5 Unexpected Costs You’ll Face When Hiring a New Employee

When you decide to hire the first employee for your small business, there are the obvious costs of making a new hire: salary, benefits, and work equipment are all expected expenses for your new worker. But there are numerous other costs that come during the hiring process that may take small business owners by surprise. Glassdoor estimates that the cost to hire a new employee, outside of expenses like salary and equipment, is around $4,000.

In order to accurately predict what you can expect to spend in terms of hiring, you have to know where the costs lie. Below we’ve outlined some key unexpected costs of hiring an employee to help you plan your hiring strategy for your small business. 

Job Board Postings

If you remember anything from your own job searching days, you might think it simple to find job postings: simply go to Indeed, Monster, or any number of job board sites and enter your criteria. Free and easy, right? 

Not so for employers. According to research, it can cost anywhere from $250 to $500 a month to post a position on just one of the major job boards, and costs may increase for additional features. While this may seem steep and unnecessary, utilizing a popular job board is one of the best ways to get a pool of diverse and qualified candidates. Free options like Craigslist or relying on your network may return less-than-stellar applicants that you settle for out of desperation, rather than because you’ve found the best person for the job. 

As you prepare to hire, research popular job boards and determine which one will best fit your needs. Be sure to consider the popularity for your industry and location and what features it includes for screening applicants in addition to the cost to you. 

Pre-Employment Screening

Conducting a background check is an essential step for all new hires. It verifies application information such as identity, employment history, and criminal records to ensure your new employee is who they say they are. But, of course, accessing this information comes with a fee. 

It’s possible to do a DIY background check by manually checking state record databases and other information sources, and fees for accessing these databases can be as little as $2 in some states, but as high as $65 in others. Although the DIY route may seem cost-effective, small business owners may miss important information or run into issues with FCRA compliance when taking this route. A background check service for employers can remedy all of these issues for a single fee, with costs ranging from $30 to upwards of $80. 

You may be thinking that background checks are an unnecessary precaution—after all, you met this prospective employee and nothing seemed off about them. But consider that according to some studies, the cost of making a bad hire can be nearly $15,000, while others place that number even higher. A background check fee of $60 or $80 is a small investment for the peace of mind that you’ve hired the right person. 

Time You Spend on Hiring

If your business is still a one-person show, you’ll be doing all the work of posting a job, interview candidates, and making a final hiring decision. This may seem like a no-cost way of hiring, but the time you spend hiring cuts into time that could be spent on client work or other revenue-generating activities. RecruiterBox estimates that it takes up to 40 hours of work to hire a single employee—that’s equivalent to a full week of work. 

Depending on the nature and state of your business, it may be cost-effective to look into working with a recruiting company to minimize the amount of time you have to spend hiring. This will vary greatly from business to business, so be sure you know the value of your own time and weigh that against the cost of working with a recruiter. 

Software Licenses

In preparing for your new employee, you’ve likely thought of the basics of job-related equipment: a desk, office chair, computer, and phone are a good start. But don’t forget the ad-hoc costs for new software licenses for things like Microsoft Office, a new business email address, and any industry-specific tools or software that may require individual or device-specific software keys. These costs are essential for doing business, so be sure to include them in your cost of hiring calculations from the start. 

Onboarding & Training Costs

In the same way you need to account for the time you personally will spend on hiring, you’ll also need to calculate the time you’ll invest in onboarding and training a new hire. Some of this time can be minimized with some preparation ahead of their start date, such as creating or compiling training documents or rounding up industry articles to get them up to speed. The more you can create a self-guided training program, the more efficiently you can use your own time, but remember that some face-to-face training time is absolutely necessary for successful onboarding. 

Another training cost that can be difficult to define is the cost to your business while your new hire reaches full productivity. Depending on the complexity of your industry, the specific role of the new hire, and how their previous experience aligns with your needs, it could take anywhere from 8 weeks to 8 months for an employee to reach full productivity. 

Final Words

Understanding the true cost of hiring an employee might seem a little intimidating and have you second-guessing whether the time is really right for you to hire. Remember that hiring employees is essential to growing your small business. 

They can bring new perspectives and expertise to your company and alleviate burdens on you as a small business owner, leaving you to focus on other ways to grow your business and expand your client base. With careful planning and an awareness of all the costs that hiring entails, you can be fully prepared to hire a new employee.