How to Minimise Exposure to Employee Costs

28th July 2016


Employee costs, from the moment that you plan to hire somebody new, slowly begin to mount up.

First, you must deal with the costs that are associated with hiring and recruitment. Then, there are ongoing expenses that continue for as long as the employee stays on your payroll, and potentially even beyond.

What are some of the potential employee costs?

  • The costs of recruiting including advert prices and recruitment agency fees
  • The employee’s salary, or wage
  • Employer National Insurance contributions
  • Pension contributions
  • Holiday pay
  • Sick pay and absence
  • Lateness
  • Training costs
  • Equipment
  • Maternity or paternity pay
  • Possible redundancy pay
  • Possible unfair dismissal case costs
  • Consumables and general overheads (the small costs like tea and coffee, electricity and paper)

In addition to all of the above costs, linked to one employee, be aware of extra costs such as employers’ liability insurance.

How can you minimise exposure to employee costs?


When you’re hiring someone new, consider avoiding recruitment fees by sourcing new employees through existing ones.

Advertise the vacancy on your company website, and ask existing members of staff if they can recommend anyone for the role. You’ll be surprised how far networking can take you!

As additional motivation, you may wish to offer a small reward to any employee that passes on the name of someone that you later employ. Even with the cost of a reward factored in, this should be cheaper than using a recruitment agency.

Sick pay, absence and lateness

As long as it is taken for a valid reason, sick pay is an unavoidable business expense. It is important to support your employees through both short-term and long-term illness.

That said, it is your responsibility (and in your interest) to keep track of employee sick leave.

Using high quality HR software from Staff Squared, you will be able to easily record employee sick days, and view reports that are based on these records. You may discover that someone is taking a very high amount of sick leave, when compared to everyone else in the company, or that they seem to continually be calling in sick on a certain day of the week.

Whilst it is important not to accuse an employee, without evidence that they might not be ill, you may find that it helps to address the issue privately. The employee may have a valid reason for requiring all of the sick days that they are taking, but it may be something that you can help with such as stress or family issues.

Think about whether you could decrease sick leave by providing more flexibility, for example. If employees are taking sick leave to deal with childcare emergencies, could you encourage them to work by offering the option to work from home?

By keeping clear and detailed reports of employee working times and dates, you may also detect patterns of lateness that may be having an impact on your business. If an employee is five minutes late, twice a week, then this adds up to 40 minutes per month or a full working day every year. It might not sound like a lot, but imagine if every single worker was doing this!

Possible redundancy costs

Before taking on a new employee, do your best to look ahead to the future.

Do you definitely have a role available? Can you afford to fill that role long term?

Some new employees are absolutely essential, whilst others are hired to do work that could probably be comfortably shared amongst existing workers if everyone sat down and discussed it.

The key to avoiding the redundancy process might lie with your existing employees, who can provide ongoing feedback about how realistic their workloads are. If employees are consistently struggling to stay on top of their job lists, someone new will need to be brought in. If they’re struggling for a short while, could you handle the extra work with temporary staff or freelance workers? Outsourcing can often remove the need to go through the entire employment process, when a new full time employee may not be absolutely necessary.

If employees might be able to take on a bigger workload, offer some incentives for doing so. Often, these incentives will be cheaper than the recruitment process and potential future redundancy costs. Could you pay some employees to work overtime, if they are happy to?

Possible unfair dismissal case costs

According to the Ministry of Justice, there were more than 61,000 unfair dismissal claims made in the year from April 2014 to March 2015.

Unfair dismissal is a big issue in the workplace, and can also be costly for employers. Most cases result in payouts of £1,000, but the largest from 2014-2015 was more than £235,000.

Regular performance reviews can reduce the risk of an unfair dismissal claim. Employees will be alerted quickly if they are seen to be underperforming at work.

Always have clear goals and targets in place for your employees. Make sure that your expectations are realistic. Objectives are important for individuals, and for the business as a whole.

Unfair dismissal cases can have a big impact on businesses of any size, but will be particularly tough on smaller businesses with limited funds available. It is far better to invest time and money in setting out clear workplace rules, reviewing staff performance regularly and making sure that each employee knows what responsibilities they have to manage.


Did you know that the average worker uses 10,000 pieces of paper every year? That’s paper to the value of roughly £40, most of which does not need to be used.

You can save your business a small fortune by keeping many of your documents online. A secure cloud based storage system, perhaps built into your HR software, can enable employees and their managers to collaborate and share documents with ease. You can also store all company policies online, where they can be easily accessed 24 hours a day.

Keeping track

The best way to minimise employee costs is to make sure that you are on top of them at all times. Record details about every employee, ideally using feature packed online HR software.

Don’t be one of the many employers that accidentally approves too much holiday, giving someone paid time off when they’ve already used up their allowance.

Some costs, like pension and National Insurance contributions, are completely unavoidable and should be given fairly. Other employee costs are often the result of poor management or poor record keeping.

Look to online software to help you to keep tabs on every worker within your business, and don’t forget to carefully consider the true cost of each employee.

Find out why most small businesses are successful and why many will fail.  See our small business tips guide can help optimize how manage your HR processes.

Written by Sue Crow

Office Manager - Staff Squared

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How can Small Businesses Access Affordable HR Documents?

11th March 2016


Are you guilty of signing a contract without reading it in full? If so, you’re not alone.

Studies show that between 7% and 10% of people will read the contracts that they’re given. The other 90+% will not.

It’s been estimated that we’d need to spend 76 days a year (from 9am until 5pm) reading through terms and conditions, to get through every contract that we sign. You might not read them all in one go, but that’s still a lot of time to set aside.

Yet, if there’s ever a workplace dispute, you can be sure that contracts and documents will be studied in great detail.

Who should take responsibility for HR documents?

It’s up to the employee to know what they’re signing and to understand the requirements and demands of their job.

It’s up to the HR department, or HR manager, to make sure that the necessary info is provided. It’s vital that the information is clear, thorough and well thought out. In the event of a workplace dispute, a slight error or omission is enough to cause chaos for a business.

So, how do small businesses manage? Solicitors can be expensive and it can cost a small fortune to have all of the necessary documents produced by someone else. Here are just a few ways for small businesses to access affordable HR documents:

Staff Squared

As well as providing leading HR software for small businesses, and larger ones, the Staff Squared website features HR document templates that you can access and edit completely free of charge. These templates include an Employee Handbook and probation letter templates.

  • We have HR documents for sale!

    Instant access for just £4.99 per document.


Acas is the Advisory, Conciliation and Arbitration Service, providing free advice to employers and employees surrounding the areas of HR, employment law and workplace relations. There are free templates and documents available to download from the Acas website, covering three main areas: hiring, managing and disciplining.
On the Acas website you’ll find job application forms, staff appraisal forms, staff turnover analysis documents, flexible working documents and letters regarding disciplinary action, as well as a number of other useful files that you can download and use.

SEQ Legal Website Contracts

The SEQ Legal website offers a number of documents to download for a small price. There is also an Employment Agreement that can be used completely free of charge, as long as credit to SEQ Legal is included within the final document.
Documents that you can pay for include employment contracts, equal opportunities policies, data protection policies and disciplinary letters. promotes itself as the Human Resources Social Network. As well as being a place for HR professionals to connect, the website includes free documents and templates for salary scales, recruitment, meeting minutes, performance reviews, injury reporting, holidays and sickness and a whole lot more. is a US website, so there may be some things that aren’t relevant to a UK small business.

What are the benefits and drawbacks of using free or cheap HR documents?

If you’re running a small business with a budget that won’t stretch to cover hours and hours of professional fees for HR document creation, then you need to decide where you can save a bit of money.

If you work with a professional… they’ll create HR documents specifically for your business, and you will benefit from their expertise and knowledge. You’ll have access to a human being who will discuss the process with you, asking questions and clarifying details.

Each document that you receive will have been designed and created based on your needs and requirements, ensuring that everything within the document is going to be useful and relevant. You might also get some say over how technical the documents are, or whether or not you’d prefer a more friendly and colloquial approach. However, all of this comes at a high price which many small business owners struggle to justify.

If you use free or cheap HR document templates… you won’t need to worry about how many different documents your business will need, and how much it’ll cost overall. As a small business owner you’ll be free from worries about which documents to prioritise, and which to put on the back burner until you’re in a stronger financial position.

Using affordable HR documents will take more of your time. Instead of having documents written by someone else, you’ll have to sort through templates and edit them on your own. There is also a risk that your final document won’t cover everything that it needs to cover, or could be inaccurate in some way.

What if you can’t decide if it’s worth paying more for your HR documents?

Low cost HR documents don’t need to be your final choice. If you’re struggling to find space in your budget for the dozens of documents that you’ll need, then a free or cheap alternative could be a starting point for your business.

As your HR budget grows, you’ll be able to replace your template documents with professionally written contracts and forms if that’s what you’d like to do. Otherwise, you’ll be able to continue to use your template-based HR documents if they’re still the right choice for your business.

Have you thought about why small businesses succeed or fail? It’s good to know and to understand why successful SMBs used online SaaS software in their operations.

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