Every owner in the busy season runs this sum in their head and gets it wrong in the same direction. Salary is the visible number; the employer's contributions, the pension, the holiday cover, the recruitment, the kit, the slow first months and your own time managing them are the rest. This adds them up for the UK, Australia or the US — and then asks what those hours would cost to remove instead.
Salary is the number on the advert. The real cost is salary plus the employer's statutory contribution, the pension, someone covering their holiday, the recruitment, the kit, the months before they are worth what they cost, and your own time managing them. In year one it is usually 40 to 65 per cent above salary, and the part most owners miss is the last line: what each hour of work the hire absorbs actually costs, every year.
Start with salary. Add the employer's statutory contribution — in the UK, employer National Insurance at 15% on earnings above the £5,000 secondary threshold for 2026/27; in Australia the 12% superannuation guarantee; in the US the employer's 7.65% share of FICA. Add the employer pension where it applies separately, which for a UK auto-enrolment scheme is a minimum of 3%. Add holiday cover: the days they are paid not to work, times a daily rate, times the share of those days somebody else has to be paid to fill. Add your own time managing them, at what an hour of yours is worth. That is the ongoing cost, every year after the first.
The first year carries three more: recruitment, equipment and set-up, and the ramp — the months during which you pay full salary for partial output. Three months at half output on a £28,000 salary is £3,500 of work you paid for and did not receive. Then the tool divides the ongoing cost by the hours of work the hire is actually there to absorb, which is the number to compare against any other way of getting those hours back.
Because in most owner-run trade businesses the hire under consideration is not a craftsman. It is somebody to do the quoting, the retyping, the chasing, the planning — clerical hours the business has outgrown. Those are exactly the hours a system removes, and a system is paid for once. In the wholesale nursery, the office hire that would otherwise have been needed came to about £17,000 a year once on-costs were added; the rebuild that removed the hours took three to four months and no bespoke software, and the office stayed at three people while revenue tripled.
That is not an argument against hiring. It is an argument for hiring the right thing. The nursery went from four people to fifteen, and every one of those hires went outside — onto the nursery and the lorries, where the work could not be systemised and the on-costs were the price of growth. Hire for the work only a person can do. Systemise the rest.
A £28,000 UK salary. Employer NI on £23,000 above the threshold at 15% is £3,450; a 3% pension is £840; 28 days' holiday at £108 a day, half of it covered, is £1,508; two hours a week of your time at £60 is £5,760. Ongoing: about £39,600 a year, 41% above salary. Year one adds £1,500 recruitment, £1,200 kit and a £3,500 ramp: about £45,800. If the hire absorbs 20 hours a week — 960 a year — that is about £41 per absorbed hour.
Write down what the hire is for — the actual hours of actual work — and look at the cost per absorbed hour. If those hours are clerical, run the operations audit first: two days inside the working week, timing where the hours go and costing what a system could remove, guaranteed to find at least ten recoverable hours a week or refunded. If the hours are skilled, hire, and budget the full figure so the business is not surprised in month four. The other calculators cover the charge-out rate and the owner's own hours, and the short version of the method is on the byHoratio homepage.
Typically 30–45 per cent above salary every year, and 40–65 per cent above in the first year. On a £28,000 salary that is employer National Insurance of £3,450 (15 per cent on earnings above the £5,000 secondary threshold for 2026/27), a 3 per cent auto-enrolment pension of £840, holiday cover, and the owner's management time — about £39,600 ongoing, and about £45,800 in year one once recruitment, equipment and a three-month ramp are added.
Australia's superannuation guarantee is 12 per cent of ordinary time earnings, the legislated final rate; payroll tax applies separately above state thresholds. In the US the employer share of FICA is 7.65 per cent — 6.2 per cent Social Security up to the annual wage base and 1.45 per cent Medicare — with federal and state unemployment insurance and workers' compensation on top. Switch the page's currency and the tool loads the relevant headline rate.
The salary you pay during the months before a new hire is producing what they cost. Three months at half output on a £28,000 salary is £3,500 of wages for work not received. It is a first-year cost only, but it is paid again every time the role turns over, which is why turnover is the hidden multiplier on everything here.
Depends what the hire is for. If it is skilled work the business cannot put into a system — a surveyor, a driver, a grower — hire, and budget the full figure. If it is clerical hours the business has outgrown — quoting, retyping, chasing, planning — compare the cost per absorbed hour with removing those hours, because a system is paid for once and a hire is paid for every year with on-costs. The wholesale nursery in case study 004 did both: it systemised the office and hired outside.
Because managing a new hire takes owner time, and owner time is the scarcest thing in an owner-run business. Two hours a week at £60 is £5,760 a year, which is more than the pension and the holiday cover together. Most owners leave it out of the sum, and it is why a hire feels more expensive than the payslip says.
Systemise the rest. The audit finds which hours are which, inside your working week, and costs both routes. Twenty minutes, no deck, no pitch.
HORATIO@BYHORATIO.COM
The office hire that did not have to happen — and the eleven that did, outside.
The hours a slow method consumes, expressed as the hire you would need.
The charge-out rate, the margin leak, the supplier ceiling, and more.