Know Your Hiring Costs

Kirsch CPA Group

Feb 11, 2020

At some point, all business decisions come down to dollars and cents. How much is it going to cost to implement a particular program and what’s the potential value to your company?

In many cases, the costs are pretty straightforward, such as when you buy a new computer or launch an ad campaign. But when it comes to hiring an employee, the cost isn’t so clear. Yet, company leaders will still ask: “What’s it going to cost us to bring in a new marketing director?” You can respond with information about the upfront and hidden costs involved.


Upfront Costs

Several pieces of the “cost to hire” equation are easy to determine because they have price tags already attached to them and they’re readily identifiable with the hiring process. They include:

  • The new employee’s salary, bonus, commissions, benefits plus employment taxes,
  • Costs for newspaper or website ads, or for taking part in job fairs or other recruiting events,
  • Fees for a recruiter (if you use one),
  • Employee referral fees paid out, if applicable, and
  • Costs associated with recruiting, screening or interviewing applicants, including meals, transportation, entertainment, and events.

Fees for background checks, drug testing, and other screenings and tests may be small in comparison to a new employee’s compensation package, but don’t forget to include them.


Hidden Costs

There are also more subtle costs associated with hiring. Although some expenses have a set fee, fixing a dollar amount to these other costs relies more on the art of “guesstimation.” Here are some examples of hidden expenses:

Time. This area takes into account the cost of the time employees spend away from their regular duties when your company is hiring and training new workers. It includes all who have a hand in the process, such as receptionists who field phone calls about an open position to personnel who screen resumes and follow up with applicants to managers who interview candidates, call references and train new hires.

Lost productivity. This is the cost of the work not getting done until you can get an employee up and running in the open position.

Miscellaneous hiring. This is a percentage of the overall cost associated with all hires your company makes. Typical hiring expenses are for recruitment brochures and materials, candidate-specific websites that are separate from your business’s general website, orientation materials, and applicant tracking and other HR systems.

This area also includes the cost of unfilled positions on employees, including lower morale resulting from the stress of handling additional responsibilities and overtime pay.



It’s good business to pay attention to how you spend money to find new employees. By doing so, you can eliminate the things that don’t work — such as ads that fail to deliver qualified candidates — and focus on what does work. But don’t get so caught up in tracking the dollars and cents that you don’t have time to track down the perfect candidate. And don’t neglect the causes of turnover. After all, one of the best ways to reduce hiring costs is to retain your best people.

About The Author

Kirsch CPA Group is a full service CPA and business advisory firm helping businesses and organizations with accounting,…

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