METHOD & GUIDANCE
How this calculation works
Keep every input on the same time basis—for example, one month or one financial year—and do not mix cash figures with accrual figures. Tool IQ recalculates every output immediately; nothing you enter is saved or sent to us.
How to use the result
First calculate the employee’s true recurring cost, then test the hire against expected monthly cash receipts, existing payments and a cash buffer the business will not spend. Save a downside case with delayed receipts.
Worked example
The opening case begins with £60,000 cash, protects £20,000, pays £5,000 of setup costs and tests a £4,200 monthly employee cost against £50,000 of receipts and £38,000 of existing payments.
Common mistakes
- Using gross salary instead of the true monthly employer cost.
- Treating invoiced revenue as cash received.
- Spending the minimum cash buffer or ignoring one-off recruitment and setup costs.
Frequently asked questions
Is the hiring affordability calculator free?
Yes. It requires no account and stores no calculation inputs.
Can I use the answer for a formal filing?
No. It is a planning estimate, not accounting, tax, legal or investment advice. Confirm material decisions with a qualified professional.
Which period should I use?
Keep every input on the same basis—for example, one month or one financial year. Use current figures first, then save a cautious scenario for comparison.
What employee cost should I enter?
Use the recurring monthly total from the True Employee Cost Calculator, including employer payroll costs, pension or retirement contributions, benefits and other recurring employment costs.
Does positive headroom prove the hire is affordable?
No. It shows the result under the assumptions entered. Test delayed receipts, lower sales and unexpected costs, then consider contractual, operational and professional advice before committing.
Continue the decision
- True Employee Cost Calculator — Estimate the full cost of hiring beyond headline salary.
- Cash Flow Forecast Calculator — Project closing cash from collections, payments and one-off movements.
- Break-even Revenue Calculator — Find break-even sales revenue from fixed costs and gross margin.
Popular small-business decision paths
- Estimate the true cost of an employee
- Calculate the revenue needed to fund the hire
- Compare payroll software for a first employee
Method reviewed 5 August 2026. Figures are illustrative and calculated locally in your browser. Official sources are linked where a rule or obligation affects how the result should be used. Read the Tool IQ calculation standard for our checking process, limitations and corrections policy.