Growth
What your first employee really costs
Salary is only part of the cost. Here is how to budget for a first hire without unpleasant surprises.
9 June 2026 · 5 min read
Taking on your first employee is a milestone, and it is also the point where a lot of founders under-budget. The advertised salary is only part of the commitment.
The costs beyond salary
- Employer National Insurance on earnings above the secondary threshold.
- Employer pension contributions under auto-enrolment.
- Employer's liability insurance, which is a legal requirement.
- Equipment, software licences and workspace.
- Recruitment, onboarding and the productivity ramp in the first months.
- Holiday and cover for it, because a salaried person is not available every week of the year.
Budget on cash, not on profit
A hire is a fixed monthly outflow that begins immediately and does not flex with a quiet month. Model it into your cash flow forecast for at least six months before committing, including a scenario where revenue is flat.
The obligations that come with it
You will need a PAYE scheme, RTI submissions on or before each pay date, a workplace pension, a written statement of employment particulars from day one, and right-to-work checks. The requirements need careful attention and depend on your circumstances.
Our team can help with payroll and workplace-pension administration. Take employment-law advice where needed before making hiring decisions.
This article is general information, not advice for your specific circumstances. Check current requirements before acting. Our team can help you understand how the topic relates to your business and agree any support you need.