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The Society for Human Resource Management (SHRM) estimates that the real cost of hiring a full-time employee in the U.S. averages around $4,700. In reality, though, when you add up the employee’s salary, benefits, and recruitment costs, you may be spending three to four times that person’s salary in hiring costs.
If you don’t get smarter about your recruitment process, the hiring costs can quickly add up, putting a huge dent in your budget. In this guide, we cover how to calculate the true cost of hiring and how you can reduce your recruitment expenses.
Hiring costs typically include both hard and soft costs. Hard costs are quantifiable and measurable costs that come out of your budget. These make up 30-40% of your total hiring costs. Soft costs, on the other hand, are the indirect costs associated with recruitment that are harder to quantify. These expenses take up the lion’s share of your hiring budget.
Only when you combine hard and soft hiring costs can you arrive at a true number.
Here’s a detailed breakdown of the most common hiring costs to give you a better idea of how much you’ll need to spend on your next hire.
Your most prominent talent acquisition cost will be the salary you pay your HR manager, or the fee you’ll pay your external recruitment agency. The average annual salary for a recruiter in the U.S. is $48,492 per year.
When you work with third-party recruitment agencies, you can expect to pay anywhere between 15-30% of the new hire’s annual salary. So, if your new hire’s pay is $50,000 per year, you’ll pay around $7,500 to $15,000 in agency fees.
Some talent acquisition partners, like Pearl Talent, charge a fixed monthly fee for recruitment. Our costs start at $3,000 per month. In exchange, you get done-for-you talent acquisition that doesn’t stop at onboarding; we also manage your new hires for you. Get hand-picked candidate profiles.
In addition to this, you’ll also have other costs associated with sourcing talent.
Even at the lower end, these recruitment costs add up to $800.
Once you pick your new hire, you need to spend time and money on onboarding and training them. Here’s what that involves (and how much it costs):
This means you’ll spend at least $2,000 in hard costs to onboard and train your new recruits. However, you must also factor in the soft hiring costs you’ll incur when bringing your new employees on board.
These costs vary from organization to organization and aren’t easy to quantify. But, you can arrive at an approximate value by tracking the total amount of time and money spent on each type of soft hiring activity.
Your employee’s salary and benefits will make up the majority of your hiring costs. The Bureau of Labor Statistics (BLS) says that an employee’s benefits cost as much as 30% of their annual salary. So, if you hire an employee for $50,000 per year, you’ll spend around $15,000 by way of benefits and perks. This brings the cost to $65,000.
Here are some of the common employee benefits:
Let’s assume you’re hiring someone for a full-time role, with an annual salary of $70,000. Here’s an estimate of how much it may cost you.
At the very least, you’ll end up spending $7,150 in hiring costs, with your employee’s salary and benefits as additional costs.
Unless you’re in an industry where on-site presence is necessary, hiring remote global talent can add value to your business through the diverse perspectives your new hires will bring, and help you cut costs significantly.
Places like the Philippines, South Africa, and Latin America have talented candidates and a much lower cost of living than the U.S. By tapping into these elite talent pools, you can reduce payroll costs without compromising on quality.
Pearl Talent specializes in helping US/ EU startups find the top 1% of remote global candidates at 60% less payroll. Find your next perfect hire.
On average, it takes companies a month and a half to source and onboard a new hire. Even if it takes your new hires just 2 months to reach peak productivity, that’s still more than 3 months of revenue lost.
But when you partner with talent acquisition agencies like Pearl Talent, you can drastically cut that time down, minimizing the amount of lost productivity and revenue. At Pearl Talent, we take care of the end-to-end hiring process for you. This means you get access to pre-sourced, pre-vetted, and pre-trained candidates who are ready to hit the ground running.
Pearl Talent also onboards your new hires and manages their payroll and compliance: all for a fixed monthly fee that starts at $3,000 per month. You can sit back and enjoy the results of having a competent employee without worrying about managing them. Get hand-picked candidate profiles now.
At Pearl Talent, we maintain an elite global candidate pool, where only the top 1% earn a spot. Each candidate goes through a rigorous vetting and training process, including mastering the 5-week Pearl AI+ course. When they come to you, they are ready to be integrated into your workflow and start being productive right from day 1.
Once you sign up to Pearl Talent and tell us your hiring needs, you’ll receive matching candidate profiles within hours.
Here are the benefits of partnering with us:
Partner with Pearl Talent and hire the top 1% at 60% less payroll. Get hand-picked candidate profiles now.
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