How much does hiring really cost your business?

In this article we are going to discuss the full cost of recruitment and explore ways to manage these expenses effectively.

The recruitment market in 2025 presents a mixed picture, while some employers are planning reduced hiring activity, some businesses are pausing recruitment altogether due to rising employment costs, such as the increase to National Insurance, and skills shortages. Recruitment cycles are taking longer, and many businesses, particularly SMEs, are shifting focus towards internal upskilling and retention, rather than external recruitment. Rather than simply filling vacancies, firms are reassessing their long-term recruitment strategies.

How has the rise in national insurance affected recruitment plans?

The recent rise in National Insurance has created additional financial pressure which is directly influencing recruitment plans and decisions for businesses. From April 2025, employer contributions have increased to 15%, and the Employment Allowance, (which allows eligible businesses to reduce their employer NICs bill) , will be increased from £5,000 to £10,500, and the eligibility threshold will be removed, adding a significant burden to payroll budgets. These rising employment costs are not just shaping recruitment plans but are also prompting businesses to reconsider their overall reward strategies.

When considering the true cost of recruitment, it’s easy to focus solely on headline expenses like Employers’ National Insurance, and the new Living Wage, but there are many hidden or indirect costs which are often overlooked. These can add up significantly and should be factored into any hiring decision. Common examples include:

• Recruitment fees
• Training costs
• Software costs (these are often user based)
• Car allowance/company car
• Licence fees
• Refreshments/staff lunches
• Staff gifts
• Insurance/medical health care plans
• Bonuses

Taking a full view of these costs ensures recruitment decisions are made with a clearer understanding of their long-term financial impact. We have included below a worked example of this to help show the true cost of recruitment:

 
How can businesses keep the costs of recruitment to as much of a minimum as possible?

So, this may lead you to consider how to keep the costs of recruitment down to a minimum as much as possible. Below are 5 ways that you can help to achieve this:

• Optimise your job descriptions and advertising:
  Clear, targeted job adverts that accurately reflect the role can attract better-qualified applicants, reducing time spent screening unsuitable candidates and lowering overall hiring time and costs.
• Leverage employee referrals:
  Encouraging current employees to recommend candidates often results in faster hires with a much-increased cultural fit, cutting down on recruitment agency fees and lengthy recruitment processes.
• Use technology to streamline processes:
  This can speed up recruitment stages, reduce administrative overhead, and limit reliance on costly third-party services.
• Focus on internal talent development:
  Promoting or redeploying existing employees to new roles saves on external recruitment costs and shortens onboarding time while boosting employee engagement and retention.
• Build a talent pipeline:
  Maintaining a database of potential candidates helps you quickly fill roles without starting from scratch each time, saving time and money on sourcing and advertising.

Are you allowing enough money within your business plan?

Should you be rethinking your recruitment plans? It’s worth asking whether your current recruitment plans truly reflect all the costs involved. Have you factored in the full financial impact when setting your recruitment goals for 2025? Ultimately it comes down to whether you have you allowed enough money within your business plan for the year. Taking into consideration your original recruitment goals/targets that you set out for 2025, are you on track with these and have they stayed within budget? If you are over budget, you may need to reassess your recruitment objectives for the remainder of the year to ensure they align realistically with your overall business plan.

The recruitment outlook for 2025 demands reflection and strategic adjustment. Ultimately, we recommend regularly reviewing recruitment goals against business budgets to ensure that hiring remains aligned with the broader financial budgets, helping companies build resilient, agile workforces for the remainder of the year, and going forward into 2026.

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Please note: This article is provided for information only and was correct as at the time of writing (03/07/25). Any lists and details provided above are not exhaustive and are not intended to be full and complete guidance. No action should be taken without consulting detailed legislation or seeking independent professional advice. Therefore, no responsibility for loss occasioned by any person acting or refraining from action as a result of the material contained in this article can be accepted.