HIRING EMPOLYEES COST

Cost Analysis

Do you have any idea of what it costs to hire a new employee? Sometimes when we see all the people coming to the door looking for jobs, we think employees are like potatoes on a conveyer belt: toss out the reject and select another one. But employee turnover costs money, usually a lot more than we realize. Costs include everything from the cost of running an ad to screening and interviewing the candidates, to the time and money to train these new people. Some companies have identified costs ranging from 35% to as much as 100% of an employee’s annual salary.

We can do a lot to minimize employee turnover by doing as much as we can to make sure we hire the right person in the first place.

Small Group Exercise

Divide participants into small teams to work on this exercise. If possible, have each team work on a particular type of employee. For example, shop floor supervisors might work on the cost of hiring an assembly line employee, while administration might work on the cost of hiring a new accounting clerk or a vice president of marketing.

Take a few minutes and have participants do their own analysis of the real cost of hiring a new employee. Each item that is applicable is a three-step process. Figure out who does it, how much time it takes, and what that person’s time is worth per hour. (And don’t assume secretaries and receptionists work for free!)

Costs to Consider

Lost productivity

Not only will you lose productivity while the job is vacant, the interviewing and training process can also consume resources and time.

Recruiting costs

Don’t forget somebody’s time to place an advertisement. They must check what the organization is looking for, prepare information, verify copy, send the ad to the newspaper, and then handle phone calls, inquiries, and resumes.

Screening costs

This includes reviewing resumes (based on a resume short-listing guide that has been prepared by someone, we hope). Also included is the cost of responding to directed inquiries and requests for information. Don’t forget any letters of regret you send out, including paper, postage, and time to type and sign.

Interviewing costs

This includes time spent contacting candidates, arranging interviews, preparing for the interviews, and conducting them. You’ll also need to type, sign, and send more letters of regret.

Testing costs

If you do testing, there is a cost associated with monitoring and rating the tests. Doing group testing? Divide total cost by number of candidates who will be interviewed.

Evaluating costs

This includes time spent evaluating, checking references, and making the selection.

The cost of making the job offer. Figure in time spent negotiating with the candidate, arranging start date, and other arrangements that must be made before the candidate arrives. (Business cards? Supplies? Locker and keys?)

Training costs

The money associated with taking the time to meet the candidate; introducing him/her to others; providing an orientation; and providing WHMIS or other training.

Other costs

As well, consider the cost of reduced efficiency as the new employee learns the job, including time spent by someone answering questions and showing him/her the ropes. There may also be other employee turnover costs associated with your organization.

Add these costs up to get the total cost of replacing one employee.