Sometimes in the thick of excitement over expanding a new department or filling a new position, it can be easy to lose track of just how much money new hires can cost your company. The truth is, though, that the cost of hiring a new employee is significantly more than that of an employee who is already onboarded and performing well in their role. You may not reach the break-even point for a new hire for a year or more.

The Cost Of Hiring A New Employee Breakdown

Not only is it expensive to bring on a new person; it’s even more expensive to deal with turnover. This decidedly not-simple worksheet shows you the full cost of having an employee leave, including lost productivity, accounting for turnover rate, and more. Of course, if they’ve been there awhile this isn’t such a hit, and it is to be expected that your team members will someday find greener pastures. This means it is very important for you to find the right employees in the first place because their total cost is high. How high? Here’s a quick breakdown to help you determine the real cost of hiring a new employee.

Hiring

The Interview Process

The hourly rate of the interviewer X the time the interviewer takes to interview the candidate

Background Checks 

Credit checks, police reports, etc., which usually cost money

Paperwork 

Printing, filling, signing, duplicating, and filing forms

Legal Representation

In some cases, an attorney may need to be present, as with serious nondisclosure or noncompete documents

Salary And Benefits

Annual Salary

The base compensation a new employee will receive

Bonuses

Many companies offer bonuses either during the holidays or for reaching specific quotas, and these must be figured in

Healthcare & Other Forms Of Insurance

Medical, dental, vision, workers compensation can all add up

Retirement Plans

401(k)s and other matched savings plans

Tuition Reimbursement

An increasingly popular option whereby a company pays for an employee to go to school

Miscellaneous

Parking passes, relocation, etc. may make for a more attractive package to your candidate, but can also add up

Onboarding

Training

A necessary step before an employee can reach full productivity

Increased Feedback & Reviews

While also necessary, another step that costs more time and money than the average employee

Reduced Output

Reduced output, increased errors, and more hand-holding that is needed during the first few months, or even years, of a new role

None of this is intended to dissuade a business from hiring people, which, in any case, is impossible. It simply means that businesses – small businesses especially – can’t afford ongoing costs like this, which is why it’s crucial you start screening applicants more carefully before you bring them on board. If you have an HR department capable of doing this, great, otherwise you might need the help of a recruiter.

Read more of our blogs on hiring and HR 101.  

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As businesses strive to grow and evolve, the allure of expanding teams or filling critical roles can sometimes overshadow the significant financial investments involved in hiring new employees. From initial interviews and background checks to salary, benefits, and onboarding, the costs can quickly accumulate. It's essential for organizations, especially small businesses, to meticulously screen candidates and make informed hiring decisions from the outset. By doing so, they not only mitigate the financial impacts of turnover but also cultivate a workforce poised for long-term success. Partner with us today and ensure that every addition to your team contributes positively to organizational goals, ultimately fostering a productive and thriving workplace.