No matter the size of the business, no experienced HR professional could dispute that the hiring process is a costly one and why companies look at hiring as an investment. It is also why employers tend to be cautious about hiring, especially during a turbulent economy.
According to data from the U.S. Bureau of Labor Statistics (March 2012) the average direct cost for a new employee, based on a 40-hour work week is $63,835.20, which includes $44,241.60 in basic wages and $19,593.60 for benefits and taxes.
Imagine what the cost would be to bring back the United States to full economic recovery with employment of 5.3 million workers!
Note that these numbers fail to include workplace integration or apportioned costs for rent, phone, Internet, training, office furniture or travel and expenses, all of which can vary and add up quickly depending upon job requirements and industry.
What comprises the hiring process?
When thinking about hiring a new employee, an employer considers several underlying factors relative to the company’s need. For example, is there an in-house candidate who can perform the job? Can the tasks effectively be parsed among current workers? Is the need temporary or permanent? Can the job perhaps be outsourced to reduce costs?
Then, if a new position is created, hard costs such as advertising, background checks and drug testing are associated.
Soft costs which take a ton of time are also incurred: developing the job description and salary range, networking, partnering with a professional staffing and recruiting firm, appointment-setting, resume-review, initial-to-final candidate screenings, negotiation and tendering of the offer, acceptance of the offer and associated paperwork details. There may also be training and equipment costs, licensing fees or other special arrangements.
Further, in determining an employee’s salary range, an employer is obligated to deduct the following from that figure before tacking on the cost of benefits:
- Social Security/FICA Taxes – 6.2% of gross pay,
- Medicare Taxes – 1.45% of gross pay,
- Federal Unemployment Taxes (FUTA) – 6.0%,
- State Unemployment Taxes (SUTA) – varies by state, and
- Workman’s Compensation- required in every state except Texas, obligation ranges between 0.3% to 7.5% of gross pay depending on the job description and industry.
Encompassing these details, is it any wonder that hiring a new employee requires dutiful consideration? Experts estimate that an employer needs approximately six months of an employee being on the job to recoup his costs. So, with the cost of hiring so significant, wouldn’t it make sense for an employer to maintain morale?
Once hired, how does an employer prevent turnover?
A wise employer doesn’t just hire and ignore his employees. Keeping employees happy so that they stay in the company’s employ is called retention. We’ll talk about that next time.
If you’re looking to partner with a firm that truly understands the hiring process, talk to us today. Recruiting professionals at The Lee Group want to serve your needs. Call the location nearest you or contact us today.