Posted October 8, 2026

How much does a £100,000 employee really cost?

At some point, many growing businesses reach the same crossroads.

The owner is working too many hours, too many decisions still land on their desk and growth has started to feel harder than it should. The answer seems obvious: hire somebody experienced. A senior manager, an operations lead, a finance director, a sales director, somebody who can take some of the pressure away and help move the business forward.

The conversation often starts with a salary.

“We’re thinking of paying around £100,000.”

The problem is that a £100,000 employee rarely costs £100,000.

By the time you’ve added Employer’s National Insurance and pension contributions, the actual cost to the business is likely to be closer to £120,000. That’s before you’ve thought about recruitment costs, training, equipment, software licences, professional subscriptions or any of the other things that tend to come with senior hires.

For many business owners, that’s the first surprise.

The second surprise is that the salary is usually the easy part.

A £120,000 Decision

When businesses are smaller, recruitment decisions are relatively straightforward. You need somebody to answer the phone, process invoices or help deliver the work. You can usually see quite clearly what they’ll be doing and how they’ll contribute.

The higher up the organisation you go, the harder that becomes.

A £100,000 employee isn’t normally being recruited because there’s a specific task that needs completing. They’re being recruited because the business has reached a point where something needs to change.

Perhaps the owner is involved in every operational decision. Perhaps sales have plateaued. Perhaps the business has grown quickly but the systems haven’t kept pace. Whatever the reason, the business has identified a problem and concluded that another person is the solution.

That’s where things get interesting, because not every problem can be solved by throwing another salary at it.

Being Busy Isn’t a Job Description

One of the most common mistakes I see is owners deciding they need help because they’re overwhelmed.

Now, being overwhelmed is a perfectly good reason to do something. It’s just not always a good reason to recruit.

I’ve seen businesses advertise for general managers, operations directors and senior leaders without ever properly defining what success looks like. The owner is busy, therefore they assume bringing in somebody experienced will fix the problem.

Six months later, they’re still busy.

The new employee is working hard. The owner is working hard. Everyone is busy. But nobody is entirely sure whether the business is actually further forward than it was before.

The issue wasn’t the individual. The issue was that the role was created before the problem was properly understood.

What Does Success Look Like?

Before committing to a salary that could ultimately cost the business £120,000 a year, I’d argue there’s one question worth answering first:

• What would success look like twelve months from now?
• Would turnover be higher?
• Would profit improve?
• Would the owner be working fewer hours?
• Would the business be less reliant on one individual?
• Would there be better systems, stronger reporting or a clearer strategy?

The answer will be different for every business, but if it’s difficult to explain why you’re recruiting somebody, it’s usually worth taking a step back before proceeding.

The best hires I’ve seen aren’t always the most qualified or the most experienced. They’re the ones brought in to solve a clearly identified problem.

The Awkward Middle Ground

This becomes particularly relevant for businesses turning over between £500,000 and £2 million.

At that size, owners often find themselves stuck in an awkward middle ground. The business is too large to run entirely on their own, but not yet large enough to absorb expensive recruitment mistakes without consequences.

The owner knows they need support. The challenge is deciding what sort of support.

Many businesses instinctively look for somebody senior. Sometimes that’s absolutely the right answer. Sometimes the better solution is investing in systems, improving processes, strengthening the existing team or outsourcing specialist expertise rather than employing it full-time.

There isn’t a right or wrong answer, but there is a costly difference between recruiting because there’s a clear need and recruiting because it feels like the next logical step.

Looking Beyond the Salary

Whenever we review accounts with clients, payroll is usually one of the largest costs on the profit and loss account. That doesn’t mean it should be avoided. In fact, the right people are often the reason businesses grow successfully.

But large salaries deserve proper scrutiny.

Not because £120,000 is necessarily too much to spend, but because every significant cost in a business should generate a return. The question isn’t whether you can afford the employee. It’s whether the business will be better because they’re there.

That’s a much more valuable conversation than simply debating whether the salary should be £95,000 or £105,000.

The Real Cost of Getting It Wrong

Business owners often focus on the annual salary when considering a new hire. In reality, the biggest cost is usually getting the decision wrong.

A successful senior hire can transform a business, create capacity for growth and free the owner to focus on the bigger picture.

An unsuccessful one can leave the owner exactly where they started, only with an extra £120,000 disappearing from the profit and loss account each year.

That’s why, before looking at CVs, before speaking to recruiters and before deciding on salary, it’s worth spending time understanding exactly what problem you’re trying to solve.

Only then can you decide whether a £100,000 employee is expensive.

Or whether they’re actually the best investment you’ll make all year.