HR Management & Compliance, Learning & Development, Recruiting

Understanding the Cost of Hiring and Onboarding New Employees

Whether you’re filling a new position to help your company grow or replacing an employee who is leaving, you’re not just filling out a slot on an organization chart. You hope to find someone who can add to the strength and capability of your group—someone who is just right for the position you want to fill.


designer491 / iStock / Getty Images Plus

It makes sense to allocate funds for actions that will get you the right person, but it’s not necessarily obvious what all that investment might involve. It’s important to have an effective process in place, as your bottom line will be impacted when an employee leaves and you must find a replacement.

All the Costs of Recruitment: A Closer Look

Some have estimated that the average cost of hiring and onboarding can range between $1,000 and $5,000 per employee. That’s a starting point—but considering all the steps that you’ll be taking along the way, the true cost is usually even higher.
For example, if you are replacing someone who has left the company, and the process drags on, you are likely to experience reduced productivity. Even if other employees work to help fill the gap, their ability to do their own jobs will be affected. It’s good to keep this in mind when you are searching for a replacement so the job is covered as quickly as possible.

A Worker or a Specialist?

If you’re in need of a receptionist or administrative assistant, you have a much larger pool of prospects to draw upon. It’s a different matter if you need an experienced professional such as an engineer, designer, IT specialist, etc.
The more defined or refined the skill set, the more you may have to invest in actions such as job postings, in-house or third-party recruiters, postings on job websites, etc. Even actions such as social media outreach, which may seem to be a free outlet, involve some degree of staff time and creativity that could be directed elsewhere.
You can do an initial interview via Skype, but if the candidate does not live in your city and he or she looks like the right person to hire, you may incur expenses for a next-round in-person interview. More employee time is taken up if the job involved is important enough that you need to consult others within your organization to evaluate a candidate.
You might be able to find a nonskilled worker in a short period of time just through your network of employees or associates, but it’s less likely you’ll have the same success if you are looking for a skilled professional. While you may have to spend more to find such a person, it’s balanced by the value of what he or she brings to your organization. It’s good to recognize both sides of this equation.


You’ve found someone who seems to match the job description. You’ve offered him or her the job, and he or she has accepted. However, you recognize that he or she won’t be a fully functioning team member immediately. What will you have to invest in to get the new hire up to speed?
Your HR department will need to ensure that tax and benefit forms are completed. Increasingly, new hires are asked to fill these out before they arrive on the first day digitally. You’ll need to ensure that company policies are explained and understood. These actions must be thorough, as skimping on them could come back to haunt you later. Modern automated HR systems have the benefit of streamlining the onboarding processes, are highly customizable, and integrate with other systems.

Deferred Productivity

It’s generally agreed that it can take an average of 8 months for a new employee to get up to speed on a job. During this time, you’re paying a full salary but you are not receiving the full productivity on which the salary is based.
Hopefully, this will balance over time, but remember that about 20% of new employees leave within the first 45 days of their employment. Even more leave within the first year. When this occurs, you are getting even less in exchange for your investment in hiring and training.

Training and Mentoring

Depending on the job in question, you may feel that the bulk of the “training” is achieved in the process of performing job tasks over time. It can be a mistake to set the threshold too low. It shouldn’t be a surprise that well-thought-out training for new hires can increase productivity as much as 50%.
The better your new employee understands what’s expected, the easier it will be for him or her to deliver what you need. A mentor can not only help shine light on the finer points of any job but also, as a living, breathing representative of the company, make a new employee feel more welcome. New hires who feel engaged in company culture are much less likely to leave.

Charting Your Course

Efficiency, productivity, and profit go hand-in-hand. It’s up to you to decide what you are willing to invest to get the employees you need. If you consider all the elements of this investment, you can work out what will be best for you. This can increase your ability to find, hire, and keep people who can make your company everything you want it to be.

Michelle Lanter SmithMichelle Lanter Smith is the Chief Marketing Officer of EPAY Systems, where she oversees the company’s go-to-market strategy, customer success, and technical support operations. Michelle brings 20+ years of leadership experience in driving revenue growth for high-tech and service-driven firms. She graduated summa cum laude from Marquette University, where she earned her Bachelor of Science degree in Business Administration. She holds a Masters of Business Administration with distinction from Northwestern University’s Kellogg School of Management.