What are hiring expenses?

Hiring expenses include the visible and invisible costs of bringing an employee into your organization. Some costs, including job advertisements, recruiting tools (e.g., applicant tracking systems), signing bonuses and candidate relocation expenses, can be easy to anticipate.

Hiring also comes with additional costs that can be more challenging to quantify, such as the cost to onboard and train your new hires.

Related: The Basics of Employee Turnover: Steps to Prevent

How much does it cost to hire an employee?

Hiring costs can vary significantly based on the company, hiring process, location and role. If you use an in-house process and have all the supplies for a new employee, such as technology or stationery, you could spend around $2,000. However, some companies may pay between $4,000 and $20,000, not including salary and benefits.

Given the associated expenses, it’s vital to ensure your new hire is the right addition to your company. By vetting candidates, conducting screenings and skills tests and asking the right questions, you may be more likely to select a quality candidate.

The most common costs of hiring a new employee

Understanding the cost of hiring a new employee may help keep your company’s finances on track. Before recruiting, review the most common hiring expenses, estimate how much it costs to hire an employee and prepare your budget effectively.

Recruitment team

If your company has limited internal resources, you may hire an external recruitment team to find potential candidates for your business.

Compensation for recruiters varies by company. In general, you may pay the recruiter a commission of 15% to 30% of the hired employee’s first-year salary. If your new employee earns $50,000 per year, the recruiter may receive between $7,500 and $15,000. Recruiters with extensive experience and valuable industry contacts may earn higher commissions.

Read more: Third-Party Recruiters: How Do They Work and Should You Use Them for Hiring?

Internal human resources team

Whether you handle hiring internally or use an external recruiter, you likely need at least one person to manage in-house human resources (HR) duties. These tasks may include writing job descriptions, posting job openings, managing applications, reviewing resumes, communicating with candidates, overseeing the screening process and scheduling interviews.

If you use a third-party recruiter, your HR employee may act as the point of contact during the hiring process. They may also organize final interviews and manage the internal onboarding and training processes.

Human resources salaries can vary by company and experience. On average, an HR specialist makes $59,239 per year.

Career fairs

You might meet prospective candidates at career fairs and other employment events. If these events are part of your recruiting strategy, you can expect to pay around $100 per event to participate, plus the cost of printing literature and signage.

You also need to send employees to staff your company’s booth—make sure to factor the cost of their time into your hiring expenses.

Technology

When hiring multiple people at once, technology can help you track each position and pinpoint where each candidate is in the hiring process. The most common tool is an applicant tracking system (ATS), a program that stores candidates’ materials, engages applicants, automates manual tasks and sends notifications about key events.

The price of an ATS depends on its features and your company size; some programs charge a monthly per-employee cost.

Job posting fees

You might find potential candidates by posting open positions on job boards. Each employment website structures its payment scheme differently. Read more about Indeed’s pricing.

Background checks

After selecting the final candidates for a position, you may run a background check on each person. Simple background checks usually start around $10. More complicated versions can cost over $100, depending on the information you need and the service you use.

Testing services

When you’re hiring for a job with specific requirements, you might conduct pre-employment testing. These tests help you verify each candidate’s skills and knowledge.

External testing services also add to the cost of hiring employees. On average, you may spend $50 to $100 to set up an account with a testing company. Most companies also charge an additional fee for each test. Custom assessments are typically more expensive than standard ones.

Employee referral bonuses

Your existing employees can be a valuable resource in the hiring process. To encourage them to pass along open jobs to job seekers in their professional networks, consider offering a referral bonus.

While bonuses are flexible, they’re typically between $1,000 and $5,000 per successful referral.

Relocation

If your new hire is relocating to work for your company, you might pay for their moving expenses. Some companies offer a set amount, while others pay a percentage of the move’s cost. Many companies spend between $21,300 and $25,000 to relocate a new hire.

Employee onboarding

You can expect to spend several days or months onboarding an employee.

Onboarding costs depend on the new employee’s salary and the supervisory employee’s salary. As you’re estimating costs, it’s safe to expect a potential loss between $1,000 and $5,000.

Related: Onboarding Best Practices

Job training

Job training can take a lot of time, particularly when you’re hiring for roles with specific 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 may depend on factors such as:

• Company size

• Industry

• Training format

• Instructor

• Materials and resources

Average training costs may reach up to $1,500 per employee.

Related: New Employee Training: Do’s and Don’ts for Every Manager

Website

Consider keeping your company website current with general information about working for your company, even when you’re not in a hiring cycle.

An in-house website administrator may handle this task, or you may hire someone to update and maintain your website’s careers section. Website maintenance generally costs between $60 and $60,000 per year, depending on the site’s size.

Compensation

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

Salaries range dramatically depending on the role, industry, location and company size.

Workplace infrastructure

When your new employee arrives for their first day of work, they may need various physical resources to perform their job (even if the role is remote). Necessary supplies might include:

• Desk and chair

• Computer

• Phone

• Office supplies

• Home office stipend

A new desk space for an employee could cost between $1,500 and $3,000.

Employee introduction

Integrating new employees into the team can temporarily impact your overall company’s productivity. Your new hire may need to ask questions, request demonstrations and shadow other workers.

Fortunately, the acclimation process is usually resolved as the new employee becomes more comfortable with their responsibilities. Initially, lost revenue may range from several hundred dollars to over $1,000.

FAQs about the cost of hiring a new employee

Is it cheaper to hire a new employee or train an existing one?

Given the cost of onboarding, it may be more affordable to train a current employee. With this strategy, you avoid paying for recruitment, relocation or any productivity dips as they integrate into their new role.

The actual cost comparison depends on the type of training you provide and the employee’s current and anticipated salary.

What is a hiring budget?

A hiring budget covers the cost of hiring new employees. To set up a budget, determine how many people you need to hire in the coming year. Then, estimate how much you plan to spend bringing on the new employee, considering existing in-house resources and external services you may need.