The Cost of Hiring a New Employee | Davis Thorpe & Associates

The Cost of Hiring a New Employee

If your business is experiencing significant growth this year, you may be looking to bring on a new employee. However, many business owners are reluctant to hire due to the potential expense. According to the US Small Business Administration, the price tag can range from 1.25 to 1.4 times the salary. Here are some things to keep in mind when calculating the cost of hiring a new employee:

Recruitment Costs

The process of hiring the right person for your team is one of the major costs to consider. Within the process of recruiting, there are monetary and time costs you will handle, including the costs of advertising the opening on job boards and the time spent reviewing resumes, pre-screening, interviewing, and contacting references. If you use a recruiter, there are also added fees for using their services. Average recruiting costs range from $3,000 to $5,000, but this also depends on your industry.


After you have hired the right person, you need to provide training so your new employee can do the work you’ve hired them to do. Unfortunately, training also comes with added costs. A recent study conducted by Training magazine says that the average training costs are $1,886 per employee. The price can rise depending on how high paying the position is and how much responsibility comes with it. Much of the costs have to do with the price of training programs, training staff, and new technologies and equipment.

Salary and Benefits

The most obvious cost is the salary. More than just their hourly or yearly wage, many costs come in many perks and benefits. Some companies offer life insurance, long-term and short-term disability, transportation costs, tuition reimbursement, and more. With COVID-19, many companies hire more remote employees and offer to reimburse or pay for new computer equipment. Despite these added costs, offering additional perks and benefits in addition to a well-paying wage ensures you attract the best possible candidate, and they will stick around.

Despite all of the obvious and hidden costs of hiring an employee, keep in mind the reason you are adding to your team – improved productivity. In some cases, it can take up to 6 months for you to break-even and even longer for you to see a return on investment on the employee you’ve hired. Hiring someone isn’t an easy decision, but it may be necessary to improve business growth, productivity, and morale.

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