When it comes to the cost of hiring an employee, numbers speak louder than assumptions. According to the Society for Human Resource Management, the average expense per hire hovers around $4,700.
But, hold on, that’s not all. Many employers estimate that the complete cost of bringing aboard a new member can be a staggering three to four times the position’s salary. So, what does this mean for your business as you scale up and increase hiring?
The path of growth, if not managed well, can lead to an unexpected surge in costs that could potentially disrupt your business momentum. But can these costs be effectively managed without compromising on the quality of hires? In this article, we delve into strategies to help you navigate this scenario and optimize your hiring costs.
Understanding the Cost of Hiring an Employee
Scaling your business inevitably comes with increasing your workforce. But each new hire brings along more than just their skills and enthusiasm. They come with a price tag, and it’s not just their worker’s salary.
The cost of hiring an employee goes far beyond the monthly paycheck that comes to mind. The first part of these costs are direct expenses. These include:
- Advertising the position
- Spending resources on recruiting processes
- Conducting interviews
Recruiting platforms and employment agencies often charge significant fees for their services. These can add up very quickly. Even if you decide to keep the recruiting in-house, you still need to account for the time your team spends on selecting candidates.
Then comes the onboarding process. A new employee needs time to become familiar with their new role, colleagues, and workplace culture. During this period, their productivity is usually lower.
They might need training, which means investing in training programs and spending valuable working hours. There’s also a cost associated with providing them with necessary work tools, like:
- A laptop
- Specialised software and equipment
- Office supplies
But it doesn’t end there. Even after the new hire becomes fully functional, there are ongoing costs. These include:
- Various benefits
- Administrative expenses
All these factors combined make the real cost of hiring an employee substantially higher than the simple sum of their salaries.
As your business scales and you need to hire more employees, these costs can escalate rapidly. For many employers, the total cost of hiring a new employee can be up to three to four times the position’s salary. It’s essential to consider this reality when planning for growth.
Strategies for Managing Hiring Costs as You Scale
Scaling your business comes with its challenges. One key hurdle is the ballooning cost of hiring new employees. Thankfully, with thoughtful strategies, you can keep these costs under control.
Talent Recruiting Efficiency
Streamlining your talent recruiting process is an effective way to manage escalating recruiting costs. One approach to enhance efficiency is data-driven recruitment. This process analyzes your past practices and pinpoints what works best.
It can guide you in refining your strategies, thus saving both time and money. Another key strategy is to broaden your talent pool. When you embrace the potential of remote candidates, you’re no longer constrained by geographical limitations.
This approach not only offers you access to a vast array of potential employees but could also lead to more cost-effective hiring options.
Lastly, don’t overlook the potential already within your business. Prioritising internal recruitment is a cost-efficient method of filling vacancies. Upskilling and promoting your existing employees can often be less costly than seeking external talent.
Strategic Employee Onboarding
Efficient and strategic employee onboarding can significantly impact your hiring costs. An effective onboarding program can speed up the integration process for new hires. It ensures they reach their peak productivity more quickly.
To achieve this, your business needs a comprehensive onboarding plan that covers all necessary training and orientation for the new role. Furthermore, the implementation of mentorship programs can be beneficial. Pairing new hires with seasoned employees can expedite their transition and reduce the time they take to become fully productive.
Leveraging Technology for Talent Acquisition
In the age of digital transformation, technology has become a powerful tool in streamlining the hiring process and contributing to reduced costs. Recruitment software is a prime example, of automating various aspects of your hiring process, such as:
- Resume screening
- Interview scheduling
- Candidate ranking
- Communication with candidates
Additionally, digital marketing plays a crucial role in attracting potential candidates. Through the effective use of your company’s website and social media platforms, you can reach a wider audience. This can reduce your reliance on more costly advertising methods.
Lastly, digital onboarding tools offer a means of delivering training and orientation materials efficiently. This technological aid not only saves time but also resources and reduces the overall costs associated with bringing on new hires.
EOR Solutions: A Game-Changer in Hiring
As your business grows, managing the increasing cost of hiring new employees can become a significant challenge. However, an innovative solution is now turning heads in the business world: Employer of Record, or EOR solutions.
EOR solutions are a way for companies to hire talent in different locations, even globally, without having to set up a physical presence there. How does this work?
Essentially, an EOR provider becomes the formal employer on record for your remote employees. They handle all the legal and administrative responsibilities associated with hiring and employment, while you retain complete control over your employees’ day-to-day tasks and responsibilities.
This innovative hiring approach offers several distinct benefits for businesses:
EOR solutions can significantly reduce hiring costs. You bypass the need to set up a legal entity in each new location, which can be costly and time-consuming. Plus, the EOR provider can save you administrative costs by handling things like:
Each country has its unique labor laws and regulations. An EOR provider is well-versed in these rules and ensures your hiring practices are compliant to protect you from potential legal issues.
An EOR provider can accelerate your hiring process. They have established networks and can quickly find and hire the right talent for your needs.
EOR solutions offer unparalleled flexibility. You can quickly scale your workforce up or down, depending on your business needs. It means you won’t need to worry about the usual costs and challenges of hiring or laying off employees.
Smart Hiring for Business Growth
Scaling up doesn’t have to mean spiraling costs. There are myriad ways to control the cost of hiring an employee while maintaining or even enhancing the quality of your hires. Be it efficient talent recruiting, strategic onboarding, or leveraging EOR solutions, each approach can significantly streamline your hiring process.
At Bradford Jacobs, we understand the intricacies of global expansion and talent acquisition, supporting businesses as they navigate growth. Ready to take the next step? Contact us to discover how we can help transform your hiring strategies and foster sustainable growth.