Recruiting and Onboarding Employees: What is the True Cost?
Are you considering hiring for your business?
While bringing new talent to the team is a great way to build your business, onboarding is a big job! One that takes considerable time, effort, and cost.
We have worked with many business owners and have seen first-hand just how many underestimate this time, effort, and cost, so this is what this article is all about.
Here is a mini-guide on the true “cost” of hiring and onboarding.
Cost breakdown of recruitment and onboarding
Direct recruitment costs:
The average time to fill a position is lengthy and expensive. For example, the average cost-per-hire in the UK is £3,000 and takes around 30 days. These costs include things like candidate screening, background checks, phone and video interviews etc., along with the wages of HR personnel and the time they invest – time that could be used for other vital HR functions such as payroll processing and employee engagement.
Marketing and advertising costs:
Attracting the right talent requires strategic advertising, so crafting educational and persuasive job advertisements is essential. Then, you will need to reach a wide audience, which often requires a multi-platform approach, including social media.
When it comes to marketing positions, businesses must balance the effectiveness of recruiters and paid advertising services against free services, which may offer limited visibility and features, affecting the overall success of the recruitment efforts.
Compensation and benefits:
Fair compensation is key to attracting quality candidates. According to the Office for National Statistics, as of March 2023, employers in the UK typically spend an average of £22.50 per hour on wages and an additional £10.10 on employee benefits.
These benefits, which can include private health insurance, pension schemes, and employee development programmes, might constitute up to 40% of an employee’s base salary, in addition to employer tax contributions.
Emotional and mental costs:
The stress involved in recruiting, especially under resource constraints, can lead to significant emotional and mental health impacts on HR staff. This not only affects their wellbeing but also their productivity, which in turn can impact the recruitment process itself.
Costs from poor hiring decisions:
Making a poor hiring decision can be extremely costly, potentially amounting to 1 to 5 times the salary of the intended position. These costs include the lost wages and benefits along with the additional costs associated with recruiting and training another employee.
Accounting tip: how can you avoid the pitfalls of a poor hire? Work with a Finance Professional to plan for your growth, as this includes talent management planning (i.e. getting the right people into your business just before they are needed rather than waiting until you desperately need them and having the recruitment process disrupt operations).
Onboarding and training costs:
Onboarding new employees involves significant costs, too, averaging about £3,600 per employee. These costs cover everything from initial training and managerial oversight to administrative expenses such as setting up IT hardware and processing documentation.
Don’t let recruitment cost you an arm and a leg
Recruitment and onboarding is already tough in today’s market, so don’t let it cost you in more ways than one. Adopt strategic planning, streamline your processes, and work with an experienced Finance professional, if you need help with this and more. They can help you reduce these costs without compromising on the quality of the talent you attract and retain.
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