Running a company is no easy task and it is one that incorporates many different aspects. One of those aspects is the actual bottom-line cost of having employees. Now, employees are paramount to any business’ growth and development, and with the right employees all working towards the same goal great things can happen. But, as employees come and go – there are varying costs that a business incurs just to onboard that perfect candidate.
Internal HR team
Human Resources (HR) is the business unit that takes care of all onboarding and hiring issues for any company. Larger companies have larger HR teams, while smaller companies in the early stages of their life may operate without one entirely. But when a company grows to a certain point, HR teams are necessary – but all come at a significant cost. Human Resources is a tertiary educated subject that requires a minimum amount of study (depending on where you are in the world) to be qualified. And what do we know about qualifications? They cost money. HR Manager salaries can range from $100,000 upwards, making this an expensive necessity. The HR expert does everything from setting up the job ad, to putting it out on job boards, screening and sourcing the candidates, assessing and interviewing them, all the way to making an offer. Of course, the HR manager and team have a lot more on their plate than just hiring. However, it only makes sense to have an internal HR team when their wages are less than the money you would lose on doing HR-related tasks.
Job Boards are a vital aspect of employment. It’s where a prospective employee can fin the advert you have placed to come and work at your company. Now, writing a job ad for a job board is tough enough, but adding in the many expenses that come with the variety of job boards like Linked, Seek, Jora, Indeed making it an even tougher (financially) task.
LinkedIn is one of the most popular places to place a job. Previously, they offered a fixed price plan of $495 USD for 30 days for one position. Last year, it was changed to a pay-per-click model. Currently, it will set you back $1.20 to $1.50 per a single click on your job ad, depending on job title, location and competition. As your budget decreases, your ad gets pushed down on the list of open positions.
Once you’ve found someone you want to hire, it’s safe practice to learn more about them before making an offer. This is why it’s useful to run background checks for prospective employees.
You can check for anything from verifying their education, previous employers, to criminal databases. One of these checks can cost as little as $5 and as much as $80 per single applicant, depending on how detailed you want to go. Another aspect is the time you may spend on finding a new employee. Financially it will be draining, but it was also drain you hours of precious time if you are a small business without an HR team.
Onboarding and training
When you hire someone new, they most likely won’t be fully productive their first day of work. In fact, it can take up a few months for them to get comfortable in their new role.
Research suggests it takes 8 to 26 weeks for an employee to achieve full productivity. Prior to this, businesses are highly likely to be losing money. After it is when the return on investment begins. The more complex the job and task, the more time it may take to onboard a new staff member. Working a cash register is a far simpler task than a project manager.
So, how does this translate to cold, hard cash? It turns out that an average company loses anywhere between 1% and 2.5% of their total revenue on the time it takes to bring a new hire up to speed.
An average company loses anywhere between 1% and 2.5% of their total revenue on the time it takes to bring a new hire up to speed.
In an ideal world, you’d just put your new employee behind their desk and leave them alone to figure things out. Unfortunately, we’re not all that smart, and even the best hires need a helping hand to get started.
Salary + extras
When you’ve set out to hire a new employee and offer them a certain amount of money, they know exactly how much they’re getting. The paycheck comes in every month with the net amount of money, and the employee can rest at ease. However, if you’re on the other end of the employing process, things are anything but simple.Taxes are no joke, and they vary greatly from one country to another. Depending on the skill level of the employee, they may be eligible to bonus schemes and fringe benefits like a company car or phone. Businesses can find themselves in strife when allowances for fringe benefits are too high, leaving employees to buy expensive phones like the Samsung Galaxy s20 or expensive cars like a Mercedes. Either way it is best to negotiate the parameters when dealing with a new started to avoid issues down the track.