Beyond the balance sheet

The recruitment cost of taking on employees

Ross Andrews 08/2/2021 9 minute read

Ross Andrews ACA explains the costs associated with hiring new employees in the UK and how to plan this into your growth strategy. 

The need for more people can be a great indication of growth for any business but, "with great power comes great responsibility". If we take this proverb and apply it to the business world, we can say that an owner manager's responsibility increases with the growth of an organisation. At some stage in your start-up journey you may weigh up the recruitment cost of taking on an employee.

Recruitment can be a strenuous task for small businesses, particularly when it comes to time and money invested. It’s not just about filling a position, it’s about finding the right person that fits your organisation culture. The chances are you'll need someone who is also prepared to grow with the business and that can take a while!

Ready to take on staff? Get in touch to start planning now!

Finding the right people for your business isn’t your only consideration. You’ll also need to think about the financial commitment associated with recruiting and retaining your team, as well as the impact a new recruit will have on the business to justify the investment.

What is recruitment cost?

Recruitment cost refers to the investment of time and money that an organisation will undertake when searching for a new employee. Recruiting tends to be a process that may involve some or all of the following:

  • Job descriptions
  • Advertising
  • Website listings and job boards
  • Social media postings
  • Recruitment agencies
  • Assessing CV applications
  • Interviews

The cost of recruitment and selection

There are essentially two routes to recruitment that businesses can choose from:

1. Recruitment Agencies

As with any decision to be made when running a business, there are pros and cons to be deciphered in order to make the best choice for your organisation. Recruitment Agencies are known for producing quick results and can be great for employers looking to fill a position in a hurray, that being said you need to consider your budget carefully when considering this option.




Recruiters have a huge database of potential candidates at the ready, meaning the recruitment process could be quicker than if you were to handle it in-house.

The price tag of recruitment agency fees can be expensive. Agency charges are typically 20-30% of the final salary.

This is a business relationship meaning you’re choosing to work with this particular recruiter, which also means you can choose to go elsewhere. If they don’t impress you with results you’ll move on to someone else and this is why recruiters are motivated to deliver the best service possible.

Recruitment agencies can find candidates that are qualified but that doesn’t necessarily mean their personality and values are a good fit for your business.


Recruitment agencies handle searching for candidates and sifting through CVs, thereby freeing your time up for running the business.

Lack of brand representation, candidates might not get the feel for your business and what it has to offer.


2. In-house recruitment initiatives

While some owner managers see using in-house recruitment resources as a cheaper solution to hiring, and although there are many benefits to using your own resources, this doesn’t mean it won’t cost you money.

Getting your advertising seen often means investing in paid social media advertising or sponsored features on websites to compete with the, at times, mass amounts of vacancy postings out there.




You know your business best which means you’ll know what you’re looking for in an employee.

Competing with other businesses to be seen on open job boards.

You have the chance to establish the essence of what it’s like to work for your business.

This can be a huge time commitment for your hiring team.

Face to face conversation and multi level interviews can demonstrate if the candidate is a fit for the team, you’ll see how they react and respond to different situations.

A lengthy process can mean you loose out on good candidates because of time restraints and other opportunities.


The cost of new employment in the workplace

Once you have found the right candidate it’s time to make them an official employee through the onboarding process and that can also be quite the financial investment.

These are some of the areas that you’ll need to consider when hiring new employees:


Once you have found the perfect candidate and a start date is agreed the training process will begin. In order for a recent hire to perform their job as expected time will be required, and this doesn’t just refer to the trainee’s time, but also that of the person doing the training.

As the old saying goes, “time is money” especially when it comes to business.

Salary and benefits

Probably the most obvious cost associated with new employment is that additional salary and benefits that your organisation may offer (i.e. discounted memberships).

Make sure you have a plan for how these changes will roll out before the position is open to applications.

National Insurance

Class 1 National Insurance for employees is comprised of payments that have been deducted from their salary, as well as your contributions paid as their employer.

The amount you will have to pay towards your employees’ National Insurance varies depending on your employee’s category letter and the earnings band.

You can find up to date contributions amounts on National Insurance rates and categories here.


As an employer, you are required to provide a workplace pension scheme for eligible employees. This also includes making contributions towards it at a minimum of 3% of your employees qualifying earnings.

As outlined by you must enrol employees who:

  • are aged between 22 and the State Pension age
  • earn at least £10,000 a year
  • normally work in the UK (this includes people who are based in the UK but travel abroad for work)

Office Equipment and Supplies

There’s always the behind the scenes costs that may or may not cross your mind amidst the huge to-do list that accompanies every hiring project. Before the process begins you should think about and plan for increases in the unexpected costs like office equipment and supplied.

Ask: What does everyone in the business use on a daily basis and will you need to increase the quantity of it?

The cost of hiring the wrong person for your business



Let’s look back for a second at some of the elements that are involved in the cost of recruiting new employees.

Now imagine having to do this all over again in the event that you’ve hired the wrong person for your business. You'll also have to consider the effects on productivity and client relationships which can vary depending on how long they have worked for you.

Hiring the right person, implementing retention strategies and developing a clear work culture are key to keeping recruitment costs low.

How your accountant can help you plan for recruiting costs:

  • Growth strategy planning – know when and why you’ll need more employees and how to fund the expansion
  • Help to reduce costs of recruitment with pre planning and financial advice
  • Provide you an understanding of how to calculate the costs - know how much you need and save for it

With the era of lifetime employment probably in the past, recruitment will continue to be a big part of running, managing and scaling a business.

Your focus should be on early planning for the hiring process so you can obtain funding and budget accordingly to keep your business growing. Contact a Wellers advisor today to get started!

Is your business ready to take on staff? Contact us today to create a viable  plan for now and the future!

The content of this post is up to date and relevant as at 08/02/2021.

Please be aware that information provided by this blog is subject to regular legal and regulatory change. We recommend that you do not take any information held within our website or guides (eBooks) as a definitive guide to the law on the relevant matter being discussed. We suggest your course of action should be to seek legal or professional advice where necessary rather than relying on the content supplied by the author(s) of this blog.



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