Optimizing The Cost of Hiring an Employee 

It is no secret that hiring an employee is one of the most expensive parts of running a business. While a costly process, employees play a key role in driving business growth and performance. This article will take a comprehensive look at the cost of hiring an employee, including best practices, insight, and vital statistics to keep in mind.

Read to the end for insight into the MOST expensive part of hiring.

Internal HR Team Costs

As a business grows, having an in-house HR team may become necessary. An HR manager’s salary can range from $91,000 to $160,000 annually. The cost of hiring a new employee through an internal HR team can be calculated by determining the HR manager’s hourly rate and the number of hours they will spend on the hiring process. The longer a role takes to fill, the more expensive it becomes. Speed is crucial when calculating this cost, as a longer hiring process results in higher expenses.

External Hiring Team or Recruitment Partner Costs

For some businesses, an in-house HR team may not be economically viable or operationally efficient. In such cases, companies often seek the assistance of recruitment agencies, such as Staffworks, to fully take on their hiring needs. These agencies typically charge a fee that ranges from the employee’s annual salary or hourly rate. The recruitment process is time-consuming and resource-intensive, especially for roles requiring a specific skill set or that are not easy to fill. However, a recruitment agency can offset these costs by charging only when the position is filled, eliminating the time factor associated with internal HR teams.

Job Boards Fees

Posting and keeping up with job ads on various job boards is a costly undertaking. The median cost per job posting rose 43% in 2021, up to more than $28 per posting. The cost can vary widely. Monthly plans like CareerBuilder range from $250-$600. Other companies like LinkedIn and Indeed offer a more budget-friendly pay-per-click option. LinkedIn charges around $1.20 to $1.50 per click, and Indeed charges between $0.10 to $5 per click, depending on the title, location, and competition. Writing job descriptions and managing job postings is a time-consuming task that can divert attention from tasks that generate revenue. When working with a staffing company, these costs are typically included in the overall fee, and the company manages the job posting process for clients.

Background Checks

Conducting background checks on job candidates is a standard practice that also incurs costs. While you might be tempted to sign up for a screening service to run a background check for the low cost of $10, this is not the best practice. The reason is risk management. The Fair Credit Reporting Act (FCRA) is a federal law that ensures fair treatment of job applicants when employers use screening companies to gather information for employment decisions. It is imperative to choose a screening service that complies with FCRA criteria and does not compromise the quality of the background check. Working with a professional recruitment agency, ensures the use of an FCRA-compliant service, mitigating the risk of facing legal challenges.

Training and Onboarding Cost

The cost of training and onboarding a new employee is also a significant factor to consider. This can include the cost of materials, equipment, and any additional training programs. LinkedIn found that the associated cost of onboarding is $3,000 per employee. Of course, you can onboard an employee for much less, but onboarding is often tied to retention. A good onboarding experience can lead to longer tenure. Companies that focus on onboarding retain 50% more new employees than companies that don’t. A bad onboarding experience is often linked to employees not referring. This is not good for future business, considering referral-based hiring is the best practice to land quality employees.

The Cost of an Unfilled Role

We know that time is money, but something we don’t talk enough about in the recruiting space is how expensive leaving a position vacant can be. It might even be the MOST expensive, especially if the role is critical to the business. A role with a $105,000 salary has a cost of vacancy (COV) of $20,000 in 35 days! An empty role can drain your company’s resources and impact your bottom line in more ways than you imagine. Here are a few:

  • Additional marketing expenses – more time on job boards means more costs.
  • Missed sales opportunities or decrease in the quality of service.
  • Overtime pay to current employees covering the responsibilities of the vacant position.
  • Decreased morale among current employees due to increased workload and pressure to compensate for the unfilled role.

Every day that goes by with an unfilled role, these costs pile up, slowly but surely eating into your profits.

Optimizing Hiring Costs

To optimize hiring costs, it’s essential to consider all the above factors and determine the most cost-effective solution for your business. This may involve negotiating fees with recruitment agencies, contemplating different job boards, and always considering time as a major factor.


In conclusion, hiring employees can be costly, but it is critical to the success of a business. By understanding the different cost areas involved in hiring and taking steps to optimize these costs, businesses can make informed decisions that support their growth and performance. Many of these costs can be avoided by partnering with an effective and reputable staffing agency like Staffworks.

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