Overhead cost per employee in the UK: what to add

Key takeaways

Overhead cost per employee in the UK is everything beyond pay needed for someone to work: equipment, software, space, insurance, IT and HR support. As a planning example, allow about £150–£300 a month for a remote employee and £400–£900 a month for an office-based one, on top of employment costs. Check your own figures.

• £150–£300 a month is a planning example for a remote employee.
• £400–£900 a month is a planning example for office-based staff.
• Employers' liability insurance is a legal requirement for most employers.
• Managed outsourcing rates include the provider's overheads.

What counts as an employee overhead?

An employee overhead is any cost of supporting a worker that is not pay or a statutory employment cost. It includes the tools they use, the space they sit in, the insurance and compliance that cover them, and the support functions that keep them working. Overheads are easy to miss because they sit in different budget lines.

• In-house vs outsourcing: which model is more cost-effective?
• Total cost of ownership of an in-house team

Which overheads should you include?

Build the list from these categories. Not every business has every cost, but most have more than they first count.

• Equipment: laptop, screens, headset, phone, replaced every 3 to 4 years.
• Software: email, office suite, CRM seat, phone system, security tools.
• Space: desk rent, utilities, cleaning and business rates share.
• Insurance: employers' liability and any other cover per head.
• IT support: set-up, patching, password resets and leavers.
• HR and payroll: payroll software or bureau, HR advice, policies.
• Training and development: courses, subscriptions, conference time.

• The tool stack for an outsourced team

What do overheads add per hour?

At £300 a month, overheads add about £3,600 a year, or about £2.07 per worked hour across 1,740 hours. At £700 a month, they add about £8,400, or £4.83 per worked hour. For a hire on the National Living Wage costing £16.27 per worked hour, that lifts the total to roughly £18.30–£21.10 before recruitment and management.

• The true cost of an employee in the UK

Are overheads lower for remote employees?

Usually, because desk space and utilities fall away. But equipment, software, security and IT support remain, and some employers pay a home-working allowance. Remote staff also need secure devices and access controls, which carry their own costs.

• Website security for small businesses

Do outsourced teams carry overheads too?

Yes, but the provider carries them and spreads them across many clients. A managed rate should include the team's equipment, workspace, connectivity, power backup, supervision and quality checks. You may still pay for seats on your own systems, such as a CRM licence, so ask which tools are included.

• The hidden costs of outsourcing
• BPO Solutions for UK businesses

Which overheads are legal requirements?

Most employers must hold employers' liability insurance from their first employee, with limited exemptions such as some family businesses. Employers must also run payroll through HMRC, auto-enrol eligible staff into a pension and meet health and safety duties. These carry admin time and cost even for one employee.

• In-house vs outsourced payroll for small businesses

How do you find your real overhead per employee?

Take last year's costs for rent and rates, utilities, software, equipment, insurance, IT support and HR or payroll services. Exclude anything that would not change with headcount, such as your website. Divide the remainder by average headcount. The result is your own overhead per employee, which is better than any benchmark.

• In-house vs outsourcing cost calculator: a worked template

What does this look like in practice?

A pattern we see in UK professional services firms: the hiring budget covers salary and National Insurance, but a new desk, licences for four systems and an IT set-up fee arrive in different budgets. Put together, the overhead per head is often double what the partners assumed.

• See client work

Overhead checklist

Add these to every staffing comparison.

• List every tool and licence one employee needs.
• Spread equipment over its replacement cycle.
• Add a share of rent, utilities and rates if office-based.
• Include insurance, IT and HR support per head.
• Convert the monthly total into a cost per worked hour.

Next step

Tell us your team size and set-up. We will estimate overhead per employee and include it in an in-house vs outsourcing comparison in a 30-minute call.