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Know Your Hiring Costs

Know Your Hiring Costs

At some point, all business decisions come down to dollars and cents. How much will it cost to implement a particular program, and what's the potential value to your company?

The costs are often pretty straightforward, such as when you buy a new computer or launch an ad campaign. But when it comes to hiring an employee, the cost isn't so clear. Yet, company leaders will still ask: "What will it cost us to bring in a new marketing director?" You can respond with information about the upfront and hidden costs involved.

Upfront Costs

Several pieces of the "cost to hire" equation are easy to determine because they already have price tags attached to them and are readily identifiable with the hiring process. They include:

  • The new employee's salary, bonus, commissions, benefits, plus employment taxes
  • Costs for newspaper or website ads, or taking part in job fairs or other recruiting events
  • Fees for a recruiter (if you use one)
  • Employee referral fees paid out, if applicable
  • Costs associated with recruiting, screening, or interviewing applicants, including meals, transportation, entertainment, and events

Fees for background checks, drug testing, and other screenings and tests may be small compared to a new employee's compensation package but don't forget to include them.

Hidden Costs

There are also more subtle costs associated with hiring. Although some expenses have a set fee, fixing a dollar amount to these other costs relies more on "guesstimation." Here are some examples of hidden expenses:

Time. This area takes into account the cost of the time employees spend away from their regular duties when your company is hiring and training new workers. It includes all who have a hand in the process, such as receptionists who field phone calls about an open position, personnel who screen resumes and follows up with applicants, and managers who interview candidates, call references and train new hires.

Lost productivity. This is the cost of the work not getting done until you can get an employee up and running in the open position.

Miscellaneous hiring. This is a percentage of the overall cost associated with all company hires. Typical hiring expenses are recruitment brochures and materials, candidate-specific websites separate from your business's general website, orientation materials, applicant tracking, and other HR systems.

This area also includes the cost of unfilled positions on employees, including lower morale resulting from the stress of handling additional responsibilities and overtime pay.


It's good business to pay attention to how you spend money to find new employees. By doing so, you can eliminate the things that don't work — such as ads that fail to deliver qualified candidates — and focus on what does work. But don't get so caught up in tracking the dollars and cents that you don't have time to track down the perfect candidate. And don't neglect the causes of turnover. After all, one of the best ways to reduce hiring costs is to retain your best people.

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