The True Cost of Hiring Your First HR Person vs...

A Business Owner’s Dilemma

It was a conversation I will never forget. I was sitting across from a small business owner, Ben, who had built his company from the ground up. With 30 employees, he was starting to feel the strain of managing HR himself—handling payroll issues, mediating staff conflicts, and ensuring compliance with UK employment laws.

“I know I need HR support,” he admitted, “but hiring someone full-time is a huge expense. Can I really afford it?”

Ben didn’t realise that hiring HR comes at a cost, and not having HR support carries hidden risks that could cost even more.

The Price Tag of Hiring Your First HR Professional

Let’s break down the real costs. Hiring an HR professional in the UK varies depending on experience level:

HR Assistant/Coordinator: £28,000 to £30,000 per year
HR Advisor/Generalist: £30,000 to £45,000 per year
HR Manager: £45,000 to £60,000 per year
HR Director: £60,000 to £100,000+ per year

Beyond salary, James would also need to factor in:

Recruitment Fees (15-25% of salary if using an agency)
Onboarding & Training (£500 to £2,000)
Pension Contributions (at least 3% of salary)
National Insurance Contributions (13.8% above the £12,570 threshold)
Employee Benefits (healthcare, bonuses, and additional perks)

Hiring a mid-level HR professional could set Ben back £54,000 - £61,000 in the first year alone. That’s a serious investment for a growing business.

The Hidden Costs of Not Having HR Support

While Ben worried about the cost of hiring, he hadn’t considered the financial risks of not having dedicated HR support. Here’s what can go wrong:

1. Legal Compliance Risks

Employment law in the UK is complex. Without HR expertise, businesses can unknowingly violate contracts, dismissals, discrimination, and health & safety laws. A single tribunal claim could cost £10,000 - £100,000+ in legal fees and settlements.

2. Poor Employee Experience & High Turnover

Companies often lack clear policies, structured onboarding, and fair progression opportunities without HR. This leads to:

Low morale & engagement
Inconsistent treatment of employees
High turnover rates - Replacing an employee can cost up to 33% of their salary in recruitment and lost productivity.

3. Payroll & Benefits Mistakes

Payroll errors, incorrect tax deductions, or missing pension contributions can lead to fines and frustrated employees. Over time, this can damage a company’s reputation and lead to retention issues.

4. Recruitment Challenges

Without HR expertise, hiring the wrong person is more likely. A bad hire can cost a company up to 30% of the employee’s annual salary.

The Fractional HR Solution: A Middle Ground

Hiring a full-time HR professional may not be the best first step for businesses like Bens. Instead, fractional HR support—where an experienced HR consultant works with your business part-time—can provide a cost-effective, flexible alternative.

Why Fractional HR Works

Lower cost than hiring full-time (typically £300 - £1,000 per month, depending on needs)
On-demand expertise without long-term commitments
Tailored support—focus on compliance, employee relations, recruitment, or all of the above
Scalability—adjust support levels as the business grows

Bens’ Decision

After weighing the options, Ben chose to bring in fractional HR support. He started with a consultant who worked with his business a few days a month, helping with contracts, compliance, and employee engagement strategies.

Within six months, Ben saw:

Reduced admin burden, allowing him to focus on business growth
Happier employees, thanks to more straightforward policies and better communication
Lower risk exposure, with contracts and policies fully compliant

The best part? He spent a fraction of what a full-time HR hire would have cost.

Conclusion: The Right Investment at the Right Time

Hiring HR is an investment, but not having HR could cost much more. The key is knowing when and how to bring in the right level of support.

For smaller businesses, fractional HR offers an affordable way to manage people, protect against risk, and create a strong foundation for growth. As the business scales, transitioning to a full-time HR hire becomes a strategic, well-timed decision rather than a rushed, reactive expense. When the time is right, utilise the consultant who has worked with you and understands the business and challenges to find you that perfect full-time hire.