Hiring an employee: everything to consider.

Hiring someone comes with a few financial responsibilities that go beyond just agreeing on a salary. From contributions to leave entitlements, there are rules and requirements every employer needs to be across. It might seem like a lot at first, but once you know the basics, it’s all pretty straightforward. In this post, we’ll cover what you need to know to handle the numbers confidently when bringing someone on board.

Set the pay

Before anything else, you’ll need to decide how much you're going to pay your new employee. Will it be an hourly rate or an annual salary? This usually depends on the type of role - for example, part-time or temporary positions are often hourly, while full-time roles tend to be salaried.

It’s a good idea to check what similar roles are paying in your industry or area. This helps you stay competitive and attract the right candidates. You can do a quick search on job boards like Indeed or Reed, or even take a look at what other businesses are offering locally.

Also, keep in mind there’s a legal minimum wage based on age brackets, so make sure your offer is in line with the latest UK National Minimum Wage rates.

Factor in employer's national insurance.

On top of your employee’s wages, you’ll also need to pay employer’s national insurance contributions, at 15% of their salary. This kicks in once their earnings go over £5,000 a year.

It’s an extra cost that can catch new employers off guard, so it’s worth factoring in early when budgeting.

Top tip: You might be able to claim Employment Allowance, which could knock up to £5,000 a year off your national insurance bill if you're eligible. It’s definitely worth checking out, especially if you're a small business.

Don't forget pension contributions.

By law, you’ll need to contribute to your employee’s pension if they are aged 22 or over and earning at least £10,000 per year. This needs to be at least 3% of their qualifying earnings - these are the earnings that fall between £6,240 and £50,270 a year (for the current tax year).

This is part of the UK’s automatic enrolment scheme, so if your employee is eligible, you’ll need to set this up through a workplace pension provider. Your employee will also contribute (usually 5%), and the total minimum combined contribution is 8%.

It’s another ongoing cost to be aware of, but it’s also a key part of offering a solid, fair employment package.

Budget for professional fees.

If you’re planning to run payroll yourself using software, you can skip this one. But if you're thinking of outsourcing it to an accountant or payroll provider, you’ll need to factor in the monthly cost.

For a small team (up to five employees), this usually comes in at around £25 to £50 per month - depending on who you go with and what’s included. It’s a worthwhile option if you’d rather not get into the nitty-gritty of tax codes, RTI submissions, and year-end paperwork.

Consider offering perks.

Attracting top talent can be a challenge, so offering benefits might be a good way to stand out. Whether it's health insurance, gym memberships, or flexible working, these perks can make a big difference to candidates.

However, don’t forget to factor in the cost of these benefits when budgeting for your employee. Offering the right perks can make your business more appealing, but it’s important to make sure they’re financially manageable.

Plan for parental leave & cover.

When hiring, it's important to consider your responsibilities around parental leave. In the UK, employees are entitled to maternity, paternity, and shared parental leave, depending on their situation.

Maternity leave is paid for up to 39 weeks, with the first 6 weeks at 90% of their average weekly earnings and the remaining weeks at a statutory rate. As of April 2025, the statutory rate for maternity pay is £187.18 per week. Paternity leave is typically paid for two weeks.

In addition to the maternity pay, you'll also need to factor in the cost of cover while your employee is on leave. This may involve hiring temporary staff, either through a recruitment agency or directly, which can come with additional costs. Recruitment agencies typically charge fees ranging from 10% to 30% of the temporary worker’s salary, so it’s something to keep in mind when budgeting for parental leave.

Providing paid leave and arranging cover can be a significant cost, but it’s essential to ensure the business keeps running smoothly and that your employees feel supported during key life moments.

Don't forget about sick leave.

When it comes to sick leave, you’ll need to decide if you’ll offer statutory sick pay (SSP), or whether you’ll provide additional sick pay on top of the statutory requirement.

In the UK, employees are entitled to SSP if they are ill and unable to work, provided they meet the eligibility criteria. As of 2025, the SSP rate is £118.75 per week, and it can be paid for up to 28 weeks. Keep in mind that this is the minimum, and you can choose to offer a higher level of sick pay as a benefit to employees.

If an employee is off for an extended period of time, you’ll also need to factor in the ongoing cost of covering their absence.

Final thoughts.

As you can see, hiring an employee involves much more than simply agreeing on their pay. From pension contributions and statutory sick pay to maternity leave and finding temporary cover, there are various financial and legal responsibilities to manage.

By understanding these key obligations and planning accordingly, you can ensure your business stays compliant while offering competitive and fair terms for your employees. With the right preparation, you can confidently handle the financial side of hiring and focus on building a strong team.

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*The information provided in this post is for general guidance only and is not intended as personal or professional advice. Employment laws and regulations can change, so it's important to consult with a qualified accountant, solicitor, or HR professional to ensure you are fully compliant with the latest requirements for your business.