Avoid surprises by planning for the internal and external costs of hiring, including costs that occur after the new hire starts work.

Many businesses are slow to hire because it’s important to find a candidate who’s a good cultural fit and has the skills they need. Most managers agree that it’s better to extend hiring timelines than to hire the wrong person who could disrupt the team or increase turnover. In addition to the cost of payroll, taxes and benefits, there are less obvious expenses. Here’s a look at the not-so-obvious costs of hiring to help you avoid surprises.

External costs of hiring

External costs fall into three categories: recruitment, pre-employment checks and possible relocation expenses.

To attract and recruit employees means getting the word out about the opening. Depending on your hiring approach, this may include fees for job boards, participating in job fairs and hiring a recruiting agency. Agency fees typically cost 15–25% of first-year compensation.

If hiring for a high-level position, one that requires special skills or is difficult to fill, a relocation package may be required to secure the talent you seek.

Internal costs of hiring

It’s easy to overlook some internal costs of hiring because you don’t see an itemized list of expenses, but they need to be accounted for.

A significant internal cost of hiring is your team’s time, including your in-house recruiter, hiring manager and administrative support staff. If you’ve been operating solo, you have to cover all these hiring roles, which will take time away from your primary work.

Once you make an offer and the candidate accepts, the cost of pre-employment background and reference checks, as well as drug tests in some cases, is money well spent. An employer’s due diligence before completing a hire can help avoid problems later. Basic screening starts around $30, and more extensive screening can be $200 or more.

Employee referral bonus programs are another internal cost. In addition to the bonus payouts, you may also need software to manage the program.

Costs after the hire

Once an employment offer is finalized, there will likely be costs associated with setting up your new employee. Depending on the role, they may require items such as a laptop, phone and software licenses. If the employee is expected to be in the office, you’ll also need a workstation, desk and seating.

The process of hiring a new team member will affect your business finances, but with thoughtful planning for all associated costs, you can stay on budget and avoid surprises.

 

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