INFOGRAPHIC: What is the True Cost of Hiring? 

When hiring new employees, one thing stays top of mind throughout the screening, interviewing, and onboarding process: how much is this new hire going to cost your company? The proposed salary is an obvious factor, but the cost of hiring new employees typically includes various other hard and soft costs.  

Continue reading to see a breakdown of what these costs entail, why they’re necessary, and tips on reducing your company’s hiring expenses.  

For a more in-depth look at hiring costs, you can also check out our webinar What is the True Cost of Hiring?, where our subject matter experts explore the hard and soft costs we’ll discuss in this article. 

---

RELATED: How Much Time Are You Investing in the Hiring Process? 

---

Hard Costs Besides Employee Salary 

There are many components that make up the hard costs of a new hire outside of their salary. For example, if you are hiring an employee with an agreed upon salary of $100,000, you’ll also end up paying an additional: 

• $30,000 in taxes 
• $11,000 in benefits 
• $3,000 in liabilities 
• $2,500 in training, tech, and office gear 
• $1,000 in administrative costs 

This leads to a grand total of $150,000 in hard costs for the first year—50 percent more than their salary. The Training Industry Report revealed that between 2022-2023, companies spent an estimated $101.8 billion in total training expenditures for new and current employees (which includes technology costs, employee salaries, and the training itself). 

Other hidden onboarding costs include conducting pre-employment checks such as background checks, drug screenings, past employment histories, and educational verification. These assessments and reference checks may also be conducted on more than one candidate per job opening. 

Even after paying the costs associated with hiring new employees, payroll taxes and benefits are continuous expenses. In fact, in March of 2024, the BLS reported that only about 70% of employer costs for that month were made up of wages and salaries, while benefits comprised the remaining total.  

We’ve covered the straightforward expenses your company can expect from hiring new employees. But what about the unexpected costs—the ones that don’t have a material value, yet add up all the same? Well, let’s get into them. 

Explaining Soft Costs 

According to data from the Society for Human Resource Management (SHRM), employers estimate the total cost to hire a new employee can be three to four times the position’s salary, with about 60% of that amount owed to soft costs. 

So, what exactly are soft costs? They are less tangible—yet all too real—expenses that go into hiring. 

These costs are linked to the time invested in hiring new employees, including time taken away from current employees. Let’s look at three of the most common soft hiring costs. 

• Time to Hire: During the hiring process, team members spend time reviewing resumes, interviewing candidates, and negotiating salary. This leaves them with less available bandwidth to perform their daily tasks. 
• Attrition/Bad Hires: Soft costs due to attrition include time spent onboarding and a gap in productivity. When a new hire leaves quickly, this can also be bad for team morale and create a vacuum of responsibilities the individual was meant to fill. 
• Learning the Ropes: Lots of time is spent training new hires so they can get up to speed. A Harvard Business School survey estimated that typical mid-level managers need six months to reach their breakeven point, meaning that companies won’t start seeing a return on investment until after this time has passed. 

Why Do These Hiring Costs Matter? 

Now that you’ve heard what goes into the true cost of hiring, you may be wondering why these expenses matter. Is there a shortcut that diminishes hiring costs without sacrificing the ability to make the right decisions? Well, yes and no. But we’ll get into that in the next section. For now, let’s talk about the importance of these hiring costs. 

Although there is nothing wrong with making your hiring process more cost effective, you must remember why you’re paying these costs in the first place. If you try to cut corners during your search for the right candidate, you run the risk of making a bad hiring decision, which will only cost you more down the line. 

Knowing what goes into total hiring expenses allows you to calculate the cost of hiring with a more accurate perspective. If your business is expanding or your team is overworked and needs help, you can’t afford not to hire new employees. But having the right estimate allows you to budget accordingly. 

Reducing the Cost of Hiring 

Instead of allowing the fear of added costs to prevent your team from a necessary expansion, follow these tips. We’ll help you improve those pesky hiring costs, allowing your team to grow stronger and stress-free. 

• Streamline Your Hiring Process: Maybe there’s an employee who has extra time to scour resumes, lifting the burden from others. Or perhaps the job description needs to be rewritten to attract the most qualified candidates, making the recruitment process quicker.
• Consider Contract Hiring: Before committing to a full-time employee, it may be worth examining a contract-to-hire model through a recruiting agency.
• Rely on Your Company Culture: To reduce attrition (one of the hardest-hitting soft costs) and promote productivity in both new hires and long-time employees, it’s important to create a positive workplace environment that empowers your team to perform at their absolute best. 

Attracting and maintaining top talent helps cut down on the cost of hiring, which allows your company to increase its bottom line. Set your hiring managers up for success by downloading our Complete Guide to Hiring Employees. 

Partnering with a staffing company like Insight Global can help your company save on hiring costs by providing more resources and quicker access to qualified candidates. This means less time that your job posting is just sitting online costing money, a faster fix for lost productivity, and a greater chance of being connected with the right fit for the role. 

Hire Efficiently and Effectively 

At Insight Global, we understand how many unseen costs go into hiring new employees, as well as just how important those costs are. That’s why we’ve refined our process into a well-oiled machine that can find your dream team. 

If you’d rather put the hiring responsibility onto an experienced third party, that’s what Insight Global does best! We’ve been in the staffing industry for over 20 years and our expertise in sourcing, interviewing, and hiring leading candidates throughout various sectors is unmatched. 

Simplify your hiring process—get right to the finish line with help from Insight Global. Connect with us today to get started! 

Download Full Infographic