What Is the True Cost of Recruiting and Onboarding Employees?

It takes 41 days on average to hire someone for a position. Any costs related to hiring a new employee and integrating new hires into a company are referred to as recruiting & onboarding costs. Depending on the role being filled and the business’s industry, the true cost of onboarding an employee or recruiting a new employee varies greatly, but it is almost always enormously costly.

Benefits, marketing, and training costs must be considered when determining the true cost of employee hiring because they increase overall employer costs. In this article, we will go through the true cost of onboarding an employee in detail and offer a way to reduce your hiring expenditures.

The True Cost of Recruiting & Onboarding Employees

According to the statistics by Forbes, the average cost of onboarding a new employee is $1,400. A new hire costs a business about six months to break even, that is, to reap the benefits and returns from the new hire. You can minimize hiring costs and maximize your resources by developing effective hiring and onboarding procedures.

Investments in efficient and clever hiring practices yield larger earnings, faster revenue growth, and reduced attrition rates. Here, we’ll look at the most common hiring expenses encountered in every business and how they collectively affect the cost of acquiring a new employee. The primary factors contributing to the overall cost of hiring and onboarding new employees are listed below:

Emotional and Mental Cost

Emotional and Mental Cost of Employees Onboarding

Finding and hiring fresh talent is challenging. 36% of HR executives claim they lack the funding to hire top personnel. Moreover, organizations are experiencing a financial strain due to increased requests for better pay, time off, flexible work hours, and more benefits. Hiring teams become mentally and physically exhausted as a result. This results in anxiety, depression, stress, and other mental and emotional side effects that affect the recruiter’s health and performance.

Recruiter’s Time, Effort, and Money

The Society for Human Resource Management (SHRM) found that companies spend an average of $4,129 and 42 days to fill a vacant position. Depending on the length of the search, the type of position, and the salary range, the cost to hire personnel rises accordingly.

A human resources (HR) recruiter is required to manage the hiring procedure at a business. To oversee the full HR administrative process, you require at least one HR manager and one HR recruiter. These HR personnel will use their productive time and specialized skills to screen, contact, interview, meet, and hire the right candidate.

They could spend the same time on other HR tasks like payroll processing, engagement initiatives, onboarding, etc. Therefore, to hire a candidate, you must consider the recruiter’s salary and the time they spend screening prospects.

Advertising Expenses

Hiring an employee includes the very expensive aspect of advertising. To hire the best candidate, you’ll first need an educational, persuasive, and noticeable advertisement for your target audience. Further, reaching your audience through one platform is difficult; you need a comprehensive strategy, including social media and other networks.

Many free solutions let you post a new job opportunity on websites like ZipRecruiter and LinkedIn, but the free or trial versions only provide limited tools to aid your search. So, typically, you’ll need a paid service to maximize a job site’s benefits. The advertising costs of all the platforms you use must be included in the entire cost of recruiting.

Compensation and Benefits

Fair compensation

Ensuring your employee receives fair compensation is one of the hiring process’s more obvious costs. However, the extra benefits you provide to the employee might increase the total cost.

Per a survey by the U.S. Bureau of Labor Statistics in March 2023, employers spent $29.70 on wages and salaries and $13.36 on employee benefits. Benefits like health insurance, retirement plans, and employee growth programs impact your budget.

Hiring a new employee with perks might cost approximately 40% of the individual’s base salary. Moreover, employers still have an additional cost for their workers: tax

Background Checks and Pre-Screening

After shortlisting a small pool of candidates, you evaluate each applicant’s suitability before conducting an interview. A phone screening or a video pre-screening are also good options. Pre-screening is a crucial step to exclude applicants who would not be a good fit for the position. If your list of potential applicants has been reduced to 16, you should spend 15 minutes on a phone screening call for each candidate.

The cost of background checks or pre-screening varies from one organization to another. It’s recommended to discover more about your short list of suitable prospects through background checks before making an offer. You may check all information, including criminal databases, verification of their education, and prior employers.

Cost of Bad Hiring

Poor hiring will cost 1 to 5 times as much to replace the position in question, including the lost wages, benefits, and the costs of hiring and training new employees. The management, administrative, and legal expenses of a bad hire should also be considered. It also takes a hit on the direct and indirect costs of lost or damaged funds, supplies, equipment, the working environment, client goodwill, and the employer’s reputation.

Insufficient skill, a lack of expertise, and a lack of time are the key reasons hiring decisions go wrong. Thus, you can save time, money, and effort by outsourcing your HR processes, including hiring, screening, background checks, payroll, and other administrative tasks. However, at some point in their career, every CEO will make a poor hire; these costs are industry-normal.

Cost of Competition

The cost of “lost candidates” is a heavy financial burden to the business. Most small businesses lack the necessary flexibility in the onboarding process, such as providing the job offer quickly or documenting all the official employment details. They, therefore, have to work harder to find people, and if they don’t offer the position quickly enough, the candidates are hired by a different business.

Due to outside competition, the business suffers financial consequences from losing a strong candidate for the position midway through the interview process. HR professionals and recruiters, particularly in small businesses, must be empowered to act quickly on the recruiting and onboarding process.

Cost of Onboarding and Training

Cost of Onboarding and Training

An employee must go through onboarding and training following the recruitment process. It could take almost a couple of weeks, which reduces the effectiveness of the job and productivity. The team manager must spend considerable time with the new hires daily to help them understand their tasks and adapt to the group. It takes away valuable hours from the manager’s schedule. 

Onboarding a new employee also increases the accounting cost by filling out forms, collecting documents, and creating payslips. Some other expenses comprise:

  • The price of IT hardware (laptops, phones, and software licenses)
  • The price of training
  • Cost of employee support (time required for assistance from other team members)
  • Decline in productivity

A new hire needs 3 to 8 months to reach maximum productivity levels. During this period, businesses often lose money as new employees cost more than they produce for the company.

Summing Up

Determining the exact true cost of hiring an employee is difficult as the cost varies with companies and locations. Fortunately, you can reduce inefficiencies and raise onboarding efficiency by knowing all the costs involved. Your company’s success depends on how you bring in and keep top people in today’s competitive labor market. The time and money involved in finding, screening, shortlisting, interviewing, and onboarding employees represent the true cost of recruiting. Using cost-effective recruitment tactics is important to help your company save time and money.

Engagedly can assist you in streamlining your hiring procedure and saving money. It is a perfect tool for people and strategy alignment. Using Engagedly, businesses may develop robust teams that will lead to a successful corporation. To explore more, click on the link below!



Frequently Asked Questions

Q1. What is the average cost of onboarding a new employee?

Ans. As per a study, the average cost per hire is $4,700, but it differs among organizations. The cost includes the equipment you need for the new employee’s integration into your organization and the time your HR department spends on the process.

Q2. How to calculate the cost of hiring a new employee?

Ans. The cost of new hires can be determined by adding the money spent on marketing, interviews, and training in an online calculator. However, the soft cost, which includes time spent on the hiring process, the impact on morale, and the loss of production, cannot be calculated.

Q3. How to avoid bad hiring?

Ans. Bad hires can be avoided if you use appropriate tools and hiring strategies in your hiring process. The first step in reducing the danger of bad hires is to determine the cost of a bad hire. By doing this, you may improve your business’s productivity and recruitment.


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