Hiring Your First Engineer in London vs. San Francisco: A True Cost Analysis

Key Takeaways:

• Hiring in London costs 50% less than in San Francisco.
• Equity expectations in London are lower, preserving ownership for founders.
• San Francisco offers unparalleled talent and networks, but at a premium.

Hiring your first engineer is one of the most critical steps for any startup. This decision shapes your product, culture, and budget, so choosing the right location—London or San Francisco—can significantly impact your company’s future.

Both cities are global hubs for tech talent, but they come with different costs, timelines, and expectations. This article breaks down salary benchmarks, equity expectations, tax implications, and recruiting strategies to help you make an informed decision.

Why This Decision Matters

Hiring isn’t just about cost—it’s about building the foundation of your business. Here’s why the location of your first hire matters:

• Budgets are tight for early-stage startups; hiring in the wrong location can drain resources.
• Equity expectations vary, impacting long-term ownership of your startup.
• Recruiting timelines differ, which can delay product launches.
• Tax and legal requirements can increase costs if you’re not prepared.

The Goal: Compare London and San Francisco to understand where you’ll get the best return on investment when hiring your first engineer.

The Cost of Hiring: London vs. San Francisco

1. Salary Benchmarks

Engineering salaries vary widely between these two cities due to differences in living costs and startup ecosystems.

City	Salary (USD)	Salary (GBP)
San Francisco	$140,000 – $180,000	£110,000 – £140,000
London	$70,000 – $100,000	£55,000 – £80,000

Key Takeaways:

• San Francisco engineers earn 70-100% more than London engineers.
• London offers a significant cost-saving advantage without sacrificing access to highly skilled talent.

2. Equity Expectations

Equity is an important part of early-stage hiring, but expectations differ culturally:

City	Typical Equity Range (% of Company)
San Francisco	0.5% - 2% (higher for founding engineers)
London	0.2% - 1%

Why the Difference?

• In San Francisco, engineers prioritize equity due to the culture of high-growth startups.
• London engineers favor higher salaries and often accept lower equity.

3. Tax Implications

Understanding payroll taxes, healthcare, and other legal requirements is essential when budgeting for your first hire.

Employer Costs (2025):

Cost	San Francisco (USD)	London (USD)
Payroll Taxes	~9% of salary	~13.8% of salary
Health Insurance	$6,000 – $12,000/year	Free (via NHS)
Total Employer Cost	~$20,000 extra/year	~$10,000 extra/year

Key Insights:

• Health insurance in the U.S. adds significant costs to hiring in San Francisco.
• Payroll taxes in London are slightly higher, but the absence of employer-paid healthcare makes London more cost-effective overall.

4. Total Cost of Hiring in Year 1

What does it actually cost to hire your first engineer for one year? Let’s break it down:

Expense	London (USD)	San Francisco (USD)
Base Salary	$80,000	$160,000
Payroll Taxes	$11,040	$14,400
Health Insurance	$0	$10,000
Misc. Costs	$5,000	$10,000
Total Year 1 Cost	$96,040	$194,400

Summary:

Hiring in London is 50% cheaper than in San Francisco, making it an appealing option for startups with limited funding.

Recruiting Timelines: London vs. San Francisco

The time it takes to hire your first engineer can impact your ability to ship products and attract funding.

London Recruiting Timeline

• Average Time to Hire: 2-3 months.
• Best Practices:
  1. Use platforms like WorkInStartups, Otta, or LinkedIn.
  2. Leverage university networks (e.g., UCL, Imperial College).
  3. Offer flexibility and a clear mission to attract high-quality candidates.

San Francisco Recruiting Timeline

• Average Time to Hire: 3-6 months (higher competition).
• Best Practices:
  1. Use niche job boards like AngelList or Hired.
  2. Emphasize your startup’s vision to stand out in a crowded market.
  3. Be prepared to offer competitive equity packages.

Office vs. Remote Work: A 2025 Lens

With remote work becoming the norm, hiring location doesn’t always mean relocation. However, there are nuances to hiring locally or remotely.

Office Costs

City	Office Space (USD)	Remote Savings
San Francisco	$100–$150 per sq ft/year	Significant savings
London	$70–$100 per sq ft/year	Significant savings

Remote Work Considerations:

• Hiring remotely in London is easier to manage due to minimal time zone differences with Europe.
• In San Francisco, remote hiring often means accommodating global time zones, which can slow down workflows.

Key Pros and Cons: London vs. San Francisco

London

Pros:

• Lower salaries and employer costs.
• Easier access to EU talent pool.
• Lower equity expectations.

Cons:

• Smaller startup ecosystem compared to Silicon Valley.
• Slower access to U.S.-based investors or networks.

San Francisco

Pros:

• Access to the world’s leading tech talent.
• Proximity to major VCs and accelerators.
• Highly competitive engineers motivated by equity.

Cons:

• High salaries and additional costs (healthcare, insurance).
• Lengthy hiring timelines due to competition.

Final Decision: Where Should You Hire?

Your decision comes down to budget, timeline, and market focus. Here’s a quick guide:

Hire in London if:

1. You’re on a tight budget and need to maximize runway.
2. You’re building a remote-friendly team.
3. Your product or customers are focused in Europe.

Hire in San Francisco if:

1. You’re targeting U.S.-based customers or investors.
2. You need elite talent with deep startup experience.
3. You’re prepared to offer competitive equity and salaries.

Next Steps

1. Calculate Costs: Use SimpleDirect’s Startup Cost Calculator to estimate your hiring budget.
2. Plan Your Strategy: Learn more about remote hiring best practices.
3. Build Your Pipeline: Use SimpleDirect to track hiring milestones, communicate updates, and streamline onboarding.

Hiring your first engineer is a pivotal decision. By understanding the true cost and trade-offs of hiring in London or San Francisco, you’ll set your business up for long-term success.

Wherever you choose to hire, focus on finding a candidate who aligns with your mission and can help you ship your product faster. Make every hire count!