How much does it actually cost to hire a new employee?

How much does it actually cost to hire a new employee?

Recruiting the right employee is crucial to the future success of any organisation, however most companies underestimate the cost of recruitment by 90 – 95 per cent. This can often lead to poor decision making that not only fails to reduce expenditure, but could ultimately increase costs in the long run.

cost of hiring

It’s widely known that costs can vary significantly by industry sector and geography, however it’s vital to identify and consider all the potential costs involved in hiring a new employee before starting the recruitment process.


Costs for consideration

It’s easy to forget that an employee, in terms of cost, means more than just the salary, which can be substantial in itself. Based on research by BE Offices, here’s an example of the key costs businesses need to consider when hiring new talent, using an average salary figure of £27,600, provided by the UK government.

  • Recruitment – need to consider advertising, interviewing and hiring fees, especially for specialist skills. Recruitment agencies usually charge 20 – 30 per cent of the final salary, so based on the UK average salary this would be in excess of £5,000. Or if you use social media or job websites, the cost is estimated at £200 – £400.

Estimated average cost: £3,000

  • Salary – depends upon experience, skillset and position.

Estimated cost: £27,600

  • Bonus – not all roles pay bonuses, but UK government figures suggest the average bonus is six per cent of total salary.

Estimated cost: £1,656

  • National Insurance – employers are legally obliged to pay towards their full-time employees’ National Insurance, with the standard rate of an employer’s Class 1 NI being 13.8 per cent of total pay.

Estimated cost: £4,037

  • Pension – UK law stipulates that employees are automatically signed up to a basic company pension scheme which is a minimum of one per cent of workers’ monthly salary, rising to three per cent by April 2019.

Estimated costs: £276 (increasing to £828 by April 2019)

  • Onboarding and training – initially there is the cost of management time to bring employees up to speed, then future in-house or external training. Figures show that the average cost per employee is £1,000.

Estimated cost £1,068

  • Office space and equipment – if you’re not replacing an existing employee you’ll need to provide a new desk and equipment. The IPD Blue Chip Office Index suggests the total property cost per occupant is £4,800.

Estimated cost: £4,800

  • Miscellaneous costs – can be difficult to quantify, but still need to be considered. For example, induction costs, holiday cover, healthcare, maternity cover, sick leave, company cars, gym membership etc.

Estimated cost: £8,000

So, you can clearly see that the estimated total cost is close to £50,000, which is far higher than just the original salary figure of £27,600.


Minimising the costs

It’s important to consider what other alternatives are available to minimise your recruitment costs, while also ensuring you’re recruiting the right people for your business.

The Access to Employment programme is a great option for Lancashire businesses. The programme is fully funded at no cost to your organisation and provides businesses with access to a variety of potential employees, keen to work for your organisation.

The programme removes the expense of using a recruitment agency or placing costly job adverts. Plus, our team will review and sift through applications to ensure you see the most suitable candidates, saving you a great deal of time and money.

Also, by training and nurturing people’s skills you can help minimise attrition costs in the future. Employees who are engaged and motivated are more likely to be loyal, productive members of your business for years to come.

Use our contact form for more information on how Access to Employment can help minimise your recruitment costs.