No matter what your business, eventually there will come a point where you will need to think about recruitment. Be it one employee or many, the business of hiring can come with significant costs. Some are clear, things like advertising for a new candidate and training them, for example.
But as well as these there are other, less obvious costs to your business such as the time it takes you (or a HR department) to screen, interview, and successfully place candidates. Time spent recruiting is time away from productivity, and these hidden costs need to be carefully considered before you begin the process of filling a particular role. This article on "why a $14 /hr employee costs $20" really got me curious.
I’ve been spending a lot of time thinking about the "cost" of a lot of different aspects of running a business. I recently was playing around with this guide to small business invoicing by the guys at Xero accounting software which motivated me to "itemize" hiring a new employee to see if I could break down why it is it costs so much.
1. Searching for a Candidate
Even when recruiting for candidates online, some of the old fashioned costs of recruitment are still relevant today. Running an advert in a recruitment publication for example can still be a successful way of generating interest in a vacant role. But as well the cost of the advert itself, you need to consider the costs associated with both writing and designing it.
2. Training
Once you’ve found the right employee for your business, training is another considerable expense. Again there are the surface costs, things like the actual price of courses to think about, but you also need to consider again how much it will cost in terms of time. If you use a current employee to train a new one up to the point where they are able to work at maximum productivity, the time they spend away from their normal pursuits will equate to a monetary loss for your company. You will also need to provide your new employee with all of the necessary equipment they need to do their job well. This is an out of pocket expense that shouldn’t be overlooked.
Don’t forget that until your employee is fully trained, they also present potential costs such as an increase in errors, and in turn, the reputation of your company.
3. Benefits
As well as the headline salary, to attract the highest quality new employees, you may need to offer certain benefits that you should certainly account for when calculating costs. Pensions, holiday entitlement, childcare, reward schemes and insurance mount up to substantial costs for your company. In addition to this, it takes precious time to add your new employee to payroll systems and fill in federal forms.
4. Insurance
In the UK, if you’re hiring an employee for the first time then you need to adapt your current business insurance policy to reflect this. Employers’ liability cover is a legal requirement for any incorporated business that has one or more employees.
Recruitment is an expensive process, and it’s for this reason that you should be absolutely certain that you need to hire. Do everything you can to ensure that your selected candidate is right for the position and will be a good fit within your company, as bad hiring could lead to you having to repeat the entire costly process.
