Why Your Staff Costs Are Eating Your Profit — And How to Track It

Staff costs are the largest expense in most service businesses — and the hardest to see clearly. The salary bill is visible. The employer NI, pension contributions, holiday pay, sick pay, training costs, and recruitment costs that sit on top of it are often invisible in routine reporting. And the relationship between what each person costs and what they generate for the business is almost never tracked in real time.

The true cost of an employee

The gross salary is just the starting point. Employer National Insurance adds 13.8% above the secondary threshold. Auto-enrolment pension contributions add a minimum of 3%. Holiday pay represents roughly 12.07% of salary for employees on standard leave entitlement. Add recruitment costs, training, and management time — and the true annual cost of a £30,000 employee is typically £38,000-£42,000 before any overhead allocation.

The revenue side of the equation

Knowing what each person costs is only useful when set against what they generate. For a service business, this means tracking billable output, utilisation rates, or revenue attributable to each team member. The gap between cost and contribution is the metric that matters — and it varies significantly across teams and individuals in almost every business.

How to build the visibility

Staff cost tracking that connects payroll data to revenue data requires connecting two systems most businesses keep entirely separate. Power BI or an automated Excel model can bridge this — pulling payroll costs from the HR or payroll system and revenue data from the accounting or CRM system, then producing a cost-per-head and revenue-per-head view by team member, updated automatically.

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