Start with the legal minimum
Whatever else you decide, you cannot legally pay below the National Minimum Wage or National Living Wage. From April 2026 the rates are £12.71 an hour for workers aged 21 and over (the National Living Wage), £10.85 for 18 to 20-year-olds, and £8.00 for under-18s and apprentices. These are legal floors enforced by HMRC, with penalties of up to 200% of arrears plus public naming for employers who underpay.
At £12.71 an hour, a full-time worker on 37.5 hours a week earns roughly £24,785 a year before deductions. That is the practical starting point for most entry-level roles. Remember the rates rise every April, so a wage that is compliant today can fall below the minimum next year if you do not review it — build an annual pay review into your calendar around the April uprating.
Benchmark the market rate for the role
Above the legal minimum, pay is set by the market. To find the going rate, triangulate three sources: live job adverts for the same role in your area (Indeed, LinkedIn and Reed show real advertised salaries), official data from the ONS Annual Survey of Hours and Earnings (ASHE) which gives median pay by occupation and region, and any sector-specific salary surveys published by trade bodies or recruiters.
Adjust the benchmark for three factors. Location matters — the same role commands a premium in London and the South East and less in much of the North and Wales. Experience and specific skills push pay up, especially where there is a shortage. And your own employer brand matters: a well-known business with strong benefits can often pay slightly below the top of the range and still attract candidates, while a lesser-known employer may need to pay at or above market to compete.
A useful rule of thumb is to advertise a range rather than a single figure, positioned so the midpoint matches the market median for the role. This gives you room to reward experience without over-committing, and signals to candidates that pay progresses.
Budget the true cost, not just the salary
The salary is only part of what an employee costs. On top you pay employer National Insurance at 15% on earnings above the £5,000 secondary threshold, and a minimum workplace pension contribution of 3% of qualifying earnings. Together these typically add 15 to 18% to the headline salary before you even consider recruitment, equipment, training or holiday cover.
For example, a £30,000 salary actually costs about £34,460 a year (£3,750 employer NI plus roughly £713 pension). A £40,000 salary costs about £45,300. Deciding what you can afford to pay means starting from the total cost your budget can bear and working back to the salary — not the other way round. Use the free <a href="/cost-of-employing">cost of employing someone calculator</a> to see the all-in cost at any salary instantly, or the <a href="/calculator">full employer cost calculator</a> to add overheads and Employment Allowance.
When it is worth paying more
Paying above the market median is often the cheaper option once you account for turnover. Replacing an employee typically costs a large share of their annual salary in recruitment fees, lost productivity and training time. If paying an extra £2,000 a year keeps a good employee who would otherwise leave, it usually pays for itself well within a year.
Higher pay is most justified where the skill is scarce, where a mistake in the role is expensive, or where the person carries knowledge that would be hard to replace. For lower-turnover, easily-trained roles, paying at the market median and competing on culture, flexibility and progression is often the better value strategy. Non-salary levers — flexible hours, extra holiday, a better pension contribution, a clear pay-progression path — can be more cost-effective than a higher headline salary and are often what candidates actually remember.
A simple framework for setting the offer
Put the three anchors together. First, confirm the legal floor for the age band and hours. Second, find the market median for the role and location from job ads and ASHE. Third, set your budget from the total cost you can afford — including the 15–18% on-costs — and check the resulting salary sits at or near the market median. If your affordable salary is below market, consider whether non-salary benefits can close the gap, or whether the role can be restructured (part-time, apprentice, or a more junior hire you develop).
Finally, write the number down as a range with a defined midpoint, decide in advance where in the range each candidate would land based on experience, and review every April against both the new minimum wage rates and the current market. A documented, consistent approach protects you against pay-equality claims and makes offers faster and fairer.