Are you thinking of expanding your team and bringing in some fresh faces? While bringing new talent to the team is a great way to build your business, onboarding is a big job! One that takes considerable time, effort, and cost.
As experienced accountants working closely with numerous business owners, we’ve seen first-hand many underestimate the true investment required for hiring and onboarding procedures. In this article, we delve into the core expenses associated with these processes and explore the trust costs of hiring and onboarding employees:
Cost breakdown:
Direct recruitment costs: Consider the lengthy and costly process of filling a position, including candidate screening, background checks, interviews, HR team wages, and more. The average time to fill a position is lengthy and expensive. For example, the average cost-per-hire in the UK is £3,000 and takes around 30 days. Time that could be used for other vital HR functions such as payroll processing and employee engagement.
Marketing and advertising costs: Attracting the right talent requires strategic advertising, so crafting educational and persuasive job advertisements is essential. Then, you will need to reach a wide audience, which often requires a multi-platform approach, including social media.
When it comes to marketing positions, businesses must balance the effectiveness of recruiters and paid advertising services against free services, which may offer limited visibility and features, affecting the overall success of the recruitment efforts.
Compensation and benefits: Fair compensation is key to attracting quality candidates. According to the Office for National Statistics, as of March 2023, employers in the UK typically spend an average of £22.50 per hour on wages and an additional £10.10 on employee benefits.
These benefits, which can include private health insurance, pension schemes, and employee development programmes, might constitute up to 40% of an employee’s base salary, in addition to employer tax contributions.
Emotional and mental costs: The stress involved in recruiting, especially under resource constraints, can lead to significant emotional and mental health impacts on business owners and HR staff. This not only affects their wellbeing but also their productivity, which in turn can impact the recruitment process itself.
Costs from poor hiring decisions: Making a poor hiring decision can be extremely costly, potentially amounting to 1 to 5 times the salary of the intended position. These costs include the lost wages and benefits along with the additional costs associated with recruiting and training another employee.
Tip: How can you avoid the pitfalls of a poor hire? Work with an accountant to plan for your growth, as this includes talent management planning (i.e. getting the right people into your business just before they are needed rather than waiting until you desperately need them and having the recruitment process disrupt operations).
Onboarding and training costs: Onboarding new employees involves significant costs, too, averaging about £3,600 per employee. These costs cover everything from initial training and managerial oversight to administrative expenses such as setting up IT hardware and processing documentation.
Navigating the complexities of recruitment and onboarding can be challenging, especially in today’s competitive market. To avoid unnecessary financial burdens, strategic planning and collaboration with an accountant can help streamline these processes effectively while ensuring the quality retention of talent within your company.
Not sure if hiring a new employee is for you? Explore your options in our previous post: Growing Your Team | Independent Contractor vs Employee