The Hidden Costs of Hiring

by Aubrey Stark

Hiring a new employee is an essential but costly process for any business. Beyond the initial salary negotiations and contract signings, there are numerous hidden expenses that can significantly impact a company’s resources and time. According to a report by the Society for Human Resource Management (SHRM), the average cost per hire in 2022 was $4,700. This figure, however, only scratches the surface of the true financial burden. Many of the employers in the report estimated that the total cost of hiring can be three to four times the new employee’s salary. It is essential for business owners to understand the various hidden expenses that contribute to this substantial cost.

Integrating a new employee into a company requires a range of materials, such as training manuals, employee handbooks and equipment. These resources incur expenses that may not be immediately apparent but are essential for a smooth transition. Furthermore, it’s important for companies to recognize the time of a trainer and the costs associated with that trainer’s time.

Ensuring the reliability and suitability of a potential employee is a critical step in the vetting process. Background checks and screening services come with their own costs, including fees for conducting criminal record searches, verifying educational credentials and checking references. Ignoring these expenses can lead to hiring candidates who may not meet the desired qualifications, resulting in additional recruitment costs in the future.

During the time of finding the right candidate, a company may have disrupted productivity levels, impacting the company’s output. This can put pressure on the company to fill a role and fill it quickly. Additionally, while new employees undergo training and familiarize themselves with their roles, their productivity may be temporarily reduced. This period of reduced output can translate into a financial loss for the company. Hiring and training a new employee often involves diverting resources and time from existing employees and managers who need to dedicate their efforts to support the onboarding process.

To avoid long-term recruiting debt and minimize the financial impact of vetting new employees, business owners should consider implementing the following tips:

  • Streamline the hiring process. Review and refine your hiring process to reduce inefficiencies. Clearly define job requirements, assess candidates efficiently and involve multiple interviewers to gain diverse perspectives.
  • Leverage additional resources for hiring and use of technology. Understanding that it may be necessary to add additional resources to support your hiring needs is critical. At times, this can mean reaching out to a talent acquisition company to partner with you, internal recruiting teams, or adding in additional online resources and job boards to help you fill your openings. Leverage applicant tracking systems (ATS) and other recruitment software to automate repetitive tasks, streamline candidate screening and improve the overall efficiency of the hiring process. These tools can reduce administrative burdens and free up resources for other critical business operations.
  • Focus on retention. A big area that is often overlooked when thinking about hiring is the costs of turnover. Having solid growth opportunities, cross-training and investing in current staff can ultimately reduce the costs of hiring by having stronger retention metrics. Invest in strategies that enhance employee engagement, satisfaction and retention. By cultivating a positive work environment, offering growth opportunities and providing competitive compensation packages, businesses can minimize the need for frequent hiring and subsequent costs.

Vetting new employees is an expensive endeavor that extends beyond the initial salary negotiations. By understanding and accounting for the hidden costs associated with the process, businesses can better manage their resources and minimize long-term recruiting debt. Implementing efficient hiring practices, utilizing technology and prioritizing employee retention are key steps toward optimizing the recruitment process and reducing the financial burden on businesses.

Aubrey Stark is the owner of Express Employment Professionals Mesa. As one of the top staffing agencies, Express Employment Professionals is the leading choice for managing workforce recruiting, contract staffing, evaluation, direct hire and flexible staffing. The company specializes in a variety of industries including office services, light industrial and skill trade. There are seven locations in the Phoenix metro area, including Chandler, Mesa, Peoria, Scottsdale, South Phoenix, Southeast Phoenix and Tempe.

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