How Much Does it Cost to Hire and Onboard a New Employee

How Much Does it Cost to Hire and Onboard a New Employee
With the cost of onboarding and recruiting new employees, it is important to actively avoid turnover in your business.

Key points:

  • Recruiting and onboarding has changed significantly since the pandemic-forced pivot to remote work  
  • Competition for top talent means companies have to recruit efficiently and engage new hires from the first day
  • Bringing on a new employee can cost anywhere from few thousand to tens of thousands of dollars

The new norms of remote and hybrid work have altered many HR processes, both in the way tasks are done and their associated costs. This is certainly true when it comes to hiring and onboarding new employees. Since the pandemic began—which instigated the Great Resignation and created the current job-seekers’ market—recruiting costs have spiked by as much as 43%.  

The average cost of recruiting and onboarding a new employee is nearly $4,700, according to a 2022 benchmark report published by the Society for Human Resource Management. For an executive position, that cost jumps to just over $28,000.

In this post, we’ll break down those costs, and take a look at how recruiting and onboarding have changed since 2020. Our goal is to help you navigate today’s hiring process and set you, and your new employees, up for success.

The Basics of Hiring and Onboarding

Getting onboarding right is critical: it improves employee retention by as much as 82%. With the current costs of recruiting and onboarding new hires—and the inevitable loss of productivity when an employee leaves—avoiding turnover is essential.

Onboarding starts when the recruiting process ends, when you hire your top pick. Onboarding encompasses all the activities and processes involved in getting a new employee fully integrated into the organization. These generally include (but are not limited to):

  • Paperwork. Signing contracts and benefits agreements, collecting personal and banking information, and other administrative requirements.
  • Workspace setup, including computer and logins.
  • Orientation. Introducing company policies and culture, providing a workplace tour, and social introductions.
  • Role-specific training.

For more details, check out our ultimate onboarding checklist for 20 things you can do to ensure your new hire’s first day goes smoothly.

How the Pandemic Changed Recruiting

Thanks to the quick pivot to remote work, most companies and employees have embraced new communications technology. Virtual interviews—especially at early stages of the recruiting process—are now the norm. This can be a cost- and time-saver.

Remote work also means recruitment may not be limited by location, offering a deeper  talent pool, but also putting companies in a global competition for candidates. Companies must move quickly and sell themselves.

Given that recruitment can take about 36 days, and that top candidates are only on the market an average of 10 days, having an efficient process is a must. Talent management software and an Applicant Tracking System can help simplify and automate many tasks.

Post-pandemic, many professionals have reconsidered their goals and ambitions. They may be looking for companies that offer flexible working hours, work-from-home options, and additional benefits. According to Future Forum, up to 76% of workers say they want flexibility in where they work; 93% are looking for flexibility in when they work. Up to 58% of workers who worked remotely during the pandemic have said they’d look for a new job if they couldn’t continue to do so.

How the Pandemic Changed Onboarding

The traditional onboarding process was on-site: in-person meetings, building tours, team introductions, and socials. It also tended to include thick company handbooks and documents that were actually on paper. Onboarding a remote employee is entirely different.

While filling out required files and sharing company policies online is easy with today’s HRIS software, cultivating a sense of connection can be much more challenging. In fact, employees hired since 2020 say they feel less connected with their team and are more likely to leave their jobs than those hired pre-COVID-19.

Remote onboarding requires an intentional, tailored onboarding plan. Consider sending a welcome package to the new hire—with required equipment, yes, but also a personalized card or treat. Schedule informal virtual one-on-ones with various individuals within the company.

Recreating the office tour and water-cooler chats virtually is tricky. Read our post on remote onboarding for 10 innovative ways to help integrate, engage, and energize remote employees.

Today’s Recruiting and Onboarding Costs

The cost of bringing on a new employee, too, has changed since 2020. It’s impossible to provide a single formula that will work for every organization to calculate the cost of onboarding one new employee. When estimating the cost of onboarding in your organization, take into account:

  • Company size and structure: The larger the company, the more stakeholders involved, and the more complicated the onboarding process tends to become.
  • New hire experience: Junior-level employees may need more supervision throughout the onboarding process; those with more experience are likely more independent.
  • Time for productivity: Employees in many jobs are not expected to reach full productivity until week 12. A mid-level manager generally requires 6 months to ramp-up; a senior executive may take a year or more.  
  • New role vs. replacement: Creating a new role brings additional costs, but loss of productivity (since it is a new role and not the result of turnover) is not a factor.
  • Your onboarding process: Is your process well-defined? Do you take advantage of digital HR solutions to streamline the flow of information and track documents? Do you have a comprehensive employee handbook and accessible organizational chart?  How much bureaucracy and regulation do you have to work through? 

Estimate your recruitment and onboarding cost

While every organization is different, we’ve compiled a list of some estimated costs and cost-ranges for the steps in bringing on new talent. You can use this list as you design your own budget and for hiring resource allocation:

Recruiting

Consider the costs of advertising, paying for a recruiter (external recruiters often collect up to 25% of the employee’s annual salary), as well as the time costs to review and filter resumes, interview, and conduct background checks.

Welcome kit

That onboarding welcome kit could cost between $20 and $100 (in addition to required office equipment expenses). 

Training and orientation

Employees devote an average of 64 hours per year to training—longer for new employees who also need orientation and initial role-specific training. Companies spend an average of $1,296 on training per worker in 2021, according to the Association for Talent Development

Equipment

This includes laptop, cell phone, key cards, software, uniforms, and workstation (at home or in-office). Many companies offer between $500 and $1,000 for home-office set-up.

Benefits

This includes everything from gym memberships to childcare to health insurance plans. Remote employees may request an ergonomic assessment. Mental health and wellness benefits are valued by today’s employees. Benefits can cost an estimated 25% to 40% of the employee’s base salary. (And since the pandemic, this is edging higher).

Workplace integration

Social events, travel, and time spent team-building are important to retention rates. Virtual events may carry only the cost of the time spent planning and enjoying them; in-person events will have food, drink, and travel expenses associated with them. 

Onboarding and Talent Management Simplified

Finding, hiring, and onboarding a new employee in today’s landscape—in which candidates are being more selective and businesses are in stiff competition for top talent—requires planning and significant resources.

SentricHR’s talent management software can streamline many of the processes involved, from document management to candidate screening, talent management to training.

To learn more about SentricHR, schedule a demo with one of our product experts today!

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The Sentric Team

The Sentric Team

At Sentric, we help businesses make people management easier with industry-leading technology and standout support.

Sentric HR & Payroll Insights

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