What are hiring expenses?

Hiring expenses include the visible and invisible costs of bringing an employee into your organization. Some costs, such as job advertisements, recruiting tools, signing bonuses and candidate relocation expenses, can be easy to anticipate. Others, like the cost to onboard and train new hires or productivity losses related to a vacant position, can be harder to quantify.

The cost of hiring employees

According to data from the Employers’ Council, the average cost of hiring an employee was about $4,700 in 2023. However, actual costs can vary widely depending on your industry, the role you’re filling and your hiring process.

Factors that can influence your total hiring costs include:

• The complexity of the role and the required skills
• Whether you rely on in-house HR staff or external recruiters
• The rate for advertising and job board fees necessary to reach the right candidates
• Whether you need pre-employment screenings, background checks and skills assessments
• The length and nature of your onboarding and training
• Whether you offer relocation support, signing bonuses or other incentives for new hires

Potential expenses associated with hiring a new employee

To determine the cost of hiring a new employee, identify all the expenses related to filling a position and add them up to get the total cost of hiring that employee. If you capture that number for all new hires and divide by the total number of hires, you can also determine your average cost to hire an employee.

External recruitment support

Some companies rely on external recruiters or staffing agencies when they don’t have the internal capacity to manage hiring or when filling specialized roles. These partners can handle tasks such as sourcing candidates, applicant screening and coordinating interviews.

Using an external recruiter can be helpful when:

• Hiring for a highly competitive or niche role
• Leveraging limited HR resources
• Tapping into an established network of vetted professionals to fill a position quickly

External support can streamline hiring, which could help balance your hiring costs.

Internal human resources team

Internal HR staff can handle a variety of hiring tasks, from job posting and recruiting to onboarding. They may write job descriptions, manage applications, coordinate interviews and communicate with candidates throughout the process. 

This cost is relevant for any organization that has an internal HR team involved in hiring processes. By factoring in your HR team’s time and resources, you can better understand the true cost of hiring a new employee.

Career fairs and hiring events

Some organizations recruit talent through career fairs, industry conferences or other in-person events. You can connect with potential candidates and showcase your brand during these types of events.

Consider career fair and hiring events if you:

• Participate in college career fairs to connect with recent graduates
• Attend industry events to network with niche candidates
• Use job expos to quickly meet a large number of applicants

Expenses associated with career fairs and similar events include registration fees, printed employer marketing materials, signage and the time of employees staffing your booth. 

Recruiting technology 

Many organizations rely on technology to make hiring more efficient and organized. Common tools include applicant tracking software (ATS), onboarding platforms and video interview software. You can use technology to receive and store applications, automate communication with candidates, schedule interviews and keep managers and others updated on progress.

Technology may be the best choice if you:

• Hire for multiple roles at once, and need a system to track candidates at different stages
• Want to reduce the time HR staff spends on recruiting and onboarding tasks
• Need a way to organize resumes and test results, and communicate in a single place

Technology investments add to your overall hiring costs, but they can also reduce long-term expenses by improving efficiency and automating processes.

Job posting fees

If you advertise open positions on online job boards or industry-specific websites, you may pay a fee. Some job boards charge a flat fee per post, while others use pay-per-click or subscription pricing models. Costs can also vary depending on how long your listing is live and whether it’s promoted.

Online job boards and websites may be a good fit if you:

• Need to quickly reach a large pool of candidates
• Want to hire for entry-level or high-turnover roles that might benefit from broader visibility
• Prefer to target specialized candidates via niche job boards or upgraded listings

Job posting fees are one of the more predictable hiring expenses, and you can scale them up or down depending on your recruiting needs.

Background checks

Many employers conduct background checks to verify details such as employment history or educational credentials. Background checks can also include criminal records or, in some cases, credit checks. Costs vary depending on whether you need basic verification or more comprehensive reporting.

You may need to cover the cost of background checks if you:

• Operate in industries with regulatory or safety requirements like healthcare, finance or transportation
• Have roles that involve handling sensitive data or financial information
• Want additional assurance of a candidate’s trustworthiness 

Skill or knowledge testing services

Pre-employment assessments evaluate whether candidates have the necessary skills to succeed in the role. These can include technical tests, personality assessments or demonstrations of role-specific skills.

Remember to account for this type of cost if you:

• Hire for technical or specialized roles
• Need objective data for decision-making
• Want to validate skills that are difficult to judge from resumes and interviews alone

Medical or drug testing

Some employers require medical exams or drug screenings to ensure candidates meet health and safety standards for a role. Requirements can vary depending on your industry and state or federal regulations.

Consider this cost if you:

• Operate in a safety-sensitive industry like transportation, healthcare or construction
• Must comply with drug-testing laws
• Require candidates to have a certain level of physical fitness

Employee referral bonuses

Referral programs reward current employees for recommending qualified candidates who are successfully hired. Employee referral programs can help you reduce the time needed to fill positions and improve retention.

Consider incorporating referral bonuses if you:

• Want to encourage trusted candidates
• Hire for roles where culture fit is especially important
• Need to motivate employees to actively support recruiting

Relocation support or reimbursement

If your new hire is relocating to work for your company, you may choose to pay for their moving expenses. Some companies offer a set amount, while others pay a percentage of the move’s cost. 

This cost is relevant if you:

• Are hiring for senior or specialized positions with a limited talent pool in your area
• Recruit nationally or internationally
• Believe offering relocation support gives you a competitive edge in attracting candidates

Employee onboarding programs

Onboarding costs include the time and resources needed to introduce new hires to company systems, policies and team members. This cost is generally applicable to any organization, but you may incur higher costs if you have highly structured, multi-day onboarding programs or complex systems and compliance requirements. 

Job training

Job training can take a lot of time, particularly when you’re hiring for roles with specialized skills or compliance requirements. In some cases, the new employee might need weeks of training before they can perform their job independently. Expenses for this period depend on factors such as:

• Company size
• Industry
• Training format
• Instructor
• Materials and resources

Job training costs are applicable to any hiring process.

Employer website with job listings

Maintaining a careers page on your website helps candidates learn about your organization and apply directly for open roles. Expenses can include designing and updating your site, as well as ATS integrations.

This cost may be relevant if you:

• Often recruit for multiple positions
• Want to showcase your employer brand
• Need an efficient way to direct candidates to your roles and application processes from job boards, referral programs or job fairs

Compensation

An employee’s salary and benefits package is typically one of the biggest hiring expenses. If you’re hiring for a brand-new position, the salary and benefits may significantly impact your company’s budget. If you’re replacing a former employee, at least part of the cost should already be factored into the budget.

Workplace tools and equipment

When your new employee arrives for their first day of work, they may need physical resources to perform their job, including:

• Desk and chair
• Computer
• Phone
• Office supplies
• Home office stipend

Supplies are required for many roles, but you may only need to purchase new items if you’re scaling rapidly and can’t leverage existing equipment to meet new employee needs.

Tips for controlling hiring costs

While you can’t eliminate hiring expenses completely, you can control them. Here are some tips for reducing total hiring expense for your organization:

• Set up an employee referral program: Your existing employees may know other professionals in their network with the skills needed to succeed in your roles. When employees refer qualified candidates, you spend less time and money sourcing applicants.
• Use job boards strategically: Post openings on platforms that best align with your industry or location. Consider posting your job on well-known sites like Indeed.
• Streamline interview processes: Keep the number of interview rounds appropriate to the role to reduce labor time and productivity costs. 
• Investing in good onboarding and training: Set up new employees for success to reduce turnover.

Track your cost per hire: Review data regularly to identify areas where your cost to hire is increasing and identify ways to improve processes or reduce spending.