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The True Cost of Hiring

By Tammy Williams (Canadian HR Reporter)

Take the recent example of a company looking to hire a senior client services associate with a salary of $40,000. Here's a breakdown of how the time was spent:

Five staff members deciding to hire a senior client service associate: 10 hours.
Developing a job description: three hours.
Deciding to call and placing the calls to people within their professional networks in search of a suitable candidate: five hours.
Posting the position internally and on the company Web site: 20 minutes.
Responding to the 50 resumes received in this process by e-mail and conducting 10 phone interviews: five hours.
Sorting resumes into various skill categories: three hours.
Inputting the resumes into the company's database: two hours. Although the company was strategic in its search, roughly 28 hours was spent over a period of eight days with this process and a suitable candidate was not found. The company then turned its search outside the organization.
Deciding to write and place an ad in the local newspaper: one hour. · Cost of the ad for two days: $500
Going through more than 600 resumes via screening, sorting, scanning and inputting into the database and conducting telephone interviews: 53 hours.
Five candidate face-to-face interviews with the office manager: seven hours. The office manager then had to reschedule the top three candidates for a second round of interviews with the three hiring managers.
Two pre-employment references on all three of the candidates completed by the office manager: three hours due to having to leave voice-mail messages.
Hiring managers completing the three face-to-face interviews and comparing interview notes with each other: five hours.
Unanimously agreeing on which candidate to offer the job: three hours.

The offer was presented to the candidate who was their first choice. This required the office manager's negotiating skills in getting a compensation package mutually agreed upon. The candidate accepted the offer and the start date was set. Now the office manager has to order business cards, stationary and new furniture and arrange for orientation and training time. This would involve the new hire shadowing another employee in a similar role for about eight weeks.

To calculate the true cost of hiring for this new staff member, one has to add up all the activities attributed to the hiring process, such as the compensation of those involved, the purchase of office supplies, training, lost productivity and the learning curve. In this case, it added up to about $14,000, or 30 per cent of the starting salary.

The hiring process doesn't even end at this point. In this case, because the company did all of the recruiting on its own, it would be faced with the daunting task of repeating the hiring process of the new staff member decided to leave or was terminated for not meeting the three-month probationary periods job expectations.

The cost of hiring a new staff member can be significant. But it can often get buried and overlooked in day-to-day operations, as organizations focus on more tangible costs.

Companies generally do a great job in finding cost effective office and warehouse space, equipment and supplies. These are easy costs to measure, and therefore get far more scrutiny.

But most hiring managers and business owners can't give a definitive answer as to how much hiring a new staff member costs simply because a dollar value has never been attached to the process in their organization. A quick look shows just how many resources are required to fill a vacant position, and how quickly the costs can add up.