Hiring An Employee: Financial Factors That Need To Be Considered

Hiring An Employee: Financial Factors That Need To Be Considered image giving money

Hiring a new employee can be an exciting endeavor. For a smaller business, it signals growth and expansion. For a larger business, it means bringing in new ideas and resources. The decision of whether or not to add additional workers, however, should be considered carefully. New hires are one of the biggest and most costly investments a business can make.

The cost to bring in a new employee goes well beyond their salary. Your new hire will come packaged with a variety of fixed expenses, such as federal and state taxes, benefits, workman’s compensation insurance, equipment and supplies. There are many other unfixed costs involved, including training and development. The initial cost to hire a new employee could easily exceed twice the agreed upon annual salary. Can your business really afford a new hire?

A few things to consider before the interview process

The costs associated with a new hire begin to pile up almost immediately upon exercising the idea to search for a candidate. Your human resources manager will need to spend time developing a job description, placing calls to potential networked contacts, posting the position internally and on the Internet, responding to all the résumés received, entering them into your database and sorting the various candidates by skill level. These tasks, while necessary, could take considerable amounts of the human resource manager’s time that they could spend focused on training and developing.

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What if you didn’t find a good candidate by just posting the position?

If you posted the position on your website and were unable to locate a suitable candidate, you might need to advertise the position in the local paper or on digital job boards. The costs associated begin to pile up based on the costs of advertising, amount of hours spent reviewing additional candidates and face-to-face interviews and more.

You’ve found the perfect candidate

You’ve found a talented individual, offered the job and your candidate accepted. What additional costs can you expect?

  • Employment taxes — Social Security/FICA, unemployment, Medicare
  • Benefits — Life insurance, health insurance, long-term disability, dental, tuition reimbursement, 401k plans, paid time off
  • Equipment and supplies — If the advertised position has just been created, you will need to provide your employee with new equipment and supplies to get started. An average employee will likely need a computer, supporting software, a telephone and general office supplies, costs which can range $2,000 per individual or more.

The cost of training

The act of hiring was the first step in the process. Once the new worker is on board, you will need to provide training and resources so the employee can begin producing for your company. Training, as it turns out, can be one of the costliest investments a company can make. In 2007, Training reported that companies spent an average of $1,200 annually per employee on training alone.

The cost of managing your new human resource

Your Human Resources department will need to spend time entering your new employee’s data into your system, setting up payroll, 401k deductions, insurance deductions and even paperwork specific to certain employees, such as seasonal workers or those whose salaries will stem from a grant. It helps to have a streamlined process for your Human Resources department and the appropriate software to make this process smoother.

The costs associated with bringing a new staff member on board can be considerable, but that doesn’t mean you shouldn’t hire them. It simply means you need to be sure you locate the right candidate and that your business can afford the cost of hiring someone to help out.

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