Category: Human Resource Management

In today’s competitive work environment, financial incentives alone are insufficient to engage and retain top talent. Salary matters, but employees require meaning and personal growth in their careers. Strategic merit increases provide benefits beyond a simple pay rise. They can significantly impact employee engagement and loyalty when implemented effectively.

A merit increase is a pay raise based on performance. It can be used to motivate employees and increase their workplace engagement. This article examines ways to increase employee engagement through merit increases, deliver real value, and improve company performance.

What Is a Merit Increase?

Employees receive a merit increase based on their performance. Unlike general salary adjustments or cost of living raises, merit increases are based on an individual’s contributions.

A merit increase rewards an employee for their achievements and productivity and can be a powerful engagement tool. Their correct implementation indicated to employees their recognition and value, promoting a culture of appreciation and motivation. Companies must go beyond standard merit increases and explore innovative applications of this reward mechanism.

Merit Increases vs. General Raises

A merit raise rewards individual performance, while a general raise provides all employees with a uniform pay increase.

It’s essential for managers and HR professionals to understand the difference between a merit increase and a raise. General raises are aligned with inflation or industry standards, whereas merit raises reward high performance and supports the company’s strategic objectives.

Research has indicated that companies with merit-based pay systems tend to have higher employee engagement and retention. Such systems reward individual performance and achievements, helping employees feel recognized and valued for their contributions. Employees are more motivated and loyal when they feel their efforts impact their pay.

Merit Increases for Employee Involvement

Workers who experience appreciation and rewards are more likely to remain involved in their jobs. Often they are more driven, efficient, and in line with corporate objectives.

A disciplined merit increase program links employee performance directly to pay scale. This connection helps to promote the idea that diligence and effort pay off and produce an involved and committed workforce.

Businesses might top the usual salary increase. Tying merit increases to flexible benefits, mentoring programs, or tailored growth opportunities will help staff members feel appreciated. We will next look at how to do this.

1. Merit Raises and Employee Psychology

Using merit increases to raise employee motivation effectively depends on an awareness of the psychological effects of financial rewards. Merit raises can boost both inner and extrinsic drive, motivating staff members to reach higher productivity and involvement. Their motivating effect can be much influenced by the communication and framing of merit.

2. Intrinsic vs. Extrinsic Motivation

Although many people consider financial incentives to be extrinsic motivators, merit increases can boost intrinsic motivation when employees see the money reward as a mirror of their successes and alignment with their goals.

Offering a merit raise as a recognition of growing leadership qualities could inspire a staff member hoping to be in charge. Businesses can improve this by tying merit increases to customized performance reviews that link financial incentives with individual career objectives.

3. Communicating the Merit Increase Effectively

Communication of a merit increase has a significant impact on how people perceive it. Research indicates that the transparency of the merit-based process greatly affects employee engagement. Employees are more motivated when they understand the criteria for merit-based raises and perceive them to be fair and representative of their contributions.

Open communication from managers, clear performance assessment guidelines, and honest feedback year-round are essential—not just during annual reviews. Managers must meet with employees post-merit increase to clarify the reasons behind it and how it relates to their future potential in the company.

Innovative Ways to Use Merit Increases to Drive Engagement

Consider the following strategies to increase employee engagement through merit increases:

1. Tie Merit Increases with Learning and Development Programs

One creative way is to connect professional development possibilities with merit raises. Employees want chances for development, learning, and skill acquisition above only financial benefits.

Providing merit-based increases linked to involvement in learning and development initiatives shows that personal development is equally crucial as reaching KPIs.

Think about putting staff members in technical training, tuition reimbursement programs, leadership development, or management courses. Employees are more motivated to engage with programs when they understand that their raises depend on expanding their knowledge and career prospects.

Consider Engagedly’s Mentoring Complete program, which connects employees with seasoned mentors for professional advice. Employees meeting specific performance criteria and engaging in mentoring can earn merit increases that reflect their contributions and personal growth.

2. Incorporate Peer Recognition into Merit Raise Decisions

Integrating peer recognition into the merit increase process can enhance engagement. Managers might overlook the daily contributions of employees, but peers recognize them.

Create a structured peer recognition system for colleagues to nominate each other for merit raises based on performance, collaboration, or innovation. Valuing peer feedback fosters a culture of appreciation and trust.

Companies using Engagedly’s peer feedback system can track and recognize top performers through colleague reviews. This method identifies hidden talents and helps employees feel recognized by peers, fostering belonging.

3. Pair Merit Increases with Flexible Work Options

Flexibility is a highly desired benefit in today’s workplace. Merit increases offer financial rewards, but incorporating flexibility can enhance employee engagement.

Merit raises with options for flexible hours, remote work days, or compressed workweeks can enhance employees’ sense of value and control over their work-life balance. This is significant for employees who may not be mainly driven by financial rewards but still seek appreciation for their contributions.

4. Gamify the Merit Increase Process

To boost engagement, think about adding gamification to your merit-raising process. Gamification uses game elements like points, badges, and leaderboards to motivate employees to reach performance goals.

Employees could earn points for achieving specific goals or completing projects, with top performers receiving merit increases quarterly or annually. Making the process enjoyable and competitive can motivate employees to stay engaged and pursue their merit-based rewards.

Platforms like Engagedly support gamification and performance tracking, enabling companies to create engaging merit-based incentive structures that enhance employee performance.

5. Use Merit Raises to Encourage Cross-Department Collaboration

Merit increases can foster collaboration, a point often overlooked. Merit raises usually reflect individual performance, but could they be used to encourage teamwork across departments?

Using team-based metrics in your merit increase system can promote collaboration among employees across departments. Introduce team goals for employees to collaborate on a shared target, with merit increases based on overall performance.

This enhances collaboration and ensures employees work together towards company goals, boosting overall engagement.

Merit Increases as Part of a Broader Compensation Strategy

A successful compensation strategy involves more than just merit increases. Organizations should integrate merit-based pay into a comprehensive strategy that also includes benefits, perks, and career development to foster long-term employee engagement. A solid compensation strategy makes employees feel valued through both financial rewards and overall recognition of their contributions.

Follow these key steps to develop a comprehensive compensation strategy:

1. Balancing Merit Increases with Non-Financial Perks

Merit increases provide financial rewards, but non-financial perks like flexible schedules, learning programs, and wellness initiatives greatly enhance employee satisfaction. Companies can create packages that combine financial and non-financial rewards, providing a balanced approach to employee motivation.

Employees may receive a merit increase for outstanding performance and have chances to join exclusive leadership development programs. This dual reward system meets employees’ financial needs and supports their personal growth and career advancement.

2. Aligning Merit Increases with Organizational Culture

Organizations with clear cultures can use merit increases to reinforce important values and behaviors. Aligning merit with behaviors that reflect the company’s mission and values encourages employees to integrate those behaviors into their work ethic. A company that values innovation might link merit increases to employees who show creativity and contribute to breakthrough projects.

The Role of Continuous Feedback in Merit Increases

Implementing a continuous feedback loop is an effective way to link merit increases to employee engagement. Annual performance reviews may not offer the engagement required in today’s fast-paced work environments. Ongoing feedback sessions enable managers to discuss performance regularly, make necessary adjustments, and ensure employees stay on track for merit increases.

Benefits of Continuous Feedback for Employees

Continuous feedback offers several advantages for employees, such as:

• Clear Expectations: Regular check-ins help employees understand expectations and adjust their work as needed.
• Timely Recognition: Employees receive insights on their performance without waiting for the annual review. Real-time recognition of achievements enhances morale and engagement.
• Growth Opportunities: Frequent feedback helps employees identify improvement areas and act before it affects their merit increase chances.

Benefits for Employers

Continuous feedback enables employers to track performance more accurately. Employers can base merit increases on a broader understanding of an employee’s performance over time, rather than relying on just one performance review. This reduces bias, enhances transparency, and assures employees that their merit raises are genuinely deserved.

The Role of Technology in Merit Increase Programs

Modern HR technologies are crucial for efficiently implementing and monitoring merit increases. Software tools like Engagedly can help companies set performance metrics, track employee achievements, and allocate merit raises transparently and based on data.

Engagedly’s platform helps companies simplify performance reviews and develop tailored merit-increase strategies that match individual goals with organizational objectives. The platform offers peer feedback, goal tracking, and mentoring, ensuring employees feel valued, supported, and motivated.

Technology can enhance the accuracy and fairness of your merit increase system while also creating a more engaging experience for employees.

Using Merit Increases to Retain Top Talent

Keeping top talent is essential for any organization. Merit increases effectively retain high performers by rewarding their contributions and providing financial incentives to remain. To keep top talent long-term, merit raises should be part of a broader strategy that includes career development and future opportunities.

1. Merit Increases and Career Paths

Linking merit increases to clearly defined career paths is an effective method for retaining top talent. Employees are more likely to remain committed to the company when they recognize that their performance affects their salary and career advancement.

High-performing employees may receive merit increases tied to promotions or new responsibilities, clarifying how their contributions are valued and how they can grow within the organization.

2. Avoiding the “Merit Ceiling” Effect

Merit increases can cause employees to feel like they’ve reached a ceiling, believing they’ve received all the financial rewards possible for their role. Companies should regularly evaluate their compensation strategy to provide ongoing opportunities for employees to earn rewards. Companies could include larger merit raises for exceptional achievements or bonuses for major project contributions.

Case Studies: Real-World Success with Merit Increases

Let’s take a look at a few real-world success stories to exemplify strategies for increasing employee engagement:

1. Altisource’s Career Development and Goal-Setting Success

In 2017, Altisource adopted Engagedly’s goal-setting and continuous performance management tools to improve tracking of employee objectives and career development. They wanted a simple system for straightforward employee adoption that aligned with wider organizational goals. Altisource utilized the platform to manage cascading goals and streamline the performance review process.

Key Results:

• Altisource improved its goal-setting system, enhancing employee participation in performance reviews.
• Improved career development pathways aligned employee goals with organizational strategy.

2. Actifio’s Performance Review Transformation

Actifio, a global data virtualization company, struggled with employee engagement in its annual review process, as only 45–50% of employees completed self-evaluations. After implementing Engagedly’s platform, Actifio completed 100% of reviews, significantly improving participation. This shift led to a nearly 100% increase in employee engagement, showcasing the effectiveness of Engagedly’s performance management system in enhancing employee morale and engagement.

Key Results:

• The performance review completion rate rose from 45-50% to almost 100%.
• The performance management process has significantly improved, as evidenced by the nearly 100% increase in employee engagement.

3. Nuspire Improves Employee Engagement by 15%

Nuspire, a managed security services provider, encountered issues with low employee morale and engagement in certain parts of the company. They collaborated with Engagedly to implement the E10 Engagement Survey, gaining insights into key drivers of employee engagement. They introduced several engagement programs over the year, including performance management enhancements and recognition modules.

Key Results:

• Employee engagement rose by 15%.
• Executed performance management strategies from survey insights, resulting in enhanced morale.

Wrapping Up

When strategically applied, merit increases effectively boost employee engagement. Companies can enhance workforce motivation and commitment by integrating career development, peer recognition, and collaboration alongside basic pay raises.

Engagedly helps organizations track performance and peer recognition, driving long-term engagement, satisfaction, and performance across the workforce. Organizations seeking to remain competitive and retain top talent can use merit increases as a way to enhance growth, motivation, and a culture of excellence beyond just financial compensation.

Integrating merit increases with platforms like Engagedly allows organizations to manage, track, and personalize rewards effectively, aligning individual and corporate goals for mutual success.

Discover how Engagedly can enhance your merit-based engagement strategies by exploring its solutions.

FAQs

1. What is a merit increase?

An employee receives a merit increase based on their performance and contributions, not on general salary adjustments for all employees.

2. What is the difference between a merit increase and a raise?

A general raise applies to all employees, usually to account for inflation or market standards, whereas a merit raise is based on individual performance and rewards specific achievements.

3. How do merit increases enhance employee engagement?

Merit increases employee engagement by linking performance directly to rewards. Employees who are aware of their valuable contributions and rewards tend to stay motivated and committed.

4. Can we combine merit increases with non-financial incentives?

Pairing merit increases with non-financial rewards like flexible work options or career development can boost employee satisfaction and engagement.

5. How can companies effectively manage merit increases?

Platforms like Engagedly help companies streamline merit increases, track performance metrics, and ensure fair and transparent raise allocations.

Conflict in the workplace is as inevitable as that Monday morning cup of coffee (or tea, if that’s more your speed). Despite the motivational posters in break rooms or the occasional yoga session, tensions are bound to surface.

The real question isn’t whether conflict will happen—it’s how we respond when it does. For decades, mediation has been the go-to solution, involving neutral third parties, awkward silences, and a lot of hoping for the best. But in today’s tech-driven workforce, does this traditional approach still hold up? Spoiler: not quite.

Enter technology. The same innovations that turn your toaster into a data-collecting gadget and power your virtual meetings are now revolutionizing conflict management. AI, machine learning, and advanced platforms are reshaping how modern organizations address and resolve disputes.

In this blog, we’ll explore how technology is not just enhancing conflict resolution but making it a core part of daily operations. Still skeptical? Stick around—we’ve got case studies that just might change your mind.

Why Mediation Isn’t Enough Anymore

The culture of mediation has been for like —  FOREVER! It’s a tried-and-true method, but it’s the equivalent of bringing a flip phone to an iPhone era. Of course, it works, but is there more that you could be doing? Absolutely.

Workforces today are global, as well as more diverse, running round the clock through remote teams across different time zones. Add in the complexities created by cultural relativity, advancing purposes and reasons for dispute, new media language barriers, and on-demand freelance gig economies — traditional mediation methods start to look like showing up with a butter knife at a sword fight.

Mediation comes after the fact, but why not prevent the conflict from ever reaching mediation in the first place? That is where technology comes to save the day, flying in wearing a cape made entirely out of algorithms. Tech can help uncover potentially percolating problems through data-driven insights and real-time communication tools before they come to a head in the workplace queues for those resources.

How Technology is Shifting Conflict Management

Now, let’s talk tech. Managing the diverse workforce in today’s world has far more to it than just staging Zoom calls with HR when tensions run high. It is quite simple to put in place technology that will allow the environment and people to monitor, analyze, and prevent the situation from reaching a boiling point. Ok, but what are these tech tools actually doing?

AI-Powered Communication Tools

While artificial intelligence is creating ripples across all of our sectors, in conflict resolution it is emerging as a game-changer. Organizations can use AI-driven platforms such as Natural Language Process (NLP) to excavate employee communication and turn it into a large graph that shows up potential conflicts.

Wait, what? AI is reading your emails? A sort of Big Brother, but the language differences are clear to an AI algorithm increasingly good at spotting tension. If the team chat is seeing a spike in passive-aggressive language, HR can notice that and Respond before things go overboard.

Conflict Management Platforms

The demand is so high that there are platforms solely dedicated to managing conflicts. In other words, they are like an HR assistant that never sleeps. Although my favorite software and platforms like Bravely or Emtrain provide employees with conflict coaching, support, and real-time feedback (often used as a way to nip issues in the bud before escalation). Leveraging the data and behavior analysis, they deliver personalized conflict resolution insights on a per-employee basis.

Machine Learning for Predictive Conflict Analysis

This is where it becomes really futuristic. These experts view a company as being a dataset that machine learning algorithms can analyze for data trends that conflict zones are brewing.

By analyzing the data on absenteeism, employee turnover or even performance reports machine learning can highlight which teams and departments are more prone to conflicts before any incident occurs.

With apologies to HR directors everywhere, it’s really like a weather forecast for the fight you’re most likely going to have with your coworker: There’s a storm of frustration building in the Marketing Department, and 70% chance you’ll get into it over lunch breaks by Friday.

Case Study #1: How Spotify Uses AI for Conflict Detection

You probably think of Spotify as just that app that helps you vibe to your favorite playlists while you work. But behind the scenes, the music-streaming giant is using AI for more than just song recommendations. With over 6,000 employees worldwide, Spotify recognized the challenges of maintaining a harmonious work environment across such a vast, global workforce.

They turned to AI-driven communication analysis tools to monitor employee interactions, particularly among remote teams. By tracking language in internal Slack channels and email exchanges, Spotify’s AI can flag potential conflicts. If the software detects patterns that suggest building tension—think passive-aggressive language or unusually terse responses—it sends alerts to HR, allowing them to address issues proactively.

Conflict Resolution Training in the Metaverse – The Workplace of the Future?

Yes, you read that right — the squabble management toolkit now comes with an implement called virtual reality (VR). Why not put on a VR headset and do a walk-through of how you would resolve certain issues with your new set of virtual co-workers, instead? It’s not just sci-fi anymore.

Digital tools like Mursion provide a wide range of realistic conflict resolution simulation experiences in a VR training environment as well. For the managers is an excellent resource, because they often need to de-escalate confrontations. VRs immersive quality is what makes it such a profound training instrument; people can feel the modes of emotional grip a conflict while preventing some consequences in real life.

The Role of Data Analytics in Conflict Prevention

Much of conflict management is more than just a response to a problem that arose. Enter data analytics, which consists of closely monitoring employee behavior to track certain metrics that are known triggers for possible conflict.

For example, a recent loss of productivity, increased absenteeism, or unplanned turnover in a specific department might be indicative of conflict on the horizon. They provide real-time data of employee satisfaction and engagement that could help their managers discern what is going on before the situation escalates.

No, the aim is not to usher in a dark future of surveillance-driven workplaces. It’s about being proactive. Isn’t it better to catch the warning signs early and correct the course before there’s a major system failure?

Case Study #2: How Buffer Uses Data Analytics for Conflict Prevention

Buffer, the social media scheduling tool, is known for its radically transparent and remote-first company culture. With employees spread across the globe, the company faced unique challenges in maintaining harmony across time zones and communication channels.

Buffer implemented Officevibe’s analytics tool to continuously track employee engagement and satisfaction. The platform provided Buffer’s management team with real-time data on potential conflict areas, such as reduced collaboration between specific teams or increased frustration with project timelines. Armed with this data, Buffer was able to address issues quickly and effectively, often heading off conflicts before they even began.

By combining data analytics with open communication, Buffer has maintained a culture of trust and collaboration, even as the company grows. In an increasingly remote workforce, this kind of proactive approach is becoming crucial for management.

How to Implement Tech-Based Conflict Management in Your Organization

Okay, by now you are probably wondering like … ”Yes yes I see the pattern by Tech is cool combine people and problems. At its core, it is a straightforward idea — applies to everyone in the company, and then you say, “But how do I actually implement it in my company?” It will be easy if we take it one step at a time right?

1. Foundational Prerequisites 

Rather than vicariously riding the tidal wave of AI-driven platforms, the first step of your new managerial expedition should be examining how management is currently being done by your organization.

Are there some open loops of communication? Is there a pattern of conflicts intensifying before they come to light? Now that you have this figure in your mind, you can choose the technologies that will deliver the most bang for your buck (!).

2. Use the Right Tools

Not all tech-assisted management is created equal. One might see state-of-the-art AI-powered communication analysis as a game changer, but for another, a simple training management platform like Bravely would suffice.

3. Train Your Team 

Technology is not a substitute for the discerning judgment of humans—at least not yet. Employees require the right conflict resolution training. Think of breathing life into VR-based conflict resolution training or programmed sessions on the best practices.

4. Monitor and Adjust 

Technology is not a “one-size-fits-all” solution. Be flexible, monitor how well your tools are working, and then adjust accordingly. If the AI is flagging too many false positives or employees aren’t interacting with training & coaching platforms, maybe you need to change some.

Conclusion

Conflict management is evolving, and technology is playing a crucial role in shaping how modern workforces handle disputes. By integrating AI, machine learning, and data analytics into conflict resolution strategies, companies can not only address conflicts more effectively but also prevent them from arising in the first place.

But here’s the kicker: technology is only as good as the people using it. While these tools can provide invaluable insights and streamline the management process, human empathy, communication, and judgment are still irreplaceable. It’s the balance between tech and humanity that will truly transform how we navigate workplace conflicts in the years to come.

FAQs

Can AI replace human mediators in conflict management? 

AI can assist in identifying and managing conflicts, but it can’t fully replace the nuance and empathy a human mediator brings. It’s more of a complementary tool.

How does machine learning predict workplace conflicts? 

Machine learning analyzes data trends, such as absenteeism and performance metrics, to identify potential conflict zones before they escalate.

Are conflict management platforms effective for remote teams? 

Absolutely. Tools like Bravely and Emtrain are designed to help remote teams manage conflicts by offering real-time advice and coaching.

What role does VR play in conflict management training? 

VR provides immersive, hands-on training scenarios for employees and managers, allowing them to practice resolving conflicts in a safe, controlled environment.

Is tech-based conflict management expensive to implement? 

The costs vary depending on the tools you choose, but many platforms offer scalable solutions that can fit different budgets. The long-term savings from reduced conflict escalation often outweigh the initial investment.

How much does it really cost to hire someone? The answer might surprise you. Hiring a single employee comes with more than just a paycheck—it’s a full-on financial investment. Beyond wages, there’s a lineup of hidden expenses, from job ads and recruitment fees to onboarding and training. For small businesses, these costs can easily hit five figures, a hefty outlay that eats into tight budgets.

Making matters worse, external forces are driving costs up every year. Ultra-low unemployment rates, an aging workforce, and a surge in freelance and remote work have created a talent crunch that’s pushed hiring expenses higher than ever before. 

In fact, the Society for Human Resource Management (SHRM) reports that average cost per hire has jumped from $4,129 in 2019 to $4,700 in 2023—a 14% increase.

And for roles in high-demand fields like cybersecurity, data science, and nursing, costs can surpass $10,000.

Hiring expenses also vary wildly by position. A typical entry-level hire may run around $2,000 – $3,000, but filling an executive position? That’s a whole different ball game, averaging $28,329 and climbing even higher for C-suite roles due to specialized recruiting, interviewing, and relocation costs. According to LinkedIn, 72% of organizations have reported higher costs for these specialized roles.

Industry dynamics add another layer. In competitive sectors like tech and healthcare, where the hunt for talent is fierce, costs reflect that reality. In 2023, tech companies spent around $6,000 – $8,000 per hire, while healthcare organizations saw hiring costs of $9,000 – $12,000 to secure top professionals.

Top 8 Costs to Consider When Hiring

Recruitment Agency Fees 

Recruitment is one of the most commonly outsourced functions for companies, especially those hiring for specialized roles or scaling quickly. Third-party recruitment agencies provide expertise, industry connections, and speed that are hard to match internally.

 

Outsourcing recruitment makes sense if you:

✅ Lack in-house HR expertise or need to fill specialized roles quickly

✅ Are in a high-growth phase and need to hire in volume

✅ Hire infrequently and want to avoid full-time HR costs

✅ Want access to international talent but lack familiarity with local labor laws

✅ Require seasonal or temporary hires, especially during peak seasons

While using an external recruiter offers flexibility and access to a broader talent pool, it comes with a price. According to SHRM, recruitment fees can range from 15% to 25% of a new hire’s annual salary. For instance:

💰 For a role with a $70,000 salary, expect to pay $10,500 – $17,500 in recruitment fees.

Job Advertising 

Advertising a job on multiple platforms increases reach but comes at a cost. Job boards like LinkedIn, Indeed, and industry-specific sites charge per click or listing, which can add up quickly.

 

Companies often use paid job ads when they:

✅ Need to target a broad audience across platforms

✅ Want to fill roles quickly in competitive markets

✅ Are seeking candidates for high-visibility positions

Here’s an idea of what you might spend:

💰 LinkedIn: $5 – $9 per click, depending on location and industry

💰 Indeed: $100 – $300 per month for sponsored job listings

Depending on traffic and competition, monthly job ad costs can range from $500 to $2,000 or more.

Internal Recruiter Salaries and Time 

Internal HR staff handle every aspect of the recruitment process, from writing job descriptions to screening candidates. For companies hiring year-round, maintaining an in-house recruiter or talent acquisition (TA) team is often more efficient.

 

Hiring in-house recruiters makes sense if you:

✅ Need regular recruitment support for ongoing hiring needs

✅ Want close control over the recruitment process

✅ Are hiring for highly specialized roles that require a more hands-on approach

Example costs for in-house recruitment:

💰 The average TA specialist’s salary: $60,000 – $80,000 per year

💰 Cost per hire for an in-house recruiter (assuming 40 hires per year): $2,000 per hire

Interview Costs 

Interviews involve not only HR but also department heads and team members. The time invested in multi-stage interviews is valuable but represents an opportunity cost.

 

Interview costs are significant if you:

✅ Conduct multiple interview rounds, especially for leadership roles

✅ Involve team members from different departments

✅ Conduct technical assessments or require in-depth screening

Common costs involved in interviews:

💰 For each three-hour interview with two managers: $300 per candidate (assuming $50 per hour)

💰 High-level or C-suite roles may require $1,000+ per candidate in total interview time across rounds

Background Checks and Assessments 

Background checks help ensure you’re hiring qualified, trustworthy candidates. These checks are especially crucial in regulated industries, like finance and healthcare.

 

Companies typically perform background checks when:

✅ Compliance requires it for specific roles (e.g., finance, healthcare)

✅ Hiring for senior or executive positions

✅ Screening remote or international candidates

Estimated background check costs:

💰 Basic check: $30 – $50

💰 Comprehensive check with credit and criminal history: $100 – $200

Onboarding and Training 

Effective onboarding is critical to setting new hires up for success, but it’s also an investment that can take time to yield returns.

Companies invest in onboarding when they:

✅ Want to integrate new hires efficiently and reduce early turnover

✅ Are hiring for roles that require extensive training, like technical or compliance roles

✅ Need to instill company culture and values early on

Typical onboarding and training costs:

💰 Average U.S. onboarding cost: $1,500 – $5,000 per employee

💰 Cost for roles requiring extensive training (e.g., IT, sales): $5,000 – $7,000

Technology and Software 

Many companies use recruitment software to streamline the hiring process. Applicant Tracking Systems (ATS) and Human Resource Information Systems (HRIS) help manage job applications and keep the process organized.

Companies invest in recruitment technology when they:

✅ Have regular hiring needs that require streamlined workflows

✅ Need to manage high volumes of applications efficiently

✅ Aim to use data to improve recruitment outcomes

Sample annual costs for recruitment software:

💰 Small to medium-sized business ATS: $6,000 – $12,000 per year

💰 Enterprise ATS solutions can cost upwards of $20,000 per year

Relocation and Signing Bonuses 

Relocation packages and signing bonuses help attract talent for critical roles but can add a significant upfront cost.

These incentives are common when you:

✅ Need to hire from out-of-state or attract candidates in high-demand roles

✅ Offer specialized positions that require unique skills or experience

✅ Want to secure talent quickly in a competitive market

Example costs:

💰 Average relocation package: $5,000 – $15,000

💰 Typical signing bonus: $2,000 – $10,000

How to Calculate Recruitment Costs: Step-by-Step

1. List All Expenses Involved in the Hiring Process

Begin by identifying all costs associated with hiring, including job advertising, recruiter fees, interview costs, and onboarding expenses.

Example: Suppose your expenses include:

Job ads: $500

Recruiter fees: $2,500

Interview costs (e.g., manager time): $300

Background checks: $100

Onboarding and training: $1,000

Total: $4,400

2. Separate Fixed and Variable Costs

Fixed costs are those that don’t change regardless of the number of hires, like an annual subscription to an Applicant Tracking System (ATS). Variable costs fluctuate based on hiring volume, such as job ads or interview expenses.

Example:

Fixed costs: ATS subscription at $6,000 annually.

Variable costs (e.g., interview costs, job ads): $4,400 for this round of hiring.

3. Sum Up Direct, Indirect, and Overhead Costs

Direct costs are those directly tied to recruitment (e.g., job ads, recruiter fees), while indirect costs include employee time (e.g., managers conducting interviews). Overhead costs are additional expenses (e.g., onboarding or equipment setup).

Example:

Direct costs: $3,100 (recruiter fees + job ads)

Indirect costs: $300 (interview time for managers)

Overhead costs: $1,000 (onboarding)

Total combined cost for this hire: $4,400

4. Divide the Total by the Number of Hires in a Specific Period to Get an Average Cost per Hire

To get a broader view, take the total recruitment costs for all hires over a given period (e.g., quarterly or annually) and divide by the total number of hires.

Example: If your company spent $44,000 on recruitment over a quarter and hired 10 employees, then:

Average cost per hire: $44,000 ÷ 10 = $4,400 per hire

5. Compare Across Time Periods or Departments to Identify Trends

Tracking these numbers over time helps you identify cost trends, such as increases in advertising expenses or differences between departments.

Example: If you find that your sales department’s average cost per hire is consistently $5,000, while other departments average $3,500, this could indicate specific challenges in sourcing sales talent. Recognizing these patterns enables better budgeting and strategic planning.

How to Optimize Your Recruitment Costs Without Breaking the Bank

Let’s face it—hiring can be expensive. But with a few clever moves, you can make sure those costs don’t spiral out of control. Here’s how to stretch your hiring budget without cutting corners:

1. Streamline Job Advertising

Imagine casting a net where the fish actually are! By using data to see which platforms deliver the best hires, you can focus your budget where it matters. If LinkedIn is a goldmine for your tech roles, give it more love and cut back on the scattershot job boards.

Pro Tip: Look at your best hires—where did they come from? Double down on those sources to get more of the same.

2. Leverage Employee Referrals

Ever notice how some of your best employees come from referrals? Employees know your company inside out, so their recommendations are often spot-on. Plus, they’ll be excited to help out if there’s a little incentive in it for them!

Example: Offer $500 for a successful hire from an employee referral. That’s a fraction of what you’d spend on an agency fee, and your team members get to build the kind of culture they want.

3. Boost Retention, Reduce Recruiting

Here’s a no-brainer: the more employees you keep, the fewer you need to hire. By investing in keeping your team happy and engaged, you’ll save tons in recruitment costs. Think of it like this—every employee that stays is one less hire to make.

Idea: Try regular one-on-one check-ins or career development workshops. Happy employees stick around, and you save big by not having to refill their seats!

4. Automate Recruitment Tasks

Ever feel like you’re drowning in resumes and interview schedules? Let technology take the load off! An Applicant Tracking System (ATS) can speed up screening, scheduling, and candidate tracking, leaving you more time for big-picture tasks.

Fun Fact: An ATS may cost $6,000 a year, but it’s worth every penny if it shaves hours off each hire. Think of it as your recruitment sidekick that never sleeps.

5. Do a Hiring Needs Analysis

Sometimes, the best hire is no hire at all. Before you post that job ad, take a step back and assess—do you really need someone new, or can current team members handle the role? You might just find that with a few adjustments, you can save a whole lot of cash.

Example: Instead of hiring a new project manager, could existing team members take on additional responsibilities? This move could mean huge savings—and hey, your team may welcome the chance to stretch their skills!

6. Invest in a Rock-Solid Onboarding Program

First impressions count, especially when it comes to new hires. A smooth, supportive onboarding process helps new employees feel like they belong, boosting their chances of staying long-term.

Think of it like this: The more engaged and prepared new hires feel, the less likely they are to leave early. Just cutting early turnover by 5% could save you thousands each year in recruiting costs!

With rising workplace demands, nearly 35% of U.S. employees report a decline in their mental health, as shown in The Conference Board’s latest survey of over 1,100 workers. This deterioration is closely linked to lower employee engagement: almost 70% of those reporting mental health struggles also report disengagement at work, underscoring the critical need for a workplace culture shift.

Mounting Pressures on Employees and Employers

Over the past year, employees and organizations have faced growing economic, cultural, and social pressures, often clashing with employees’ increasing desire for a healthy work/life balance. According to a report by Jabra, 61% of workers now expect greater autonomy and flexibility in their work environments. This change reflects a broader shift in worker expectations post-pandemic, with employees seeking better boundaries between work and personal life to protect their mental health.

However, as inflation, high interest rates, and economic uncertainty persist, many companies have prioritized cost-cutting over employee well-being. Instead of adding support, they have increased workloads, hoping to maintain or improve productivity with fewer resources. As a result, managers are being asked to “do more with less,” a demand that often passes to employees, raising stress levels across organizations.

“Workers are calling for more control, flexibility, and a voice in shaping their work experience,” says Bernard Wong, Senior Manager of Insights at Mind Share Partners. However, many employers are focused on cutting people-related costs, maximizing productivity, and avoiding contentious social or political issues. This tension exacerbates workplace mental health challenges, trapping employees between wanting meaningful change and facing rigid organizational priorities.

Adding to the challenge, ongoing social isolation since the pandemic has affected employees’ abilities to communicate and maintain relationships. The cumulative effect of these pressures has made discussions around mental health and well-being tougher and often more stigmatized. Employees struggling with strained relationships at work or home may feel especially reluctant to disclose their mental health issues, fearing negative impacts on job security or performance evaluations.

The Roots of Burnout: Broken Workplace Cultures

A key takeaway from The Conference Board report is that burnout often stems from systemic workplace issues, including long hours and heavy workloads. These demands drive poor mental health, as employees spend more time and energy managing workload than engaging in self-care. Data from Deloitte shows that 77% of employees attribute their burnout to these kinds of workplace pressures.

For example, 48% of employees experiencing mental health declines report working over 50 hours weekly, which not only reduces their time for personal care but also drains their mental resilience. Toxic workplace cultures that overvalue productivity at the expense of well-being lead to chronic stress, decreasing job satisfaction and leaving employees more vulnerable to mental health issues.

“As valuable as perks like healthcare benefits and self-care apps may be, they don’t address the underlying toxic culture,” says Wong. “Organizations need to go beyond coping mechanisms and address the root causes of stress and burnout.” Research consistently shows that without structural changes—such as reduced workloads, clearer boundaries, and reasonable performance expectations—programs and perks alone cannot prevent or reduce burnout.

Rising Stigma and a Decline in Openness

The Conference Board survey found that 38% of workers felt uncomfortable discussing mental health with their managers, a significant rise from 18% the previous year. This increase in discomfort indicates persistent stigma around mental health, which is particularly present in high-pressure work environments where productivity and resilience are emphasized.

This reluctance to seek support could mean that employees experiencing mental health challenges go without critical resources or help. According to Abbie Rosenberg, founder of Mental Health Collaborative, this stigma is often based on misconceptions, such as viewing mental health struggles as personal failings rather than valid health issues. Additionally, the worsening dynamic between employers and employees has made some workers feel more insecure, discouraging them from sharing their concerns openly.

“When support from management feels uncertain or insincere, employees may feel safer staying silent,” says Wong. This is reinforced by Qualtrics research, which found that 62% of employees feel their employers don’t genuinely care about their well-being. This perceived lack of support can deepen employees’ mental health struggles, reduce trust, and further impact engagement and productivity.

Strategies to Improve Workplace Mental Health

The Conference Board survey highlights that employees value flexibility and work-life balance above all else, with 55% citing guilt-free paid time off as helpful for their mental health. Here are some actionable strategies experts recommend:

1. Model Vulnerability at the Leadership Level: Wong suggests leaders share their own mental health experiences to normalize conversations and build a culture of openness. When leaders show vulnerability, employees feel safer sharing their own challenges, promoting a supportive workplace atmosphere.
2. Mental Health Training for Managers and Employees: According to an ADP survey, 57% of employees feel their managers lack the skills to discuss mental health issues without judgment. By providing mental health training for managers, companies can empower them to identify and support struggling team members effectively.
3. Align Culture with Supportive Policies: Avoiding inconsistencies between words and actions is critical. When leaders advocate mental health but also enforce rigid productivity metrics, employees may notice and feel unsupported. Instead, aligning company policies—such as setting achievable targets and respecting work-life boundaries—with mental health commitments can improve trust and engagement.

Holistic Approaches to Mental Health Support

While wellness programs are beneficial, they cannot solve deep-rooted issues that lead to mental health crises in the workplace. Experts recommend a comprehensive approach that addresses the broader cultural and systemic problems contributing to stress. One example of this is the “How Are You, Really?” campaign by General Dynamics Information Technology (GDIT), launched in 2021.

This initiative was introduced after a tragic employee suicide and aims to reshape work policies to better support employee well-being. GDIT has seen positive results, with employees responding well to the campaign’s focus on reprioritizing workloads, flexible hours, and guilt-free paid time off.

Amy Gilliland, GDIT President, explains, “We’ve challenged our traditional approach to work, adding flexibility when life gets out of balance. Almost daily, an employee tells me how our program has helped them.” This shift away from traditional, rigid structures shows how embracing flexibility can create a culture that not only values productivity but also prioritizes mental health.

Building a Mental Health-First Workplace

According to a report by McKinsey, companies with strong mental health policies see a 21% reduction in turnover and a 30% boost in productivity. Here are effective ways to integrate mental health support into core business practices:

• Implement Flexible Work Options: Flexibility is critical, with over 80% of employees in a recent LinkedIn survey ranking it as their top mental health priority. By allowing flexible hours, remote work, and adjustable workloads, companies can create a more supportive environment that enables employees to balance work with personal well-being.
• Focus on Prevention Rather than Reaction: “Organizations need to redefine their stance on stress and performance expectations,” says Rosenberg. Rather than relying on wellness apps after burnout occurs, proactive workload management and realistic goal-setting help prevent mental health challenges from arising.
• Establish Confidential Support Channels: Offering employees confidential access to counseling services can help them feel safe seeking help without fear of judgment or career impact. By establishing clear support channels, companies show commitment to employee mental health.

Looking Ahead

The evolving workplace landscape makes addressing mental health not only necessary but imperative. Companies prioritizing mental health are not only retaining talent but also attracting top candidates. A 2024 report by Boston Consulting Group reveals that, on average, 48% of workers from eight countries indicate that they are currently struggling with burnout.

This underscores the urgency for organizations to take preventive steps in supporting mental health. With flexible policies, open dialogues, and comprehensive approaches, organizations can create workplaces where employees feel mentally supported, engaged, and productive.