There isn’t always a lot of consideration for how much it costs to hire an employee, but according to a survey by the Society for Human Resource Management, “the average cost to hire an employee is $4,129, with around 42 days to fill a position.” Of course, these costs will vary depending on the position and economics of the local community, but it will still take some of your resources.
That makes hiring crucial for any company. You want to approach it in a way that attracts the right pool of people – and those who are more likely to stay with the company longer term. Otherwise, a more involved hiring process and potential high turnover rate may affect your budget and the cost to hire.
Where do the costs of hiring an employee come from?
Several factors contribute to the overall cost of hiring an employee. From employment ads to training, several steps are involved in the process. Here are some of the costs associated:
- Job listings/recruiting events: The first costs of hiring an employee come from the search. Posting your job typically costs money, and you may choose to list in several places. For example, online job/career websites (Indeed, Monster, Glassdoor, etc.), Craigslist, or local publications. Another method companies use to find employees are attending career fairs and other job recruiting events. In general, you’ll be paying your HR team to conduct searches, but some companies may hire (and pay) an outside agency and outsource the work instead. The decision often depends on the size of the organization, what roles need to be filled, how much extra bandwidth HR has, and whether using a specialized agency will attract better talent.
- Interview and background process: Each prospective employee will require time and energy, as well as some funding. The more people you look at, the more you’ll spend. Any background checks, interviews, and even the time it takes to read through all the correspondence and applications requires time and money. It’s also essential to look at this from another perspective: If your company is having to focus someone’s time on hiring, they are not focusing on tasks that actively generate income, which is why it's crucial to reduce high turnover.
- Orientation, Onboarding and Training: Research shows it takes anywhere from 8 to 26 weeks for a new hire to reach full productivity. Of course, the more complex the job, the more time it takes. Companies tend to lose revenue during this transition period, which is an additional cost to the time and resources needed to onboard and train.
Where can you reduce the cost to hire an employee?
Some common pain points of hiring include targeting the right candidates, swiftly reducing the field, and getting new employees up to speed quickly. You can help the process by:
- Optimizing your screening process by thoroughly presenting accurate criteria on job duties.
- Using more cost-effective orientation methods
- Creating a work culture that reduces turnover
The cost of hiring an employee is eye-opening, but can been reduced when the hiring process is approached thoughtfully and with care.