The True Cost of an Employee for Your Heating & Plumbing Business

Whether you’re a sole trader struggling to keep up with demand or a team looking to expand, bringing on a new engineer or admin member is a great sign of progress and an exciting prospect.

That being said, it’s crucial to do a basic cost analysis to avoid unwelcome surprises later down the line.

This is because an employee can cost significantly more than just their salary. But where is this money going? And how can you accurately predict how much an employee will cost your business? 

In this blog, we’ll break down the often-overlooked expenses and help you avoid unwelcome surprises later down the line. 

Breakdown of Costs

Here’s a breakdown of all the major costs. As an example, we’ll estimate the cost for an employee earning a salary of £40,000 p.a.

National Insurance Contributions (NICs): 

This is a significant cost often overlooked. As an employer, you are required to pay Employer’s National Insurance Contributions on top of your employee’s gross salary. This is currently set at 15% from the 6th of April 2025 on earnings above a certain threshold. This means that for every £100 you pay your employee in salary, you’re effectively paying an additional £15 (at current rates) to HMRC.

Estimated cost: £6,000

Pension Contributions: 

Auto-enrolment into a workplace pension scheme is a legal requirement for all eligible employees. As an employer, you must contribute to your employee’s pension pot. The minimum employer contribution is currently 3% of their ‘qualifying earnings’, though some schemes may require more. This might seem small individually, but across a team, it adds up.

Estimated cost (at 5% contribution): £2,000

Holiday Pay & Sick Pay: 

Employees are legally entitled to paid annual leave (currently 28 days or 5.6 weeks for a full-time employee, including bank holidays). This means you’re paying for time when your employee isn’t actively working. Similarly, you’re responsible for Statutory Sick Pay (SSP) if an employee is off work due to illness for four or more consecutive days. While SSP is a fixed rate, prolonged illness can still impact your bottom line through lost productivity and the need for cover.

Of course, you aren’t paying extra for your employee’s holiday or sick leave, but it’s something to consider. 

Tools & Equipment: 

A skilled heating and plumbing engineer is only as good as their tools. When you hire, you’ll likely need to invest in new, high-quality tools and equipment. This can include: 

• General hand tools and power tools
• Specialised plumbing tools (e.g., pipe cutters, soldering kits)
• Crucially for gas engineers: a new, calibrated Flue Gas Analyser, CO detector, and other gas safety equipment. These are significant investments.

While these costs will be greater upfront, tool replacement and repair are something to consider. 

Estimated upfront cost: £1,000 – £2,000

– Gas Engineer Software can connect with Bluetooth enabled flue gas analysers to import readings & create dated certificates. Learn more.

Vehicle Costs: 

If you’re hiring an engineer, they’ll need a van to get to customers. This isn’t just the upfront cost (purchase or lease). You also need to factor in: 

• Commercial vehicle insurance – £300-1200
• Fuel – £2000-3000
• Maintenance, MOTs & Servicing – £200-500
• Vehicle Tracking – optional

A new van on a PCP (to spread out the cost for the sake of this estimate) sits at around £3600 a year.

Estimated cost: £3600

Uniform/Workwear: 

Professional, branded workwear enhances your company’s image. This involves initial purchase costs and potentially ongoing replacement costs for items like safety boots, work trousers, and branded polo shirts/jackets.

Estimated cost: £100

Training & Qualifications: 

The heating and plumbing industry, especially for gas engineers, requires ongoing training and the maintenance of specific qualifications. This is a vital investment, not just a cost. You’ll need to budget for: 

• ACS (Accredited Certification Scheme) renewals: Crucial for Gas Safe registration.
• Manufacturer-specific training: To stay up-to-date with new boiler technologies and heating systems.
• Health and Safety courses: To ensure compliance and a safe working environment.
• And any other relevant courses based on their area of expertise.

Insurance: Employers’ Liability Insurance: 

This is a legal requirement in the UK as soon as you become an employer. It covers your business against claims from employees who suffer injury or illness as a result of their work.

Estimated cost: £150-200 

Breakdown of Indirect Costs / Time Costs

Beyond the easily quantifiable direct costs, there are a host of less obvious but equally impactful “time costs” that you should be aware of:

Admin: 

Any new employee comes with more admin work. This includes: 

• Setting up payroll and managing PAYE.
• HR duties (contracts, policies, performance reviews).
• Scheduling and dispatching jobs for an additional engineer. See how Gas Engineer Software saves time with scheduling.
• Managing holiday requests and sick leave.
• Filing tax returns and pension reports.

Management Time: 

You’ll need to allocate time for: 

• Supervising and mentoring your new employee.
• Conducting regular check-ins and performance reviews.
• Team meetings and coordination.
• Addressing any issues or challenges that arise.
• This time is essential for integrating a new team member effectively but is time you cannot spend elsewhere.

Office Space/Utilities (if applicable): 

While not always a direct concern for field-based roles, if your business expands to a point where you need dedicated office staff or more physical space, you’ll face increased costs for rent, utilities, internet, and office supplies.

How Software Can Help Manage Costs

The list of costs can seem daunting, but it doesn’t have to be. As long as you’ve properly planned for your new employee, they will make you more money than they cost. 

Using software, you can streamline much of your day-to-day admin and vastly improve employee productivity. 

How it helps engineers: 

• Fast & easy certificate creation
• Less paperwork to deal with / take back to the office 
• All customer data, job notes, and other info is readily accessible in the field
• Schedules that update in real time 

How it helps admin staff: 

• Efficient quoting & invoicing process
• Seamless accounting process that avoids hours of manual data entry
• Quick & easy access to customer data when answering calls