How Much It Really Costs To Hire A New Employee

Do you know how much it costs to hire a new employee? It’s a pricey process. It requires time, energy, and money to hire the right person for the job. When you see how expensive it can be, you’ll want to do your best to improve your employee retention!

Fingers Stepping Up Stacks of Money

Let’s take a closer look at how much it costs to hire a new employee:

  • Salary – Many employers only consider the cost of an employee’s salary or hourly wage when they think about the cost of hiring, but it’s much more than just that.
  • Benefits – The price of employee benefits add up – gym memberships, day care, free coffee, ski passes, paid vacation, sick days, health insurance. Perks and benefits can make your employees happy, but they can also cost your company a lot of extra money.
  • Recruiting – Recruiting is typically only a one time cost so it is often overlooked. The recruiting process takes time and requires your HR department to log some serious hours. They have to write job posts, advertise the job listing, pay for drug tests and background checks, sort through resumes, schedule and conduct interviews, call references, and more.
  • Training – There are few employees who can show up and truly do their job on day one. They need to be onboarded, learn the rules, attend orientations, get job specific training, and be given the right equipment and materials.
  • Miscellaneous – As an employer you may have to pay taxes, relocation costs, referral fees, travel costs, and other costs. You also have to allocate space for that employee to do their job.

The costs to hire a new employee add up. estimates the costs as:

  • $3,500 per employee in direct and indirect recruiting costs
  • $1,200 per year per employee for training
  • 1.25 to 1.4 times the base salary when you include benefits

Recruiting, hiring and training a new employee is an expensive process. It is estimated that a new employee only works at 25% of their capacity for the first month. It may take upwards of six months just to break even (Investopedia).

Even though it seems expensive, you need people to work for you who can do the job. Without people, your business would be worthless. Don’t overlook the value of the hiring process. Always watch out for these red flags when reviewing job candidates!

As an HR professional you need to make sure your company realizes how much it costs to hire a new employee. But more importantly you need to focus extra effort and energy into making sure you hire the right people who will do a good job and stick a round. As long as your employees are happy and aren’t going to quit, you’ll be in a good position.

Should You Pay An Employee An Hourly Wage Or A Salary?

According to, the cost of a bad hire can cost roughly $25,000 for a low paying job or up to $220,000 for a high paying job! Plus loss of productivity, time, employee morale, and potential clients.

The lesson is that you need to spend the time to make sure you hire the right person for the job the first time around. Don’t make a desperate hire. Be sure to use a hiring checklist and make sure your latest hire is the right person for the job.

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