As businesses across the UK look to scale after a challenging few years, many are asking the same question: Is now the right time to hire? While bringing on new talent can fuel growth, the decision to expand your team carries important financial implications—especially in the current economic climate.
From wage increases and shifting employment regulations to changing workforce expectations, here are the key financial factors business owners should consider before taking the next step.
Understand the True Cost of Hiring
It’s easy to focus solely on salary when planning to hire, but the real cost of a new employee goes far beyond their monthly pay packet. Employers must also factor in:
- National Insurance contributions
- Employer pension contributions (currently 3% minimum under auto-enrolment)
- Holiday pay, sick pay, and statutory leave
- Recruitment costs (advertising, agency fees, onboarding time)
- Equipment, software licences, and training
A good rule of thumb is to budget an additional 20–30% on top of gross salary to cover these costs. Having a clear view of this figure can help you assess affordability and forecast cash flow accurately.
Stay on Top of Legal and Regulatory Changes
April 2025 brought several employment-related updates that directly affect payroll budgets:
- National Minimum Wage increases across all age brackets, including a rise in the National Living Wage for workers aged 21 and over.
- Changes to Statutory Sick Pay (SSP) and family leave entitlements, which employers must fund for eligible staff.
- New guidance around employment status and IR35, especially if you use freelancers or contractors.
Staying compliant isn’t just a matter of ticking boxes—it can protect your business from unexpected penalties and costly disputes. Your accountant or payroll provider can help you navigate these updates with confidence.
Consider Flexible Hiring Options
Not every growth plan requires a full-time hire. In today’s market, businesses are embracing flexible options such as part-time or fixed-term contracts, freelancers or self-employed consultants, and outsourced support for specific functions (e.g., marketing, admin, or IT).
Each option has different tax and financial implications. For example, while freelancers may cost more per hour, they don’t require the same employment benefits—potentially easing the short-term cash flow burden. Your accountant can help you weigh up these options, including scenario modelling to compare cost-effectiveness over time.
Build Hiring into Your Business Plan
If you’re aiming to scale, recruitment shouldn’t be reactive—it should be strategic. Forecasting your hiring needs 6–12 months in advance allows you to build costs into your budget and cash flow projections, time new hires to align with income cycles or contract wins, and identify when external funding or support (e.g. grants or loans) may be needed
Hiring is a sign of growth—but it must be underpinned by financial clarity. Whether you’re taking on your first employee or expanding an established team, working with your accountant can ensure your hiring decisions support long-term sustainability.
Need help assessing your hiring budget or modelling employment costs? Get in touch with our team today.