Hiring and growing your team is an exciting time for any business, it’s a sign of growth and bringing new talent to your team.
However, with the new tax year approaching it is important that founders are aware of the additional costs associated with hiring a new employee.
Before making a full-time hire, here are the financial questions every business owner should be asking.
What is the real cost of this role?
From April 2026 National Minimum Wage rates are increasing and there are other costs employers should be aware of. From April 2026 the NWM rates will be;
- Age 21 and over: £12.71
- Age 18 – 20: £10.85
- Under 18: £8
- Apprentice: £8
In addition to the hourly rates above other costs are incurred including;
- Employer National Insurance: Class 1 rate is 15%
- Workplace pension contributions (minimum 3% employer contribution)
- Holiday pay (5.6 weeks statutory)
- More office space required.
Therefore the annual salary for an employee aged 21 years and over is £24,784 before employer NIC, pensions which could increase this to circa £29k.
What are the other options available?
In 2026, more SMEs are reassessing the need for permanent roles. Since the Covid pandemic more offices are working a hybrid model and being agile has been a key trend for many SMEs.
Things to consider are;
- Could this be delivered by a specialist partner?
- Do we need this role 5 days a week?
- Would fractional expertise deliver better value?
What are the benefits of outsourcing?
- Flexibility (scale up or down)
- Lower fixed cost exposure
- Access to senior expertise without full-time salary cost
- Reduced HR risk
- Less time spent on managing a large team.
It’s not always the right answer but it’s increasingly part of the conversation.
What are the key things to consider when making the decision to hire?
Before confirming an offer, consider:
- What is your cash runway after this hire? Can you commit to the costs associated with this new role?
- How quickly must this person add value?
- Are you prepared for onboarding time before productivity?
Conclusion;
Trends for the SME business model has significantly changed the past few years and many businesses are reassessing their business models.
The key takeaways are:
- Understanding total employment cost and anticipating wage and NIC pressures
- Protecting cash flow
- Choosing the right delivery model
Growth is exciting, however sustainable growth is strategic.
Written by Danielle Biggins & Shannon McDonald
