Budgeting for Growth: Calculating the True Cost of Employment

Growing a business is not an easy thing to do – and not for the reason that many people think. Often, a business grows without much in the way of attention from its leader or its staff; all it takes is one viral moment, one unexpected celebrity endorsement, or one interaction with a favourable distributor, and then a business can become a rocket-ship that’s your responsibility to guide more than anything.

While the ignition and launch may be the ‘easy part’ for many rapid-growing businesses, rocket-ships still need fuel to soar. This is where the challenge lies. There are many ways to fuel a growing business, but the most important aspect of all is staff – and growing your staff cohort in a competitive, but sustainable, manner.

Any business worth its salt takes time to consider the costs associated with employment, but it’s the growing business that needs to take especial care in this regard. Here, we will explore what it means to hire employees, and exactly what the true cost of employment is to the fast-growing business.

Beyond Salaries: The Full Cost of Employment

First and foremost, it is important to impress the fact that employment costs are far greater than the cost of a given employee’s annual salary. Even if we were just to look at the salary of a given employee, we would also see the costs of National Insurance contributions, pension contributions, taxation and tax management – not to mention the cost of other employees in HR and accounting, who are paid to handle all of this on your behalf.

Outside of the salary, you will find costs related to workplace equipment and staff training. These costs are ongoing, too, as business needs change, as staff develop their careers and as technology is inevitably superseded. But before all of this, there is the significant cost associated with hiring staff.

Tools to Simplify Employment Cost Analysis

With all these various – and variable – considerations, it can be difficult to get a meaningful grasp on what exactly it costs to hire and maintain staff. There are some conservative average estimates that place employment costs below £10,000 per staff member, but the reality will differ wildly from business to business.

Thankfully, there are some technological tools we can use to ballpark the costs associated with hiring in our own specific circumstances. For instance, an employee cost calculator can be used to predict costs associated with a new hiring sprint, helping you plan and allocate your budget more effectively.

Strategic Cost Management for Business Growth

It is this planning, though, that is key for you to engage in. Knowing is only part of the battle when it comes to employment costs, as said costs need to be justifiable against the current and prospective profitability for your company. If you can properly justify staff expansion to others in your team or network, then and only then should you consider putting costs towards staff.