Do you know how much you cost the company when they hired you? Unless you’re in charge of bookkeeping or in a Human Resources related function, then probably not. Not many employees are aware of the true investment companies are making in them when they decide to hire them. In addition to an annual salary, there are many other costs that go along with hiring employees. Three of the biggest costs associated with hiring new employees are statutory costs, discretionary costs, and human resources expenses.
Statutory costs are mandatory expenses that all organizations are legally obligated to pay. These costs can include things such as:
- FICA (Social Security and Medicare)
- SUI (State Unemployment Insurance)
- FUI (Federal Unemployment Insurance)
Statutory costs will vary depending on pay rates and industries, but in 2011 these legally required benefits accounted for an average of 8.1% of total compensation for private sector employees.
Discretionary costs are employee perks and benefits that are not legally required, but are provided at the discretion of the employer. These discretionary items are things such as:
- Vacation, sick leave, or paid time off
- Paid holidays
- Paid leave (such as maternity or bereavement)
- Medical insurance
- Dental insurance
Discretionary benefits are the second biggest employment expense behind direct wages, but are very important to job candidates when deciding between companies to work for. Discretionary benefits are costly to employers, but many times can be the single factor that causes candidates to select one company over another.
Human Resource Costs
Human Resource costs are often the most overlooked hiring expense. These costs are more intangible than other costs and include items such as:
- Job advertisements
- Job fairs
- Employee referral bonuses
- Job board subscriptions
- Recruiter and HR salaries
The Society for Human Resource Management reports that recruiting cost per hire for an IT professional is between $9,777 and $19,219, and estimates HR overhead costs per hire of around 5% of total wages.
All of these extra costs can add up quickly, but there are a few things that can be done to combat them effectively.
Determine if a permanent employee is needed
Conducting a full search to fill open positions can require significant time and company resources. If a certain position only requires someone to fill a spot for a shorter period of time, it may make more sense financially for a company to explore other avenues of hiring.
Use a temporary staffing agency
Companies that use contingent labor to fill certain temporary or project-based positions have been shown to save money over those that don’t. A recent study by Staffing Industry Analysts shows that organizations who utilized contingent labor had a median savings of 13% of their expense budgets.
Employment costs are a major portion of an organization’s spending. Knowing what an employee will actually cost to hire will allow companies to project costs and expenses more effectively.