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The Cost of Hiring New Employees: 4 Things to Know

January 3, 2020 | posted by Abacus Payroll

It’s no secret that the hiring process takes time, patience, and thoroughness; however, it also costs a fair chunk of change. The repercussions of an improper hire can last for far longer than the employee in question.

While the approximate figures around hiring someone new range from around $1,000 to over $5,000 per employee, the full cost of bringing someone onto your team is hard to calculate.

Here are four things to keep in mind when considering the implications of a new hire.


Dollar Signs

As mentioned above, the cash price of hiring a new employee can fluctuate pretty dramatically. The only constant is that the hiring process is irrevocably expensive—and that’s even if you get it right on the first try. On average, you can expect to spend around $4,000 on a new employee from start to finish; that’s a tough pill to swallow regardless of your standing. If you’re wondering where that money comes from, your average cost breaks down as follows:

  • HR salaries
  • Referral bonuses
  • Signing bonuses
  • Relocation costs
  • Office expenses
  • Software costs
  • Recruitment fees
  • Advertising budget
  • Qualification fees (e.g., testing or background checks)

Naturally, not all of these costs will apply to you every time you hire a new employee, but most will come into play every so often. Knowing the actual dollar cost of each of these categories of expenses will help you understand more clearly the impact a new hire makes on your company’s budget. It can also help you understand where you can cut or reduce costs, so take a look at your current hiring practices before your next round of recruiting.

One rule of thumb to consider relates to your new employee’s salary: Save for extreme cases, spending more than 20 percent of that salary in pursuit of the employee is overkill.


Abacus Payroll’s HR Help Center has calculators to help HR and business owners determine values such as employee turnover, absenteeism, and—you guessed it—cost per hire.


Cashless Variables

One thing that you can’t always quantify in terms of dollars is your time. Hiring is a time-intensive process—all the more so if you’re on the actual interview panel like you should be—and that time will negatively impact your daily responsibilities, at least in the short-term picture. Time is also a factor for your new employee, as it will take them some amount of it to get up to speed in your operation. Waiting for them to rise to everyone else’s productivity rates isn’t negligible from a monetary standpoint.

Turnover is another variable which can cause your hiring costs to spike dramatically. If an employee feels they aren’t a good fit for your company or their onboarding process doesn’t go well—or, worse yet, if another company makes a better offer to them—you’ll find yourself saying goodbye to them shortly after welcoming them into your workplace.

Finally, the onboarding process is extremely expensive for a variety of reasons, not least of which is employee equipment setup and orientation. Even if you don’t need to purchase new software or hardware for your hire, your HR team and tech department will most likely have to spend time—and, thus, money—getting your employee situated with your company’s equipment and online presence.

These aren’t unavoidable aspects of hiring, but you can seek to reduce the cashless costs of hiring by streamlining your onboarding process and ensuring that you pick the right person for the job.

First Time’s the Charm

Choosing the wrong employee for your company can have disastrous effects, starting with aggressive turnover. As noted previously, the cost of interviewing and onboarding is high, so failing to select the correct candidate during the interview process can set you back quite a bit. For this reason, you should collaborate with your HR team to review each candidate’s qualifications and history as needed to avoid making a costly mistake.

Onboarding is also a key aspect of the new hire song and dance; it’s important to make the employee feel welcome, wanted, and supported. If they don’t feel up to the challenge after you complete onboarding, you run the risk of losing the employee altogether. You can work with your HR department to make sure that all of the necessary resources are at the employee’s disposal, but the fact of the matter is that your first impression on them is every bit as important as their first impression on you.

Avoiding New Hire Pitfalls

Of course, onboarding, encouraging, and supporting your new hires is incredibly important during the first few weeks, but it’s even more important to make sure that your HR team has all of the resources they need to help your new employees make the transition to your workplace. Since your HR team’s salaries figure into the hidden cost of hiring someone new, supporting them as much as possible up front will pay dividends throughout the course of your employees’ tenures.

Another area to focus on actually begins before the hiring process even starts: your interview questions. One of the most common reasons that employees leave jobs that seem well-adjusted to their needs is that the job itself isn’t the way it appeared on paper; revising your interview questions and tactics to address the job’s nuances without misleading the candidate or underplaying the less-positive aspects of the position may have a tough return up front, but you’ll see better long-term benefits from the employees who make it through.

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The hiring process is tricky under any circumstances, but no more so than when starting out. Fortunately, Abacus Payroll can tailor our advanced HR services and HR Help Center to fit your needs, and our resources can make your evaluation, hiring, and onboarding efforts as smooth as possible. For more information about how Abacus Payroll can help you both cut down on your hiring costs and make the right hire the first time, call us at (856) 667-6225 today!

About the Author: Abacus Payroll

Abacus Payroll, Inc. is a leading provider of payroll solutions for businesses of all sizes. Whether yours is a family-owned small business or a national corporation, we provide payroll, tax and other financial services on time and at an affordable price. Unlike other payroll providers, Abacus Payroll will assign your very own payroll specialist who will understand your payroll needs inside and out. So no more speaking to a different person each time, no more sitting on hold for hours and most importantly no more missed deadlines! Contact us today to see how we can help your business. You can count on us.