What every business owner in Sussex, Surrey and London needs to work out before they advertise for the first member of staff.
Here’s a scenario we see more often than you might think. A business owner decides it’s time to take on their first member of staff. They’ve settled on a salary, they’ve done a rough mental calculation, and it looks manageable. A few months in, they’re looking at the books wondering why the hire is costing considerably more than planned and the new person still isn’t quite up to speed.
The salary was never the whole cost. For most SME employers, it represents roughly 75–80% of the true annual cost of employment. The other 20–25% is the part that tends to catch first-time employers off guard and is quite often the difference between a budget that works and one that quietly bleeds money through the first six months.
What’s included in this article:
The true cost of hiring an employee in the UK: a full breakdown
Breaking down the the key costs
Where first-time employers often come unstuck
Three things to do before you post the job advert
The working estimate and why it’s just the start
The figure most HR advisers use as a starting point: multiply the headline salary by 1.25 to get a realistic all-in annual cost. For a £30,000 salary, that means budgeting closer to £37,500.
That’s a useful sense-check, not a final answer. Below is what’s actually inside that 25% — and where it can run higher than you’d expect.
The true cost of hiring an employee in the UK: a full breakdown
For a £30,000 salary in a typical desk-based role, here’s what a realistic first-year cost looks like:
| Cost Component | Annual Cost (est.) |
|---|---|
| Salary | £30,000 |
| Employer’s National Insurance | £2,884 |
| Pension contributions (3% minimum) | £800 |
| Equipment (amortised) and software licences | £900–£1,800 |
| Recruitment (your time, valued honestly) | £1,500–£3,000 |
| Statutory Sick Pay buffer | £400–£800 |
| Training, onboarding and reduced output | £1,000–£2,000 |
| Total realistic first-year cost | £37,500–£41,300 |
We’ll now talk through what each of those lines can look like, all of the figures quoted are for illustrative purposes and an indicative example, every case will of course be different.
Breaking down the key costs
Employer’s National Insurance
This is the biggest single add-on beyond the salary. Employers pay Class 1 National Insurance at 13.8% on earnings above the secondary threshold (currently £9,100 a year, check the figure before you budget, as these thresholds change every April).
For a £30,000 salary: £30,000 − £9,100 = £20,900 of NIable earnings × 13.8% = approximately £2,884 a year. That takes your actual starting figure to £32,884 before anything else.
Employment Allowance may reduce your NIC bill by up to £10,500 a year if you qualify but not every business is eligible, so confirm your position before building it into your projections.
Pension auto-enrolment
If your employee is between 22 and State Pension age and earns more than £10,000 a year, you must auto-enrol them in a workplace pension. The current minimum employer contribution is 3% of qualifying earnings, around £750–£800 a year on a £30,000 salary. Many SMEs offer above the minimum to remain competitive in the current market; at 5%, that’s closer to £1,250 a year.
Equipment and software
For a desk-based role, a typical first-year equipment budget looks something like this:
- Laptop: £800–£1,400, amortised over three years (roughly £270–£470 per year)
- Software licences (Microsoft 365, CRM, project management tools): £400–£900 per person per year for a typical SME stack
- Desk, chair, monitor: £500–£900 one-off
For hybrid workers, you may need to provision both office and home set-ups.
Recruitment costs
For a first hire, this is largely your time and it can all begin to add up pretty quickly. Allow 30–50 hours across the full process: defining the role, writing the job description, advertising, sifting CVs, interviewing, checking references, and completing the paperwork. At your effective hourly rate as the business owner, that is a real cost even before any agency fees.
If you use an external recruiter, budget 15–20% of first-year salary, typically £4,500 to £6,000 for a £30,000 role.
Training, onboarding and productivity ramp-up
Your new hire will not be at full output from day one. In our experience working with SMEs across Sussex, Surrey and London, most roles take two to three months before a new hire is genuinely operating independently and some specialist or client-facing roles take longer than that.
That ramp-up period is a real cost: your time, your team’s time, and reduced output at a point when you’ve already committed to the salary. Build it into your plan rather than being surprised by it at the three-month review.
Where first-time employers often come unstuck
The figures above are manageable if you’ve planned for them. The problems we see most often at MJV when new clients from across Sussex, Surrey and London are taking on their first hire, tend to fall into one of three areas.
The employment contract isn’t right. A contract downloaded from the internet or put together from a generic template often leaves gaps around probationary clauses, notice periods, IP ownership, or flexible working rights. The cost of getting this wrong after the fact is considerably higher than getting it right at the start. With The Employment Rights Act 2025 now in force, can you really afford to get this wrong, in a recent blog we provide a full overview and checklist to help you form the very start of this process.
The onboarding process isn’t structured. A new hire who doesn’t know what’s expected of them, or who doesn’t feel properly set up to succeed, takes longer to reach productivity and is more likely to leave inside their first year. The first 90 days matter more than most business owners realise.
The paperwork is incomplete. Right to work checks, PAYE registration, pension enrolment, and issuing a written statement of employment particulars within two months of the start date are all legal requirements. Recruitment compliance is more important than ever and missing any of the key documentation creates unnecessary risk and, in some cases, significant financial exposure.
Many of the businesses we work with come to us specifically at the point of their first hire because they want to get it right the first time. A short conversation before you advertise can clarify what the role actually needs, flag anything you may have missed, and save you considerably more time and cost further down the line.
Three things to do before you post the job advert
- Run the numbers properly. Not just the salary-the full first-year cost. If the business case doesn’t hold at £37,500–£41,000 for a £30,000 hire, it won’t hold at £30,000 either. Do this calculation before the offer goes out, not after.
- Get the contract and paperwork in order first. Don’t advertise until you have a proper employment contract ready to issue. If you’re not certain what should be in it, that’s exactly the kind of conversation we have every week with business owners who want to get it right.
- Plan the first 90 days. Who will onboard your new hire? What will they be working on in their first month? How will you know things are on track? The cost of a poor first hire and having to start the process again six months later, is the number you really want to avoid.
At MJV Consulting, we work with business owners across Sussex, Surrey and London who are navigating their first hire and beyond. If you want to make sure you’re getting it right all the way from employment contract to onboarding process, we’re here to help.
If hiring is on your agenda this year, it all starts with a conversation. Our team of experienced HR professionals will help you build a solid foundation from day one all before the first offer letter goes out.
Frequently asked questions
How much does it really cost to hire an employee in the UK?
The full cost of employing someone typically runs to around 1.25 times their headline salary in year one. For a £30,000 salary, that’s a realistic first-year cost of £37,500–£41,000 once employer NI, pension contributions, equipment, recruitment time, and onboarding are included.
What is employer’s National Insurance and how much will I pay?
Employer’s NI is a contribution paid by the business on top of the employee’s salary. It’s currently charged at 13.8% on earnings above £9,100 a year. For a £30,000 salary, this adds approximately £2,884 per year to your employment costs.
Do I have to set up a pension when I hire my first employee?
Yes, if your employee is aged between 22 and State Pension age and earns more than £10,000 a year, you are legally required to auto-enrol them in a workplace pension. The current minimum employer contribution is 3% of qualifying earnings.
What legal paperwork do I need when hiring my first employee?
You must carry out a right to work check, register as an employer with HMRC and set up PAYE, enrol your employee in a workplace pension if they meet the auto-enrolment criteria, and issue a written statement of employment particulars within two months of their start date. Getting this right from the outset is considerably easier than correcting it after the fact.
What is the most common mistake first-time employers make?
The most common issue we see is underestimating the full cost of a hire and underpreparing for the first 90 days. The salary is only part of the picture and a new hire who isn’t set up to succeed is one of the most expensive outcomes a small business can face.
Should I use an HR consultant when hiring my first employee?
For many SME owners in Sussex, Surrey and London, taking advice from an HR Consultancy like MJV Consulting before their first hire, rather than after something goes wrong is one of the most cost-effective decisions they make. An HR consultant can review your contract, sense-check your onboarding plan, and make sure your paperwork is in order, usually for considerably less than the cost of getting it wrong.
Statutory rates and thresholds
All statutory rates referenced in this article (employer NI, pension thresholds, SSP) are correct as of May 2026 and are subject to change each April. Check the current figures on GOV.UK before committing to a hire. This article is general guidance, not financial or legal advice.
