What Is the Cost of Hiring an Employee?

Hiring new employees is an exciting time. However, bringing new employees into your business doesn’t come without its costs. Understand the expenses, both in terms of money and time, of hiring a new employee to ensure you’re prepared to absorb those costs. Learn what hiring expenses are and understand how much the most common hiring expenses will likely cost your business. 

 

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What are hiring expenses?

Hiring expenses are the visible and invisible costs of bringing a new employee into your organization. Most organizations are prepared for hiring-related expenses like recruiting fees, candidate travel to the interview or relocation expenses. However, employers should also prepare for other costs that are less clearly quantifiable but cost the business money and time nonetheless. These can include an initial decrease in productivity as the new hire learns their role and lost time from current employees as they participate in the hiring process and help the new hire acclimate. 

Related: The Basics of Employee Turnover: Steps to Prevent

 

Most common hiring expenses

Understanding the true cost of hiring a new employee is vital. Review this list of the most common hiring expenses to effectively prepare for bringing a new employee onboard.

 

Recruitment team

An external recruitment team can often help you find the best potential candidates for your business while saving your internal employees’ time. Depending on the company you choose, you can expect to pay the equivalent of 15% to 25% of the hired employee’s salary to the recruiter in exchange for finding your new employee. 

 

Internal human resources team

Whether or not you use an external recruiter, you’ll likely need at least one person or a small team of people to manage in-house human resources responsibilities. They may conduct recruiting, or they may handle the internal onboarding and training processes. This cost is harder to quantify since human resources salaries can vary, but the average human resources specialist’s salary is $48,094 per year

 

Career fairs

Another way to meet prospective candidates is at career fairs or other employment events. Depending on the event, you can expect to pay a small fee of around $100 to participate, but you should also consider the time cost for the employees that attend the fair. 

 

Job posting fees

One of the best ways to find potential candidates for your company is by posting job listings on internet job boards. Many job seekers turn to these job boards when looking for new positions, so you’re likely to receive a number of applications using this method. Job boards structure their payment schemes differently, but you can expect to pay around $300 per single job posting per month. 

 

Background checks

After selecting the candidate you want to hire, you’ll likely want to run a background check on them to ensure they’ve been honest about their past. Background checks range in cost roughly $5 to $80, depending on the information you want to find out and the company you use. 

 

Testing services

Depending on the specific job, you may want to perform some aptitude or personality testing for your top candidates. Many companies offer industry-specific or role-specific testing so you can be sure the employee you hire is prepared to perform the job well. Testing can vary, but on average, expect to spend $50 to $100 establishing an account with the testing company and then a lower fee for each test. 

 

Employee referral bonuses

Some companies offer bonuses to employees who refer candidates to the company. If you offer bonuses to your employees who help recruit new hires, then you’ll have to account for that cost in your general hiring expenses. These bonuses often vary depending on the position, but on average, they cost around $1,000. 

 

Relocation

If your new hire is moving from a different city, state or country to join your organization, you might pay for their relocation expenses in part or full. Some companies have a set amount they offer while others pay for a percentage or the full cost of the move. Relocation can cost anywhere from $1,000 to $5,000 depending on the distance. 

 

Employee onboarding

Onboarding a new employee can take a day or a few days depending on the role. During that time, your new employee won’t be producing any value for your organization, and the person in charge of onboarding loses the time they normally spend on other company tasks. This cost is harder to quantify and depends on the onboarding employee’s salary and the new hires time to get up to speed but figure a potential loss of between $1,000 to $5,000. 

 

Job training

Job training can take a substantial amount of time. Some roles require specific and extended training that can take days or weeks to complete before the employee can adequately perform their job. During this time you’re not only losing the employee’s productivity, but you’ll also likely have to pay for the training. The average cost of training a new employee is roughly $1,300. 

 

Website

Even if you’re not in a hiring cycle, you’ll want to keep the careers or employment section of your website up to date with general information about working for your company. This requires maintaining a website and hiring someone to ensure it’s properly updated. Website maintenance generally costs between $180 to $1,260 annually. 

 

Compensation

One of the biggest hiring expenses is the new employee’s salary and benefits. If you’re hiring for an entirely new position, then the salary and benefits will massively impact your company’s expenses. If you’re replacing a former employee, you may end up paying the new employee more if they negotiate a higher salary during the hiring phase, but it won’t cost quite as much as a brand new position. Salaries range dramatically depending on the role, but the average starting salary for an entry-level employee is between $20,000 to $45,000 annually. 

 

Workplace infrastructure

It’s also important to consider all of the physical materials your new employee will require to perform this job. Common items include:

  • A desk and chair
  • A computer
  • A cell phone
  • General office supplies

In some cases, you may already have these items in your possession. For brand new positions, you’ll need to purchase these for the employee. Should you need to fully outfit a new desk space for an employee, you can expect to spend between $1,500 and $3,000. 

 

Employee engagement

Introducing new team members can impact your overall company’s productivity. Particularly for small companies or close-knit departments, a new employee can change the way other employees work. Luckily, this is usually a short-term challenge, and one that should resolve as the new employee becomes more comfortable with their responsibilities. This can cost anywhere from a few hundred dollars in lost revenue to a couple thousand. 

 

The full cost of hiring a new employee

There’s no single hiring cost figure you can apply to all your new hires. Every situation differs slightly, and the costs will vary along with it. However, using averages and generalization, you can assume that it will cost between roughly $4,000 to $20,000 to hire a new employee, not including the new employee’s salary and benefits. Due to the expense, it’s vital you take the time during the hiring process to ensure your new employee is the right fit for the position and your company. 

Hiring a new employee can be surprisingly costly. Ensure you’re aware of the specific expenses involved for your company so that you’re prepared to cover them when bringing a new team member into your business.

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