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The Cost of Hiring and Everything To Consider

September 10, 2022
5 min read

There’s no denying that recruiting new staff is a crucial stage in business growth. It takes money to make money, and bringing new people on board who share your vision and values can take your company to new heights. 

Generally, the total cost of hiring an employee is expensive. There’s much more to it than the salary range. It’s truly an investment that can go wrong if you make a bad hire or fail to budget accordingly. The key is to prepare for the entire hiring process, from recruiting to onboarding and training. 

Below, Poised discusses the cost of hiring new employees and ways you can make smart decisions throughout the process. 

What’s the True Cost of Hiring a New Employee?

The average cost of hiring an employee varies drastically depending on the company’s size, type, location, and industry. The particular position you’re filling also plays a role. That said, a Glassdoor study found that it cost businesses an average cost per hire of $4,000. This number can be higher due to turnover costs from current employees leaving.

People are the true driver of business growth, and it’s essential to see your hiring process as an investment; you shouldn’t rush through the process and make rash decisions. You may think moving a candidate through the pipeline quicker will save you money, but it can end up costing you much more money down the road.

The key is to know what to look for and how to vet and interview candidates effectively. Note that you can lower the cost by streamlining your recruitment and retention efforts.

What Are the Most Common Hiring Expenses?

So, you’re convinced to approach the recruitment and hiring stages thoroughly; part of that is knowing what to expect and developing a hiring budget.

Let’s take a brief look at a few of the most common hiring expenses:

External Recruiters

Many small businesses that lack a human resource management department turn to external recruiters to find new hires. Recruiters and recruiting agencies typically have access to a significant talent pool of experienced and qualified candidates. If you don’t find anyone in the top talent pool, the recruiter will probably have the tools and resources necessary to find the ideal employees.

The catch is that pricing structures vary among recruiting agencies, and agency fees can quickly add up no matter the job opening you’re hiring for. Some recruiters base their fees on a percentage of the position’s annual salary, some charge a flat rate, and others work on retainer. 

Double-check that external recruitment is the best talent acquisition tactic because it will add considerably to the overall cost of discovering and onboarding a new staff member.

Background Checks

Background checks are expensive, but they often factor into the hiring process, especially for certain fields. A pre-employment background check involves a deep dive into the candidate’s past.

Neither federal nor state law requires businesses to conduct these checks, yet 95% of employers do at least a light background check before bringing on a new team member.

Here are some of the most common pre-employment background checks:

  • Criminal background checks
  • Drug testing
  • Identity verification
  • Credit background checks
  • Professional license verification


Perhaps the hiring process wouldn’t cost so much if you were done paying money after onboarding a new team member. Officially bringing on a new employee is only the beginning of the time and money you’ll invest in that person. You’ll also need to plan for training costs.

Yes, training is usually pretty expensive, but there’s no denying that it’s a critical investment for any company to make. A well-strategized training program helps new employees deliver ROI, boosts team morale, and improves overall satisfaction and engagement.

First, you’ll need to purchase any materials and equipment necessary to complete the training activities, which may require you to buy new items for each employee. You should also plan to spend hours upon hours completing training, including the new staff member and the people instructing them. 

This is time that won’t be used directly on day-to-day operations. Additionally, if you have to hire external experts to conduct your employee training, that’s another expense to consider.

Why Is the Cost of Recruiting So High?

The costs above are just a few of many others to consider when hiring. External recruitment, background checks, and training alone can take a significant chunk out of your business budget, especially if you run a smaller enterprise.

But you also have to factor in costs like:

  • The onboarding process(e.g., form filling, IT costs, orientation tasks, etc.)
  • Employee benefits packages (health insurance, PTO, etc.) and an employee’s salary
  • Job-related equipment and tools
  • Recruiter fees 
  • New hire bonuses
  • Employee referral costs (e.g., employee referral software, employee referral bonuses, development costs, etc.)
  • Advertising an open position via Linkedin, Facebook, and other platforms

It’s worth noting you can still spend a lot of money if you handle the recruitment process in-house. Besides paying your hiring managers, prepare for everything from the job board and job posting fees to resume screenings, interviews, recruitment events, recruitment software, and more.

That’s why it’s vital to compare the expenses when determining whether to use your HR team or an external recruiting agency.

What To Consider When Recruiting New Team Members

So, how do business owners ensure they’re making a solid hire?

Here are a few characteristics to look out for as you’re vetting candidates:

Look for Strong Communication Skills

Communication is crucial to any company‘s success. No matter the position, any job candidate you consider should have strong verbal, written, non-verbal, and interpersonal communication skills. At the very least, you should see lots of potential and an eagerness for improvement.

Look for Willingness To Learn

You need smart people who are willing to take risks — not know-it-alls. The truth is, even the most skilled and knowledgeable workers can improve in one or more areas. Find employees who have a fire to learn.

Then, provide them with the learning tools they need to succeed. Additions like grammar and spell check programs like Grammarly can help, while AI like Poised can guide them into TED Talk-worthy speakers.

Look for an Active Listener

Active listening is another essential communication skill for business teams. From the top down, each person in your organization should practice active listening to show interest and engagement.

When your team members know their ideas and concerns are being heard by their colleagues, it does wonders for morale and innovation.

Look for Confidence

Lastly, go with candidates who are confident in themselves and in their abilities to help the organization reach its overarching goals. It’s a delicate balance; you want a team of confident individuals who are not arrogant. In other words, look for strong communicators who love learning, listening, and confidently fulfilling their responsibilities!

Use Poised To Conduct More Effective Interviews

There’s no denying the cost of hiring can be significant. But recruiting new talent is a vital move for spurring business growth.

As you start interviewing candidates, turn to a communication coach like Poised. Our software will give you tips for improving your communication in real-time and allow you to analyze performance metrics over time.


How Much Does It Cost to Hire an Employee? | Business News Daily

13 Strategies For Training New Employees Efficiently | Forbes

The Cost of Hiring a New Employee | Investopedia

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