The cost of hiring staff is rising in 2026 and a £35,000 salary will now cost employers £40,550 a year after additional costs are included.
The impact is even greater when you assess the business as a whole. For example, a business with 20 staff earning a salary of £35,000 a year would see costs rise by more than £13,000 compared to previous years.
A series of changes coming into force from April 2026, including increases to the national minimum wage and statutory entitlements, coupled with the already enforced increase to Employer’s National Insurance mean the overall cost of employment is rising.
It is crucial for businesses in Birmingham to understand the full cost to employ someone when planning for the year ahead.
Ioana Mateias, payroll expert at HB&O, said many employers still underestimate the true cost of employing staff.
She said: “There are so many variables depending on the business and what benefits are offered, but National Insurance, pensions and statutory costs all add up.”
The real cost to employ someone
A key question for employers is how much does it cost to employ someone, beyond the core salary of a staff member. By using a £35,000 salary as an example, the cost continues to rise.
In 2023/24:
- Employer National Insurance: £3,574.20
- Employer pension: £1,050 in pension contributions (Assuming no qualifying earnings band is used)
- Total cost: £39,624.20
In 2026/27:
- Employer National Insurance: £4,500
- Employer pension: £1,050 in pension contributions (assuming no qualifying earnings band is used
- Total cost: £40,550
This equates to £3,379.17 per month in total employment cost, rather than the £3,302.02 monthly salary alone.
This represents an increase of £925.80 per employee per year, before any additional benefits are included. In this example, pension contributions are calculated on full salary, this increases both employer cost and employee deductions.
Why hiring staff costs more in 2026
The increase in the cost to employ someone is being driven by several key changes taking effect from April 2026, this follows on from the April 2025 increase of. Employer National Insurance to 15 per cent, with the threshold reducing to £5,000.
For April 2026, National Minimum Wage rates are rising to £12.71 per hour for those aged 21 and over, with further increases for younger workers and apprentices.
Ioana said: “When the national minimum wage increases, it doesn’t just affect salary. It increases National Insurance and pension contributions as well, so the overall cost to the employer goes up.”
There are also changes to Statutory Sick Pay. From April 2026, sick pay will be payable from the first day of absence, this removes the previous three-day waiting period.
For a full-time employee, this equates to around £24.65 per day, which can quickly make an impact if an absence mounts up.
Ioana said: “This is one of the biggest changes from an employer perspective. Previously there was a waiting period, but now you will be paying from day one.
“That will have a knock-on effect on costs, particularly for businesses with larger teams.”
Further changes mean that rights such as paternity leave will become day-one rights, increasing employer responsibilities from the start of employment.
Eligible employers can claim the Employment Allowance to offset part of their National Insurance liability (now up to £10,500).
Ioana added: “We always advise clients to look at the updates every April and plan ahead.
“Some businesses are quite aware of the changes, but others still need support to understand what it means in practice.”
Utilising apprenticeships
While costs are increasing for most roles, the picture is different for entry-level positions.
An apprentice aged 20 earning £8 per hour working 37.5 hours per week would receive £1,300 per month, with no employer National Insurance payable provided earnings remain within the exemption threshold.
This results in a total employer cost equal to salary, at £15,600 per year.
Ioana said: “Apprenticeships can be a more cost-effective way of bringing people into the business, particularly for smaller employers.
“For some roles, it can be a way of managing rising employment costs while still investing in future talent.”
How HB&O can help
If you are planning to hire in 2026 or want to understand how these changes will impact your business, speak to the payroll experts at HB&O to review your position and plan ahead.
Visit https://hboltd.co.uk/payroll/ to find out more and book a meeting with one of our experts.
