Whenever you recruit new employees, whether your business is expanding or people have resigned, it’s easy to underestimate the true costs involved. Here are some of the typical expenses, some obvious (or optional) and others more hidden when hiring new employees.
1) External Hiring Resources
If you don’t have an experienced in-house talent team, you’ll likely use an external agency to help you source candidates. These typically charge a percentage of an employee’s annual salary. Also, management time will be used when creating the brief, reviewing short-listed candidates, etc.
2) HR Resources
If you have an in-house HR team, how much of their time (and therefore their salary) has to be allocated to resourcing? High turnover will result in the need for more resources, and indirectly increase your payroll costs.
3) Onboarding
Not only is the time required for admin, but every new employee will also need new "stuff" – uniform, entry permit, software licenses and much more. The total cost of initial onboarding is rarely calculated.
Next, training and the time required before their full output is reached. This requires the time of supervisors and colleagues, taking them away from their normal work. Overall, each new employee will reduce the productivity of the team until they can work independently.
Safety training is also essential to reduce the risk of accidents and protect yourself against possible personal injury claims. Neglecting this can be costly to you as the employer
4) Career Events
If you're looking to recruit graduates, or do bulk hiring, open days are a great way to attract candidates. But they don't come free: cost of the venue, stands, manning, marketing materials, giveaways, advance publicity –all need to be factored into your resourcing budget.
5) Job Board Fees
There’s not only the cost of the board itself to take into consideration, but the time to create ads, then manage and respond to applicants. While most job boards offer a powerful range of filters and tools to assist the selection process, shortlisting by a human being, most likely the job-owner, is still unavoidable.
6) Background Checks
Background checks can save thousands by identifying unsuitable applicants, but for each one, an external agency will charge a fee. In-house checks can be time- consuming and difficult to complete.
7) Interviews
When candidates go through multiple interviews, this requires management time, which is lost to the main business. Calculate the cost of your interviews, in terms of senior time, and you may be surprised.
8) Risk Of Turnover
More serious than the occasional mistake is the possibility that your new employees will leave. The highest risk of this happening is between two and six months of joining. When this happens, you’ll have wasted all those resources listed above. And if it happens repeatedly, the financial impacts can have a devastating effect on your bottom line, so be sure to look after your new hires well! It costs a lot more to hire a new employee than it does to retain an existing one, even with added incentive.
Hiring Help
If your business is going well and growing, you will need to hire new employees. Just keep these 8 tips in mind to ensure that you don't bite off more than you can chew in terms of employee expenses.
