Hiring a new employee is not an easy task, especially for cash strapped businesses. The hiring process itself is a time-consuming and money-costing proposition. The cost factor is not only the salary, but recruitment, onboarding, and training all push up the hiring costs.

Finding the right person to fill in the position can be time-consuming. One has to first advertise for the post, add to it the time cost to the recruiter in advertising and reviewing the applications, and then weeding out the potential candidates and starting the interview process.

After that, the background checks and related tasks too need to be taken care of. There can be arguments in favor of outsourcing the whole process, which would save time. But then that also comes at a price.

What is hiring cost?

An $8 per hour employee can end up costing an employer nearly $3,500 in turnover costs, says a report in Investopedia. According to Recruiterbox, the total cost of hiring a new person can go up to $5000 in the professional and manufacturing industry. In the service-related industry, it can be lower—$1000. A study by the Society for Human Resource Management (SHRM) Human Capital Benchmarking Report, says that average cost per hire can be somewhere in the vicinity of $4,129 and it can take up to 42 days to find the right person.

Counting the actual costs; can include hiring a third-party recruiter, referral bonus, travel expenses, and in some cases, even relocation costs.

According to the Bureau of Salaries’ March 2019 Employer Costs for Employee Compensation report, salaries account for 70.1 per cent of total employee compensation. Benefits account for an average of 29.9 per cent of total employer costs, which include paid leave, supplemental pay, insurance, retirement and savings plans, and legally required payments like FICA.

Joe Hadzima, a lecturer at MIT’s Sloan School of Management, says the salary plus benefits usually total “in the 1.25 to 1.4 times base salary range.” Hence, the salary plus benefits package for a $50,000/year employee could equal $62,500 to $70,000, he adds.

Once the recruitment process is over, the employee needs to be introduced to the workplace culture and environment, along with whatever training is required to fill in the position.

Training can be a costly proposition, especially in a manufacturing and special skills job.

The 2018 Training Industry Report says training an employee costs an average of $986 per learner. Larger organizations spent $1,046 per employee, compared to midsized companies at $868 and small companies at $1,096.The training report says that in 2016, employees spent an average of 47.6 hours per year on training. This includes on-the-job training, the cost of orientation, and the additional hours required to do the same. Consultant and entrepreneur Scott Allen puts the training cost more simply, “Calculate the cost of both structured training (including materials) and the time of managers and key coworkers to train the new employee to the point of 100% productivity.”

Here we should not forget the cost of workplace integration where the new hires have to be given a workplace with the incumbent paraphernalia of seating, laptop/desktop, and more.

After all these investments, companies need a return on their investment and fast. The company needs to recover the cost of hiring a new person who will hopefully be an asset to the company. A survey of 610 CEOs by Harvard Business School found that mid-level managers reach the break-even point for companies in about six months. Hiring a new employee should not be taken lightly. A wrong hire can lead to a greater burden on the company than hiring cost.

Recruitment Tips to Reduce Cost Per Hire

Introduce an employee referral scheme
Leverage social media
Create a clear and compelling job post
Build alumni networks
Create talent pools

Now that we have a fair idea of the hiring cost and ways to reduce cost per hire using recruitment tips, let’s look into ways to kick off a successful recruitment drive.

The post Recruitment Tips to Reduce Hiring Cost For Cash Strapped Businesses appeared first on The HR Digest.

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