The Cost of Making a New Hire

The Cost of Making a New Hire

How to “Invest” Well in New Hires

Hiring a new employee can be compared to making an investment

A new employee comes with more risk and cost than salary and benefits. A new hire decision has to factor in recruiting costs, hiring time and effort, new trainings and productivity loss, and potential turnover. When it comes to the cost of a new employee you need to think well beyond their hourly wage.

Hiring a new employee can be compared to making an investment. When you are well-informed, taking the time, making the effort, and, yes, spending the money to invest well, your risks are low and your return is essentially guaranteed. In order to avoid making a bad, new hire investment, factor in all the costs effectively.

The Cost of Finding

The first step in any hiring decision is reaching out to the right candidates. The time it takes to post a job, including the cost to post to well-trafficked job boards and place advertisements, all contribute to the total cost of a new hire.

Even after you have collected a pool of applicants, screening applicants demands the time of current employees. Interviews, manually screening applicants, and searching resumes and qualifications are all ways to stay informed on your new hire investment. Still, most organizations overlook a more secure way to protect the costs associated with making a new hire: Pre-hire assessments.

A pre-hire assessment evaluates workplace personality traits that you cannot discover by looking through a resume or detailed application. Pre-employment tests are standardized measurement tools that help ensure a safe, productive, and satisfying work environment. Using them makes hiring a statistical and data based decision that helps reduce risk of a bad hire and all of the ramifications that come with it.

Pre-employment tests are standardized measurement tools that help ensure a safe, productive, and satisfying work environment

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New Hire Losses

A new hire presents a situation where your organization must accept the required cost in order for future growth. A new employee requires the obvious salary or hourly wage, but there is also an unavoidable cost in new equipment, onboarding and new hire paperwork, training videos, background checks, lower productivity, and potential cost for mistakes of inexperience or lack of training.

All these costs eventually lead to a more productive future and increased revenue. Investopedia estimates the “break-even” point at over 6 months after the date of hire for mid-level managers and 5 months for an employee to reach full productivity. An employee who leaves before reaching this mark is a total loss in investment.

Turnover Risk

Make the right investment by using the correct tools

Recruiter Box estimates the cost of a new hire between $1,000 and $5,000. Yet the impact of a “bad hire” reaches much deeper than the simple dollar cost. Recruiter Box suggests a quick turnover or “bad hire” can negatively affect productivity, recruiting time and costs, employee morale, and client relations.

Turnover can be limited through not only establishing your company’s employee friendly work environment, but through your organization’s hiring strategies. Make the right investment by using the correct tools such as targeted job boards, pre-hire assessments, relying on employee referrals, and using interview screening options to minimize the risk of quick turnover and total loss on your investment.


In knowing the real cost associated with making a new hire, we can conclude the best option is to simply invest well. Do what you can to make a smart decision and a safer investment. The less you put into your hiring plan, the higher the risk in total loss.

The more effort, planning, and tools you use to ensure you make the right hiring decision, the safer your investment will be. The temptation to minimize cost and maximize risk often leads to unforeseen negative impacts that have very high costs. Instead take the most cost effective steps to ensure you are hiring effective employees. Don’t waste your investment trying to hit the jackpot. Use tools available to you in order to minimize the risk and capitalize an employee’s productivity.

See more on the best way to assess your applicants by viewing ApplicantPro’s Assessment Options.

Or to schedule a demo of the ApplicantPro software click here.

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