The Real Cost of Hiring a New Employee

Hiring new employees can be an expensive and time consuming process for employers, and bringing on new help can end up costing a business a lot of money.

According to a study on employee turnover from Ere Media, it costs employers between 30-50 percent of a worker’s annual salary to replace them – and that’s just for entry level positions. For mid-level positions, the costs can be as high as 150 percent of the annual salary to be replaced.

When it comes to high-level or highly specialized employees, replacement costs can be up to 400 percent of that employee’s annual salary. These expenses can leave employers hesitating before hiring new employees. Without the employees, however, there are sure to be concerns about productivity loss and delayed projects.

There are multiple components in the hiring process that expend time and money. Recruiting requires advertising to reach out to job-seekers, which isn’t free. There are also costs associated with the time of internal recruiter interviewing, reviewing applications and various other pre-employment assessment tests.

In an article by Quarsh, the average hiring time is between 10-12 weeks, from job opening to accepted offer. This can be a long wait if projects are being delayed or other employees are being forced to work longer hours to cover for the gap.

Training a new hire is one of the most expensive investments a company can make. According to an article by Association for Talent Development, in 2013, organizations spent an average of $1,208 on training and development per employee.

During the training process the learning time for a new employee is approximately 31.5 hours. In addition to training, it can also be costly to integrate the new employee into a work situation that best fits both employer and employee. This includes fitting the new hire into a team where they can perform well, into a physical space that works, and with the correct materials for the assignment, whether a computer or ergonomically designed desk chair. Also included in this complex equation are unemployment costs, offering benefits to new employees, the expense to keep employee records, changes in payroll, and the risk of lost intellectual property.

To reduce some of these costs, employers can consider what needs to be done to incentivize employees that are performing well to stay. This helps the employer avoid looking for new help. Setting the right compensation and benefits package is an important tool to keep people at a company. Reviewing this annually will help a company stay competitive in the job market.

Paying attention to employee’s personal needs and offering more flexibility is greatly valued by employees. Also keeping employees engaged and on a clear career path will keep them incentivized to stay with the employer.



About Ben Clairday

As Bolton’s Compliance Assistant, Ben Clairday is responsible for handling Business Associate Agreements, Form 5500s, HIPAA files and Summary Plan Descriptions for clients. He also supports Bolton’s employee benefits service teams by providing his knowledge on the Affordable Care Act, wage and labor laws and paid sick leave laws. Ben works closely with Bolton Chief Compliance Officer John Garner, and recently assisted with updates on the 12th edition of the Health Insurance Answer Book. Ben is licensed in Life & Accident & Health Insurance and holds a Bachelors of Art in History from Humboldt State University.

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