £11.99 per candidate, and Complygate offers checks for £8 per candidate.

Additional screening costs may include:

These checks can support better hiring decisions but may also increase the cost and duration of the recruitment process. Technology helps reduce manual workload. An Applicant Tracking System (ATS) typically costs between £2,500 and £10,000 per year, depending on features and company size [6].

Technology and equipment costs for new hires

When your chosen candidate accepts the offer, further costs typically follow. Modern employment often requires immediate technology investment that extends beyond traditional office setups. With hybrid working now common, many roles require equipment that supports productivity both in-office and remotely.

These technology requirements reflect both operational needs and evolving employee expectations. For example, basic office roles may require a reliable laptop, a suitable monitor, and essential productivity software. These initial costs can increase when factoring in additional requirements such as cybersecurity tools, collaboration platforms, and industry-specific applications that support day-to-day operations.

Technical roles often require high-performance hardware and specialist software, which can increase overall setup costs. For example, a workstation may cost £560 to £2750 per person [3]. For senior executive roles, equipment costs are shaped by the need for security, mobility, and presentation tools, often resulting in total setups valued between £5,000 and £10,000 [3].

Software licensing has increasingly shifted to subscription models. This change has introduced ongoing operational costs that scale with headcount. Microsoft 365 Business licensing ranges from £50 to £365 annually per user and forms a common baseline for internal communication and collaboration. Industry-specific needs can add further software costs. Creative professionals may require Adobe subscriptions priced at £240 - £760 per year, engineering roles may involve software licences like AutoCAD, ranging from £1,000 - £5,000, and regulated sectors such as healthcare or financial services may need compliance-focused applications costing £500 - £2,000 annually.

Workspace infrastructure extends beyond technology. Ergonomic furniture is now widely expected. A quality ergonomic chair costs about £220–£800, height‑adjustable desks typically range from £200 to £800, and storage solutions such as lockable cupboards or filing cabinets start around £85 and can exceed £250. Some employers also provide one‑off home‑office allowances (often £500–£1,000) to equip remote workers. These figures demonstrate how equipping each new hire requires a mix of hardware, software, and furniture tailored to the role and working pattern.

Training, onboarding, and productivity ramp-up

Once a new employee starts work, additional costs begin to emerge - particularly during the early months when full salary is paid but productivity is still developing. This phase can require a substantial investment in training and support, which is sometimes underestimated during workforce planning.

According to data from the Learning and Work Institute [7], average training costs are around £1,530 per employee. However, when onboarding time, training materials, trainer time, and administrative support are included, the total onboarding cost may reach £3,600 per person [8]. These figures vary by industry and role type. For example, onboarding in the healthcare sector can increase significantly due to compliance requirements.

In addition to training costs, most new employees experience a productivity ramp-up period. Research from the CIPD shows that 41% of new hires leave within the first 12 weeks [9]. Survey data from Oleeo indicates that 71% of HR professionals report it takes at least three months for new employees to reach full productivity [10]. This creates an output gap that affects overall employment costs.

Statutory employer obligations and ongoing costs

While recruitment, equipment, and training costs are being managed, there are also statutory obligations that result in additional mandatory expenses. These apply to all employers, regardless of size, sector, or profit level. Such costs are ongoing and scale with employee earnings over time.

Employer National Insurance contributions are one of the largest statutory costs. Employers are required to pay 15% on employee earnings above £96 per week (£5,000 annually) [11]. This contribution is separate from employee-paid income tax and National Insurance, and it represents a direct cost to the business. As salaries increase, so do these contributions, including for bonuses and other variable earnings.

National insurance impact by salary level

In addition, employers must comply with automatic pension enrolment legislation. This includes a minimum employer contribution of 3% on qualifying earnings between £6,240 and £50,270 per year [12]. These pension contributions, while modest on a per-employee basis, represent a permanent financial commitment. For example, an employee earning £25,000 would require an annual employer contribution of £564, while a £50,000 salary would generate a £1,314 contribution.

Holiday pay also forms part of the employer's legal obligations. All full-time employees are entitled to 5.6 weeks (28 days) of paid annual leave as a statutory minimum [13]. Additional leave provided by the employer increases total cost. For mid-year starters or variable working patterns, pro-rata calculations and accrual tracking are required, which can add administrative complexity. Statutory Sick Pay (SSP) is another mandatory cost, currently set at £118.75 per week for eligible employees, and can create additional short-term financial pressure [11].

Beyond these direct costs, government compliance also introduces ongoing administrative requirements. These include payroll processing, pension scheme management, statutory reporting, and record-keeping. Businesses need to allocate significant time per month per employee to manage these tasks, particularly in environments without dedicated payroll or HR staff.

Administrative and operational overheads

Beyond the more visible recruitment, equipment, training, and statutory costs, employment introduces a range of additional expenses that are less immediately apparent. These hidden costs often accumulate gradually and can have a significant effect on cash flow, resource allocation, and operational efficiency.

Human resources administration is one area where these costs emerge. Each new hire typically requires multiple actions beyond the initial offer letter. Contract drafting and legal review, right-to-work checks, and IT setup all require time and resources. In addition, employer liability insurance premiums often increase with each new hire.

Some of the most impactful hidden costs arise from team disruption. Even when a new hire is a good fit, the process of adjusting team responsibilities and workflows can result in a temporary productivity decline. These changes can delay project delivery, shift priorities, or affect client outcomes.

Management input is another factor that can significantly influence the total cost of employment. Beyond the onboarding phase, managers are typically involved in regular check-ins, performance reviews, development planning, and cultural integration. For senior or strategic roles, management time also includes stakeholder introductions and broader alignment with business objectives.

Opportunity cost is another consideration. Time spent on hiring, onboarding, and supervision can reduce the capacity of business owners or senior staff to focus on revenue-generating activities, client acquisition, or strategic growth initiatives. This indirect impact may not always be reflected in hiring budgets, but it can materially affect business performance -particularly in small and medium-sized enterprises where leadership time directly supports operational delivery.

Sector-specific employment cost drivers

Employment costs vary significantly across industries due to differences in regulatory requirements, equipment needs, role complexity, and labour market conditions. Understanding these sector-specific factors can help businesses benchmark their hiring expenses more effectively and identify areas where costs may be managed or anticipated.

Technology companies often face some of the highest hiring costs. These are driven by skills shortages, high-specification equipment, and extended onboarding requirements. Research from techUK shows there’s approximately one qualified candidate for every seven digital vacancies, creating intense competition for talent [14]. Equipment needs and training for complex technical environments create substantial additional costs.

In healthcare, employment costs are affected by regulatory compliance, specialist training, and equipment requirements. NHS recruitment processes involve extensive background checks and compliance training, adding significant costs per hire [15]. Many clinical roles require investment in medical tools, professional development, and continuing education. Regulatory obligations also create long-term costs through mandatory refresher training, licence renewals, and audit preparation.

Financial services organisations face similar pressures, particularly in roles regulated by the Financial Conduct Authority (FCA). Compliance training, professional references, and enhanced background screening contribute to substantial costs per hire. Cybersecurity and secure data handling requirements also increase equipment and infrastructure costs, including secure workstations, encrypted communication systems, and access-controlled environments.

Manufacturing and retail sectors typically have lower per-employee costs but face challenges with higher turnover rates and safety training requirements. Each sector's specific regulatory environment, skill requirements, and market conditions create distinct cost profiles that businesses must consider in their workforce planning.

According to ONS data, London salaries average 26.8% higher than the national average (£47,455 vs £37,430) [16], which affects both direct payroll and percentage-based costs such as agency fees. Conversely, organisations hiring in northern or rural regions may encounter lower base costs but may also require additional investment in relocation support or remote working infrastructure.

The financial impact of hiring errors

The financial impact of unsuccessful hires can be significant - often exceeding the costs of successful recruitment. This makes risk management a key consideration in long-term workforce planning. UK SMEs with around 250 employees report average losses of £125,347 per year due to failed recruitment outcomes [10]. These figures reflect how ineffective hiring decisions can contribute to ongoing financial pressure and operational disruption.

Turnover data highlights the scale of the issue. Approximately 39% of new employees leave within six months of joining [10], and the total cost of replacing a mid-level manager - when factoring in recruitment, lost productivity, training time, and potential disruption to clients or teams - may reach £132,000 [17]. These costs aren’t limited to the hiring process itself; they can include emergency recruitment fees, delays to project timelines, and reduced team stability during transitions.

The balance between hiring quality and recruitment speed plays an important role in mitigating these risks. The average time to hire in the UK is 40 days [18]. Accelerated hiring decisions, particularly under time pressure, are associated with higher rates of turnover and lower long-term performance. In contrast, well-matched employees often deliver significantly higher output and retention.

The consequences of a failed hire can include the full loss of the original recruitment investment, along with productivity disruption during notice periods, additional management time, and potential impacts on client relationships. Emergency replacement processes may also incur higher costs, particularly when carried out under time constraints with limited candidate availability.

Planning employment costs for long-term stability

Effective employment planning involves budgeting for more than just salary. A comprehensive approach includes direct, indirect, and ongoing costs - from recruitment and onboarding to equipment, compliance, training, and retention. Without full visibility of these elements, businesses may encounter unanticipated financial pressures that affect growth and stability.

Planning should extend beyond the first year of employment. Ongoing costs such as annual training, technology upgrades, and employee development initiatives contribute to sustained productivity and support long-term retention. Factoring these into budget forecasts can help reduce the likelihood of turnover and its associated replacement costs.

While employment represents a significant investment, allocating resources appropriately can support better business outcomes over time. Providing structured onboarding, suitable tools, and development opportunities may contribute to improved performance, employee engagement, and organisational resilience. Building these cost considerations into financial planning helps support sustainable growth and informed hiring decisions.

This article is intended for informational purposes only and does not constitute legal advice. The information is accurate at the time of writing but may be subject to change. For advice specific to your situation, please consult a qualified professional.

[1] British Business Bank, Tips on Hiring New Employees, 2025.

[2] CIPD, Resourcing and Talent Planning Report, September 2024.

[3] Zentura, How Much Does Office Furniture Cost?, 2023.

[4] Department for Education, Employer Skills Survey 2019: Training and Workforce Development, November 2020.

[5] Agency Central, How do Recruitment Agencies Get Paid (and How Much)?.

[6] The Access Group, How much does an Applicant Tracking System cost in 2025?, March 2023.

[7] Learning and Work Institute, Learning at work Employer investment in skills, July 2021.

[8] BW Business Accountants & Advisers, What Are the True Costs of Hiring and Onboarding Employees?, July 2024.

[9] CIPD, New data highlights need to step up recruitment and retention strategies, September 2024.

[10] Oleeo, UK Businesses Battling The Unseen Costs of Recruiting, September 2019.

[11] Gov.uk, Rates and thresholds for employers 2025 to 2026, June 2025.

[12] The Pensions Regulator, Pension schemes under the employer duties, 2025.

[13] Gov.uk, Holiday entitlement.

[14] techUK, Fast Forward for Digital Jobs, 2021.

[15] Oleeo, NHS Recruitment Process Guide: All You Need to Know, November 2023.

[16] Office for National Statistics, Employee earnings in the UK: 2024, October 2024.

[17] Recruitment and Employment Federation, Hiring Mistakes Are Costing UK Businesses Billions Each Year – REC, June 2017.

[18] Smart Recruiters, Recruiting Benchmarks 2025, 2025.