Despite wanting to take every step possible to grow their business and its audience, companies must think strategically when it comes to expansion. Development often requires financial investment, and adding employees is no cheap task. Instead, there are many costs associated with bringing on more people. Each worker should receive the same or similar perks and benefits as their peers, while also feeling engaged in his or her new workplace. Let’s take a look at some of the expenses associated with hiring new people:
Although companies and their human resources teams may believe salary is the most expensive item related to bringing on a new employee, that is often not the case. Business leaders have to keep certain actions in mind when filling positions, especially those abdicated by former workers. The cost to replace a person varies depending on his or her role and the amount of money he or she made, according to a Center for American Progress study. For example:
- It costs 16 percent of a person’s annual salary to fill a high-turnover, low-paying position. This means it could cost organizations around $3,300 to replace workers earning under $30,000 per year.
- For employees earning $30,000 to $50,000 as an annual salary, replacement costs would total around $8,000. That’s about 20% of their yearly earnings.
- Replacing people in executive positions would cost up to 213% of their annual salary.
It can cost businesses a lot of money to replace valuable employees.
Human resources and recruiting teams know a strong way to improve employee satisfaction and attract high-quality job candidates is to ask current workers for recommendations of friends and family. Most often, companies will offer referral bonuses to people whose referrals are hired and stay with the business for a certain amount of time. This practice gives people who may not have known about the organization an opportunity to flourish, while working with people they’re familiar with on a daily basis. While additional money for recommending people is a great incentive for current employees, company leadership has to take this expense into consideration during their hiring process. Allocating for this reward will keep workers engaged and broaden an organization’s’ pool of capable workers.
Referred job candidates do offer companies many cost-effective benefits. These recommended applicants will onboard more quickly – requiring HR teams to put less time and money into training. These people are also more likely to stay on board for longer periods of time, reducing the need to spend money recruiting new employees, according to LinkedIn.
“Companies have to allocate funds for recruiting new employees.”
Sometimes, businesses look outside of referrals to pull in job candidates with various backgrounds and skills. While this practice may bring more applicant diversity to the workplace, it can also cost companies more money. These recruiting expenses can include advertising cost, sign-on bonuses, travel expenses, in-house recruiter salaries and third-party recruiter fees, Recruiterbox noted. Relocation costs can be combined with that list depending on the level of the worker being brought on. All of these costs add up quickly, resulting in organizations spending more money to hire an employee than they originally budgeted for. Recruiting expenses will vary depending on the company, position and candidate, but it’s crucial for onboarding teams to be aware of these financial obligations.
The process of hiring new employees is an exciting one. Job candidates bring fresh ideas and perspectives to a company, helping the organization improve in the long run. The recruiting process, however, can be stressful, especially in a financial sense. It costs businesses a lot of money to add new workers to their roster. HR teams must be familiar with all expenses associated with this procedure to properly budget for the endeavor. Keeping referral bonuses, replacement costs and recruiting expenses in mind will help company leaders find the best fit for their open roles.Contact us to learn about payroll, HR, HCM, benefits, and time clock services