The 10 hidden costs of direct hiring

When planning to bring new talent into an organisation, most employers consider salary as the main expense involved in recruitment. However, direct hiring comes with a range of hidden costs that, if overlooked, can have a significant impact on a company’s budget and resources. Understanding these costs can help businesses make informed hiring decisions and even consider alternative solutions like Flex Legal. 

Here’s a breakdown of the often-hidden expenses that accompany direct recruitment:

Recruitment doesn’t begin with posting a job and end with making an offer. Hiring a new employee is often a multi-stage process involving sourcing, screening, interviewing, and negotiating—all of which require a substantial time investment from internal teams. HR professionals, hiring managers, and sometimes even senior leadership dedicate hours, or even days, to finding the right candidate. This time translates directly to costs in terms of wages and productivity losses, as these resources could otherwise be spent on driving the business forward.

Did you know?

Research by Indeed found the average time-to-hire in the UK (the amount of time that elapses from the moment a person submits their application to the point at which they accept a job offer), to sit at around 36 days. Highly skilled or senior roles can take significantly longer. These costs may not show up directly on the budget, but they impact efficiency and productivity.

Employers in the UK must consider the mandatory National Insurance (NI) contributions. Employers are required to pay a percentage of each employee’s salary towards NI, which helps fund social security benefits. This cost isn’t optional and scales with the employee's salary, making it a significant additional expense, particularly for higher earners.

Did you know?

For each employee, companies need to budget around 13.8% of their salary toward NI contributions, which adds up significantly with each new hire. The contributions are due to increase by 1.2 percentage points to 15% from April 2025.

In the UK, auto-enrolment requires employers to contribute to workplace pensions for eligible employees. The minimum employer contribution is currently set at 3% of qualifying earnings, though some companies choose to offer more generous pensions as a perk. Either way, pension contributions are an additional cost that can significantly increase the total expense of hiring and retaining an employee.

Did you know?

Even at the minimum required contribution, pensions add up over time, especially if companies are competing by offering higher contributions.

To attract top talent, companies often need to go beyond base salary and provide a range of benefits and perks, such as private healthcare, dental coverage, wellness programs, and gym memberships. These additional benefits are not only expected in certain industries but are also a crucial part of any comprehensive employment package. Though they’re valuable for employee satisfaction, these perks add another layer to recruitment expenses.

Hidden cost

Benefits packages can range from a few hundred to thousands of pounds per year, depending on the nature and level of perks offered.

Once an employee is hired, they need the tools to do their job. The cost of providing IT equipment (like laptops, monitors, and mobile phones) often surprises employers when budgeting for a new hire. Additionally, licences for necessary software, subscriptions, and security measures for remote work can add up quickly.

Hidden cost

Between high-quality equipment and required software, companies can expect to spend anywhere from £500 to £2,000 per new employee.

New employees typically undergo a training and onboarding period, during which they are brought up to speed on the company’s processes, systems, and culture. This period often requires dedicated time from HR and other team members, as well as formal training programs that may have additional fees. Productivity also tends to be lower as employees ramp up, meaning they’re not operating at full efficiency immediately.

Hidden cost

Onboarding costs vary, but estimates suggest that UK companies spend over £1,000 per employee just on training and integration.

If you’re hiring for an office-based role, accommodating new employees requires additional office space, furniture, and other office amenities. Even if your team is primarily remote, companies often provide stipends for home office equipment, internet, or other remote working tools.

Hidden cost

Real estate and workspace allocation can become costly, especially as headcount grows. Remote stipends, though smaller, are still an additional expense.

In times of economic downturn or restructuring, reducing staff can lead to redundancy costs that aren’t usually accounted for upfront. In the UK, statutory redundancy pay depends on the employee’s age, length of service, and weekly pay. For senior or long-serving employees, redundancy packages can become substantial, putting a further strain on financial resources. Planning for these potential expenses is essential for a realistic understanding of the long-term costs of a direct hire.

Hidden cost

Redundancy costs can vary but often amount to several months of an employee's salary, especially for long-term employees, adding up to a significant, often unexpected financial burden.

If internal recruitment resources aren’t sufficient, companies may turn to external recruitment agencies. While agencies can be effective in finding specialised talent, they often charge fees between 15% to 30% of the hired employee’s annual salary. This can be a substantial additional cost, especially for senior or highly specialised roles, and may make the total cost of recruitment much higher than anticipated.

Hidden cost

External recruitment fees can add tens of thousands of pounds to the hiring budget, especially when engaging agencies to fill high-level positions.

Beyond the costs of absence and turnover, law firms also face the challenge of managing headcount effectively in response to fluctuating workloads. When work volume is high, fixed headcount can result in high levels of utilisation, with lawyers and paralegals working long hours to keep up with demand. However, if work decreases, firms may struggle with underutilisation—a situation where the workforce is not fully engaged, leading to reduced efficiency and billable hours.

For law firms, where labour is one of the largest operating expenses, excessive underutilisation can lead to substantial financial strain. Fixed headcount means that firms are locked into certain staffing costs even when demand decreases, creating a challenge in terms of cash flow and resource allocation. High fixed costs combined with variable workloads can also impact profitability and make it difficult for firms to scale down when needed without resorting to costly redundancies.

Hidden cost

Underutilisation of a fixed headcount in low-demand periods leads to inefficiencies and increased financial pressure, as firms are required to maintain payroll for non-billable hours.

Each of these “hidden” costs contributes to the true price of hiring an employee, often making direct recruitment more expensive than expected. When all these factors are accounted for, businesses may find that direct hiring can be both costly and time-consuming.

Did you know?

The true cost of an employee is often 1.7 times their basic salary!

If these hidden costs of direct recruitment sound overwhelming, Flex Legal provides an efficient solution. With a network of top legal professionals available on demand, Flex Legal can help reduce or eliminate many of the typical expenses associated with traditional hiring. Here are five key benefits of using flexible resources over permanent recruitment:

1. Faster time-to-fill: In fast-paced environments, time is often a critical factor, and flexible resourcing offers a quick solution. Flex Legal has candidates ready to start immediately, reducing the need for lengthy recruitment cycles, interviews, and notice periods. This approach allows your internal teams to focus on strategic growth initiatives rather than spending valuable time and resources on hiring.

2. Curated, high quality talent: Flex Legal’s talent pool is rigorously curated—only 15% of applicants are accepted, ensuring that only highly qualified professionals are available. Moreover, 20% of our talent pool is regularly re-deployed due to exceptional client feedback, meaning you benefit from top-performing, well-reviewed professionals. This approach saves you time in vetting and interviewing, providing peace of mind that you’re hiring proven talent.

3. Flexible agreements and pricing: Hiring through Flex Legal allows you to scale your team quickly and efficiently, adapting to changing workloads. Flexible agreements mean you can increase or reduce resources as needed, ensuring that your team size remains optimal. Flex Legal’s pricing model is transparent, with hourly or daily rates that include all costs related to talent acquisition, vetting, payroll, and ongoing support, making budget planning straightforward and predictable.

4. “Try before you buy” for cultural fit: Flexible resourcing offers the unique advantage of testing candidates in a real work environment before committing to a permanent hire. Sometimes, interviews alone aren’t enough to determine whether a candidate aligns with your team culture. With Flex Legal, you can bring on a professional on an interim basis and evaluate their performance, cultural fit, and potential for long-term success before making a permanent offer.

5. Enhanced diversity and skills: Interim talent can introduce fresh perspectives, skills, and experiences that enrich your team’s culture. Flexible resourcing helps increase diversity within your team by providing access to a wide range of backgrounds and expertise, ensuring you benefit from a broader pool of knowledge and new approaches to problem-solving.

By partnering with Flex Legal, law firms and companies can access a flexible, scalable workforce that aligns with changing demands while reducing administrative and financial burdens. Flexible resourcing provides the agility needed in today’s market, helping firms meet their goals efficiently and cost-effectively.