Retention is a big issue these days. One of the reasons being that this market is heavily weighted in the employee’s favor. Another is that when an employee leaves and a new employee is onboard to fill the position vacant, it’s one heck of a big investment of both time and money.
And there are many aspects to that cost. This blog is about the true cost of hiring an employee in 2018. We’ll talk about why the true cost of hiring is much higher than we tend to think it is.
As it is, hiring is a complicated thing. Sometimes, you’ll opt for an external recruiter or a consultant to guide your hiring process and improve it.
And if you’re a small company, it makes sense to use a consultant. But it doesn’t come cheap. Using a hiring consultant can cost anywhere from 15% to a whopping 25% of the new hire’s annual salary.
All the same, keeping a permanent HR department in place is costly. Once your company grows and ROI meets muster, it’s the more cost-effective option, though.
Candidate-Facing Bells and Whistles
Outreach bells and whistles also come with a price tag. Take career fairs, for example. Over half of new hires right now are college-aged people who attend these events. But the price tag goes beyond the price of admission. Travel, accommodations and outreach materials will leave a dent in your budget.
Job boards can be highly effective for helping you find the perfect person for that tough-to-fill role, but they’re also expensive. LinkedIn’s new pay per click scheme costs $1.20 – $1.50 per click. Monster, Dice and ZipRecruiter aren’t cheap either, cost on average $300 (per month) for just one job posting.
When the Search Is Over
Once you’ve found that ideal hire, your costs don’t just stop. There’s still more to pay for. Background checks can cost between $5 and $80 depending on how deeply you dig into the background of your new hire.
And then there’s onboarding and training. Bringing a new hire up to speed can take from 8 to 26 weeks, depending on the complexity of the role.
Your new hire doesn’t start contributing to the bottom line for the entire orientation and training period. This adds up to between 1% and 2.5% of your revenue – that’s total revenue, by the way.
MIT’s study on the true cost of hiring an employee is revealing. Their research revealed that a salary of $50K per year wound up costing the employer more in the order of $62.5K to $70K.
And those employees expect raises, eventually.
Retention really does matter. When you add everything up, the true cost of hiring a new employee in 2018 is edging $8K in companies with 0-500 employees, according to the National Association of Colleges and Employers.
Hiring people is expensive and complicated. But so are your financials. Why not put your financial operations on our plate and let us be your personal finance department? Contact us.