Posted October 13, 2026

Why Has Hiring Staff Become So Expensive?

In my last blog, I wrote about the £100,000 employee and how a £100,000 salary can quickly become a much bigger number once you add Employer’s National Insurance and pension contributions.

Whilst writing that article, Adam asked me how much the cost of employing somebody has actually changed over the last decade. In the office, we all knew employer NI and minimum wage had increased, but being accountants we wanted data! So we asked everyone to write their guess on a post-it note – you’ll be pleased to know Cath from the payroll team was closest.

I then set to work crunching the numbers and, once we had double checked the figures, we were all surprised by how much the total cost had increased.

The Cost of Employing Somebody

My calculations are below, I went back to 2016 and looked at the cost of employing somebody working 35 hours per week on the National Living Wage. Rather than just looking at salary, I included Employer’s National Insurance and minimum workplace pension contributions.

*The 2022 figures account for the Health and Social Care Levy that was added to employer NIC between April and July 2022.

In 2016, employing somebody on minimum wage cost just under £14,000 a year. Today, it costs more than £26,000.

That’s an increase of around 90%!

It Doesn’t Feel Like a 90% Increase

I expect most business owners, like our team probably wouldn’t have guessed the figure was anywhere near that high.

That’s partly because the increase happened gradually, the minimum wage increased, auto-enrolment contributions increased, the NI thresholds and rates changed, there wasn’t a single year where there wasn’t an increase.

Until 2025 when the employer NI rates increased substantially, no individual change felt particularly dramatic at the time, but when you stack ten years’ worth of changes on top of each other, the result is a completely different cost base.

I think that’s why many business owners feel the pressure without necessarily understanding where it’s come from. They know costs have increased. They just haven’t stopped to add up what all those increases look like together.

What Has Your Business Done Over The Same Period?

The more interesting question isn’t what happened to employment costs.

It’s what happened to your business.

If the cost of employing somebody has increased by 90%, what has happened to your turnover, your prices and your profits during the same period?

Many businesses will have grown over the last decade. They’ve taken on more staff, won more clients and increased turnover. On paper, they’re bigger businesses than they were in 2016.

But bigger and better aren’t always the same thing.

If your employment costs have increased by close to 90% but your prices haven’t kept pace, then somebody is funding that gap. In most cases, that’s the business owner through lower profits, longer hours or both.

Why Some Businesses Feel Stuck

This is probably one of the biggest frustrations we hear from clients.

They’re busier than ever. Turnover is higher. The team is larger. Yet somehow it doesn’t feel like there is much more money left at the end of the month.

The immediate reaction is often that taxes are too high, or costs are out of control and sometimes that’s true. More often, the issue is that there has been a gradual erosion of margin over many years.

When payroll is one of your biggest costs, a 90% increase is difficult to absorb unless prices, productivity or profitability improve alongside it. If they don’t, the business can spend years working harder simply to maintain the same position.

The Numbers Are Actually Conservative

What’s particularly striking is that the figures above are only looking at salary, Employer’s National Insurance and the auto-enrolment minimum pension contributions.

They don’t include recruitment fees, training costs, software licences, equipment, uniforms, insurance or the management time involved in supporting employees. Every business owner knows those costs exist, even if they don’t always appear neatly on a payroll report.

The true cost of employing somebody has increased by more than the table suggests. The table simply gives us a consistent way of measuring the trend.

Looking Back Can Be Useful

Business owners spend most of their time looking forward. The next customer, the next deadline, the next challenge.

Sometimes it’s worth stopping and looking backwards for a moment.

The employee who cost just under £14,000 to employ in 2016 now costs more than £26,000. That isn’t a political statement or an opinion. It’s simply what the numbers show.

The bigger question is what those numbers mean for your business.

If your turnover, pricing and profits haven’t increased at a similar rate, then despite all the hard work, your business may actually have gone backwards.

It’s not a comfortable thought, but it’s probably the most important question this table raises.