Research highlights ‘true cost’ of hiring an employee

Research highlights ‘true cost’ of hiring an employee


The true cost of hiring an employee is almost double their salary during the first year of work, according to research by serviced offices provider BE.

Based on current government figures BE examined the total costs of employing a new member of staff on an average annual salary of £27,600, and discovered it would cost a company more than £50,000 in the first year.

One of the most expensive factors is recruitment. Typically recruitment consultants charge between 20% and 30% of the first year salary, equating to between £5,000 and £8,000 for someone on the Government’s estimated average salary.

On joining a business the cost of employment continues to rise. Government figures suggest the typical bonus is six per cent of total pay, resulting in an annual bonus of £1,656 for someone on an average salary while National Insurance at the standard rate is 13.8% of pay which equates to £4,037 a year.

Meanwhile, compulsory pension auto-enrolment means employers have to pay one per cent of an employee's monthly salary towards a pension. This is currently £276 a year but will rise to three per cent, or £828 a year, by April 2019.

BE also referred to data from Bersin & Associates, which estimated the average UK company spends £1,068 per employee a year on training while The IPD Blue Chip Office Index calculates it costs employers a further £4,800 in office space and equipment.

Finally BE highlighted other costs that can include holiday cover, parental leave, sick days, company cars, software licences and more. These can total as much as £8,000 a year - as a result the £27,600 salary becomes a £50,269 annual overhead.

Nazia Ahmed, HR director at BE Offices, said: “The total cost of hiring a new member of staff can be higher than it first appears. Companies, small businesses in particular, need to budget carefully when taking on new staff to ensure they are not overextending themselves and creating unnecessary financial strains on the company.

“However, employees are a firm's best assets and will underpin its future growth therefore taking on new people is essential for expansion. Companies just need to be aware of the true cost of taking on new staff.”

BE has produced an infographic to accompany the research:

Monday, 20 February 2017

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