01.12.2022

Real cost of average UK employee is £62,000

Budgets are set to be squeezed in 2023, as a looming recession will undoubtedly put business finances and jobs at risk. There are many things to factor in when it comes to growing a team or replacing an outgoing employee, but the cost of a new hire in their first year of their employment could come as a shock to business leaders.

Research from NerdWallet has shown that an employee earning the average UK salary of £31,722 could in fact cost their employer £62,892.78 - over double the initial pay packet. The cost breakdown to employ the average UK worker is as follows:

Salary: £31,722
Office rent per desk: £15,600
Recruitment: £6,544.40
National Insurance: £3,412.14
Business energy bill (for five-person office): £3,103
Training: £1,530
Pension contributions: £764.52
Work social function per head: £150
Employers’ liability insurance (lowest estimate): £66.72

Total: £62,892.78

On top of these costs, there are other expenses to factor in too. Bonuses, new equipment, company benefits and travel - including use of a vehicle - can also stretch the balance sheet.

A recent NerdWallet survey of 2,000 employed UK adults showed that workers are more interested in flexible hours and commuting time over team social events and office refreshments, so there is potential to make savings in some areas.

Connor Campbell, business finance expert at NerdWallet, commented: “Businesses are under a lot of financial pressure at the moment and things don’t appear to be getting easier with a rise in inflation on top of spiralling energy costs.

“It’s clear to see why a jobs market that favours the employee would be a struggle for some businesses, as not only do you have a salary to account for, but other expenses, such as National Insurance, pension contributions, and training, to add to your balance sheet.

“There are ways to bring the cost of an employee down, such as by paying less in recruitment fees, or by reducing the number of working days in the office to help limit utility costs. It’s a balancing act for business owners right now, but with careful planning and good recruitment choices, the short term investment may pay off longer term.”

Full details and breakdown of employee costs can be found here.

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