For many UK businesses, particularly SMEs, the decision to grow by hiring staff is a major milestone – and a significant financial commitment. With economic pressures still biting, from inflation to interest rates and evolving employment regulations, it’s vital to think carefully before expanding your team.
At Elsby & Co, we work closely with growing businesses and understand the complex mix of ambition, opportunity and caution that defines this stage. So, is now the right time to take on staff? Let’s explore the key factors to consider.
- Understand the True Cost of Hiring
Hiring a new employee is about much more than their salary. As a rule of thumb, the total cost to your business can be 1.3 to 1.5 times the gross salary, once you factor in:
- Employer’s National Insurance (currently 15% on earnings above £5,000 per year)
- Pension contributions (minimum 3% for auto-enrolment)
- Holiday pay and statutory entitlements
- Training and onboarding costs
- Payroll processing and compliance
For example, a £30,000 salary could cost your business around £40,000 annually. Understanding this early helps you make a realistic financial plan.
- Payroll and Compliance Responsibilities
With new staff comes new responsibilities – and HMRC doesn’t take non-compliance lightly. Key areas to stay on top of:
- Payroll setup: You must run a compliant PAYE payroll system and report in real time (RTI).
- Pensions: Auto-enrolment duties begin from the day you employ someone.
- Employment contracts: You are legally required to provide written terms on or before the employee’s first day.
- Holiday accrual: You need to track and pay holiday appropriately — a common area where small businesses go wrong.
Outsourcing payroll or seeking help from your accountant can reduce admin, ensure accuracy, and keep you compliant.
- Forecast Your Cash Flow
The financial commitment of hiring should be planned against your projected revenue. Are your income streams stable enough to support a long-term hire? Hiring too early – before the work or revenue justifies it – is one of the biggest pitfalls we see.
Our advice? Run a cash flow forecast assuming different scenarios: What if your growth is slower than expected? Can you still afford the hire if a client drops out?
- Consider Alternatives to Full-Time Staff
Hiring doesn’t always mean a full-time employee. Before making a commitment, consider:
- Freelancers or contractors
- Part-time roles
- Apprenticeships (which come with government funding)
- Temporary support during busy periods
These options can offer flexibility while you scale.
- Time It Right for Growth, Not Just Reaction
The best time to hire is when you’re proactively planning for growth – not simply reacting to being overwhelmed. If you’re regularly turning down work, missing deadlines, or your existing team is stretched, it may be time to bring someone in.
But also look at your processes: could automation, better software, or outsourcing ease the load before you commit to a hire?
Final Thought
Hiring staff is a sign your business is evolving – and that’s exciting. But doing it right means more than finding the right person. It means understanding the financial, legal and operational implications.
At Elsby & Co, we help businesses like yours prepare for growth with smart forecasting, payroll support and advice tailored to your stage of development. If you’re thinking about hiring, let’s talk first – it could be the difference between a good hire and a great decision.
Need help assessing the cost of hiring or setting up payroll? Contact Elsby & Co today for expert, straight-talking advice.