Training

It can take a new employee quite a while to get comfortable in their role and achieve full productivity. A study from Mellon Financial Corp. found that it takes an average of 8 to 20 weeks for new hires to reach full productivity. And while you’re working on onboarding and training a new employee, your productivity suffers too. The same study estimated that loss of productivity costs between 1% and 2.5% of total revenues.

Travel & Relocation Expenses

What happens when you can’t find the person you need to hire in your geographic location? You might be able to fill the role with a remote worker, but when physical presence is essential and that’s expensive.

Relocating an employee can include costs such as:

• Travel costs for in-person interviews and home-finding trips
• Assistance in selling a home and finding a new one
• Moving and transporting household goods
• Temporary housing
• Employment assistance for an accompanying spouse

Payroll Taxes

After salary, one of the most significant costs of bringing on a new employee is payroll taxes.

The U.S. federal payroll tax, also known as FICA, includes Social Security and Medicare taxes paid by employers. Currently, the FICA tax rate for employers is 6.2% of wages for Social Security and 1.45% for Medicare. This can vary from country to country, but no matter where you company is, you have a lot of money to spend in payrolls. Even more, you need to know what to pay, how and this can take a lot of, not only money, but also time.

Benefits

Will you offer benefits to your new employee?
The cost of offering employee benefits varies widely depending on the types of benefits offered and the employer’s level of contribution to things like health insurance premiums and retirement accounts. Human resources and payroll service company Paycor estimates the cost of employee benefits to run up to 30% of overall labor costs.

Office Space & Equipment

Where will your new employee work? Depending on the type of work they’ll be doing, you may need to provide office space for them to do it.

These costs are tough to estimate since the cost of office rent can vary widely depending on location, office size, and amenities.

You also need to outfit the office with a desk, chair, computer, phone, and other equipment and supplies. Again, the final cost depends on the size of the space you need to fill and the quality of the furnishings you purchase.

 

One more thing: Don’t think you can avoid these costs entirely by having your employee work out of a home office. While you can avoid overhead costs such as office rent and utilities, more employers today are reimbursing employees for some of their home office expenses. In some states, it’s mandatory. For example, in California, employers must either provide remote employees with the tools necessary to perform their work or reimburse them for these tools.

As you can see, the real cost of hiring an employee is difficult to calculate. But don’t let these numbers dissuade you from expanding your team when the time is right. To grow your business, at some point, you need to get the right team in place and start delegating tasks.

 

If your company wants to hire more workers, unless you are prepared for the time and costs, you may consider the option of an EOR (Employer of record). Contact us here