Subscribe to Our Newsletter

Subscribe to our newsletter to stay updated on our news

Please enter a valid email address.
Please check the required field.
Something went wrong. Please check your entries and try again.

The Cost of Employing Staff


Taking on employees can be essential for a business to grow and increase its capacity.

However, before taking on employees does your business make enough money to pay its wage bill each month?

When looking to take on employees you need to consider the true cost of employing them.

You may look at the salary you will pay an employee to see whether your business can afford them, but you also need to take account of Employers National Insurance and Workplace Pensions.

Employers National Insurance

At the time of creating this article Employers National Insurance is charged at 13.8% on an employee’s wages above £166 a week.

This can make a significant difference to the expected cost of taking on an employee.

There is a relief for Employers National Insurance called the Employment Allowance, which means that businesses do not need to pay the first £3,000 of Employers National Insurance that they incur in a tax year.

Workplace Pensions

Workplace Pensions are a requirement for all business that employ anyone that is between 22 and state pension age and earn more than £10,000 a year.

Employees and their Employer both need to contribute to the pension scheme and the minimum contribution for the 2019/2020 tax year is 5% for the employee and 3% for the employer.

There is no relief for the employers pension contributions, other than the contributions paid being tax deductible on the businesses tax return.


When you are considering whether you can afford to take on an employee you cannot simply look at their salary.

An example of the true cost of employing a member of staff is:

Employee’s Annual Salary: £24,000

Monthly Gross Pay: £2,000

Monthly Employers NI: £176.73

Monthly Employers Pension: £60

Therefore the monthly cost of the employee is £2,236.73, which is £26,840.76 a year.

Processing a Payroll

Whether you have 1 employee or 100 employees, your business needs to complete submissions to HMRC for the wages that are paid to staff.

This can be very time consuming and if not done correctly can lead to fines, penalties and interest.

If you are unsure of your requirements or how to file your payroll information with HMRC why not outsource your payroll processing?

If you would like to discuss payroll outsourcing please contact Edwards Bailey Chartered Accountants on 01708 200675 or email us at

Related Articles


Our Guide to Corporation Tax Rates

If you have a Limited Company it is essential to have a basic understanding of the tax the business will pay so you can be prepared for that inevitable tax bill. At present the Corporation Tax rate for a Limited Company is 19% of the businesses taxable profits, which at the date of this article…

eb hero news 2

Starting a New Business But Have Bad Credit?

We recently assisted a client incorporating a Limited Company, but unfortunately the client had bad credit. Although a Limited Company is a separate legal entity from its directors and shareholders, bad credit can cause significant issues when setting a company up. Bank Account The first issue the client faced was opening a bank account. No…

Get In Touch

If you would like to discuss the services we offer or for a no obligation quote please contact us using the details on the right.

"*" indicates required fields

This field is for validation purposes and should be left unchanged.