The Cost of Hiring an Employee (Beyond the Salary)

Hiring a new employee is one of the most important decisions a company can make, but it’s also one of the most complex and costly. Beyond the obvious expense of a salary, the cost of hiring an employee includes recruiting, training, advertising, background checks, onboarding, and countless administrative tasks. These hidden costs can quickly add up, often catching businesses by surprise.

Understanding the true cost of hiring is critical for making informed decisions and maximizing the return on your investment in talent. When you know exactly where your money and time are going, you can design a more efficient hiring process, attract the right candidates, and set your business up for long-term success.

HOW MUCH DOES IT REALLY COST A COMPANY TO HIRE SOMEONE?

While exact figures vary depending on the industry, role, and level of seniority, the financial impact of hiring can be substantial. According to the Society for Human Resource Management (SHRM), the average cost to hire a nonexecutive employee is around $5,500, while bringing an executive on board can exceed $35,000.

These numbers, however, only scratch the surface. Many hidden costs, such as recruiting, onboarding, training, and lost productivity during ramp-up, can push the total much higher. 

HIRING COSTS FOR NEW EMPLOYEES BEYOND SALARY

Beyond compensation, employers also face a range of operational and administrative expenses throughout the hiring process. These costs show up long before a candidate is officially hired, beginning with how companies promote open roles and manage applicant interest.

Costs of Career Pages, Hiring Tools, and Events

A well-designed, up-to-date career page on your company website is one of the most important tools in attracting talent. It often serves as the first impression for potential employees. Investing in a clear layout, mobile-friendly design, and strong branding helps candidates quickly understand your company culture and available opportunities. While the cost of maintaining the page is typically handled in-house, it’s important to account for web development time, content updates, and occasional design refreshes in your hiring budget.

In addition to your own website, job seekers frequently browse external platforms to find openings. Posting on professional networks and job boards can be a significant expense. For example:

• LinkedIn: Around $500 per month for standard job postings, with options for targeted sponsored posts at higher rates.
• Indeed: Pay-per-click pricing can start as low as $0.25 per click, though a typical job post can run several hundred dollars depending on visibility.
• Monster: Approximately $375 for a 60-day listing, with additional fees for premium placement.

Recruitment is not limited to online postings. Career fairs, university events, and industry conferences can provide direct access to talent but come with their own costs. Participating in these events may require:

• Travel and lodging expenses
• Booth fees or registration costs
• Printed materials, swag, or giveaways
• Staff time for attending and networking

Considering these costs holistically ensures your hiring strategy is both effective and budget-conscious. Balancing online visibility with in-person engagement can help you reach a broader, more qualified pool of candidates while controlling spending.

Costs of Using an Internal (HR) Team

Hiring and managing an internal HR team can give your company direct control over recruitment, onboarding, and employee engagement. However, it comes with both visible and hidden costs that should be factored into your hiring budget.

Salary and Benefits

HR staff salaries range from $60,000–$120,000 annually, depending on role and experience. Benefits such as health insurance and retirement can add 20–30% to these costs.

Recruitment and Onboarding

Even with an internal team, there are costs for applicant tracking systems, job postings, and onboarding materials.

Time and Opportunity Costs

Recruiting and interviewing take time away from strategic HR initiatives like employee development and compliance.

Training and Compliance

Ongoing training ensures HR staff stay updated on labor laws and best practices, but adds both time and expense.

Cost of Background Checks

A significant part of hiring is making sure you are selecting a loyal employee. Therefore, it’s vital to know all aspects of a candidate before they join your team. You can verify many aspects of their lives through background checks like education, previous employers, and criminal backgrounds. These backgrounds can vary anywhere from $5 to $80, but it’s necessary to make this important hiring decision.

Cost of Onboarding and Training

After deciding to hire a new employee, it takes time to get them acclimated, potentially taking several weeks for an employee to reach their total productivity. Before this point, a company is losing time and money. Every company hopes that the lost time and money will be a positive return, but until they can fully handle the tasks on their own, the company is at a loss. The onboarding and training period is significant; companies need to ensure they are efficient to continue to work at full speed as quickly as possible.

THE COST OF A BAD HIRE

Bringing the wrong person on board can be far more expensive than the hiring process itself. A bad hire can cost a company up to 30% of that employee’s first-year salary, factoring in lost productivity, training resources, and the time managers spend addressing performance issues. Beyond financial implications, a poor hire can also affect team morale, slow project timelines, and even damage your company culture.

USING AN EXTERNAL HIRING TEAM TO REDUCE THE COST OF HIRING

For many companies, leveraging an external hiring team or recruitment agency can be worth it to streamline the hiring process and reduce hidden costs. These professional partners bring expertise in sourcing, screening, and matching candidates to the right roles, ensuring a higher likelihood of long-term success.

While there is a cost—typically ranging from 15% to 25% of the new employee’s annual salary—the value often far outweighs the expense. High-quality recruitment partners save your company significant time by handling the most labor-intensive aspects of hiring, including candidate outreach, interviews, and initial assessments. This allows your internal team to remain focused on core business operations and strategic initiatives rather than administrative hiring tasks.

Additionally, professional recruiters often have access to broader and more diverse talent pools, including passive candidates who may not be actively seeking a new role but are an ideal fit. They also provide guidance on competitive compensation, market trends, and hiring best practices, helping companies make informed decisions and avoid costly hiring mistakes.

KNOW THE COST OF HIRING AN EMPLOYEE BEFORE STARTING THE PROCESS

Hiring a new employee involves far more than simply adding a salary to your budget. From recruiting and advertising to onboarding, training, and compliance, the true cost of hiring an employee includes a range of visible and hidden expenses that can quickly add up. By understanding these costs upfront, companies can make more informed decisions, allocate resources wisely, and design a hiring strategy that balances efficiency with quality.

Ultimately, approaching hiring with a clear understanding of costs—and the options available—transforms recruitment from a challenging expense into a strategic advantage that supports growth, productivity, and long-term success. 

Looking to simplify your hiring process and reduce costs? TSP offers expert staffing and workforce solutions tailored to your company’s needs. From recruiting and onboarding to IT support and professional services, TSP helps you find the right talent efficiently and effectively.