Hiring new employees isn’t cheap. According to new benchmarking data from the Society for Human Resource Management (SHRM), the average cost per hire was about $4,700. But many employers estimate that the total cost of hiring a new employee can be three to four times the position’s salary, according to Eddie Goldberg, founder of Menlo Park, California-based talent management and development firm E.L. Goldberg & Associates.
This means that if you’re hiring for a job that pays $60,000, you could spend $180,000 or more to fill that role.
“Of those costs, I would say 30 percent to 40 percent are hard costs, and the remaining 60 percent are soft costs,” says Goldberg, who is chair-elect of the SHRM Foundation and co-author of the book The Inside Gig. Lifetree, 2020).
Soft costs include time invested by department leaders and managers in supporting HR-specific roles in the hiring process. When these hard costs are added, the cost of recruitment skyrockets.
“When all these professionals meet with potential candidates, screen applications, schedule several rounds of interviews and make the final decision, it takes time to achieve organizational goals/outcomes, which must be correlated with ROI [Return on Investment]. ” says Ankit Shah, supervisor of talent development at Columbus State Community College in Ohio.
Here are some other indirect costs to consider.
Impact on productivity
Most people don’t consider the cost of losing someone on the team, Goldberg said. “It disrupts the flow of how things are done. Teams can become stagnant,” he said.
Organizational network analysis shows the relationships between different employees. Some staff members are “brokers” of information across different teams or sub-functions of the organization. Losing one of these people can disrupt the flow of information critical to getting the job done.
Goldberg suggests implementing the stay interview. Employee retention is directly related to reducing recruitment costs. Additionally, such conversations can shed light on a person’s concerns that led to the decision to stay or leave.
For example, many parents and caregivers are anxious about going back to the office because they fear bringing the COVID-19 virus home. Other workers may look for similar positions in other companies that pay higher salaries or offer better benefits. Scheduling time to talk with employees about their most pressing concerns can reveal solutions to help them stay rather than leave.
The emotional toll
More demands for higher compensation, time off, flexible work schedules and benefits are taking a financial toll on organizations, according to Sharon Daley, SHRM-SCP, founder of GO-HR, a full-service consulting firm in Columbus, Ohio. All this creates emotional exhaustion and fatigue for recruiting teams.
“All the ghosts, needs, etc. emotional and mental damage is not sustainable and may cause them to lose focus on other responsibilities,” he said.
Competition costs
There is also a price for what DeLay calls losing candidates. Most small businesses are not ready to move quickly. So they must fight harder to hire candidates and then if they don’t offer the job quickly, the candidates are snapped up by other employers.
Losing a great candidate for a role midway through the interview process due to external competition also has financial implications.
“Recruiters and HR people, especially in smaller companies, need to be empowered so they can be faster,” he said.
Goldberg predicts that 2022 is going to be the year of the employee experience. Lack of opportunities for professional development and career growth is motivating employees to leave.
This juxtaposes with a recent study of Z Z employees expressing feelings of being unable to contribute to their strongest skill areas in their top professional concerns. Finding ways to allow them to use or develop those skills can support retention.
“Knowing where their talents lie and creating project opportunities for them to gain new experiences helps a company stay on top of things and deliver the employee experience they want,” he said.
Data Source: SHRM
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