Preparing to hire your next employee? How much will it cost you? There are several steps an employer will need to make—each contributing to the overall time and cost associated with hiring a new employee. The actual cost of hiring begins accruing before a candidate starts their first day. Basically, your costs involve more than just the salary and benefit calculations for the employee.
“Many small businesses fail to consider the time needed to prepare for hiring a new employee, especially the cost of current staff time associated with preparing, screening, interviewing, and hiring,” says Hope Paryzek, Owner of Principle Strategies. A solid recruiting process involves:
- Create/Review Job Description and Compensation Package (2-4 hrs.)
- Write and Post Ad on Job Board (2.5 hrs.)
- Review Resumes and Select Top Applicants (23.5 hrs.)
- Prescreen Candidates (4 hrs.)
- Interview Candidates (3 hrs.)
- Wrap Up and Job Offer (7.5 hrs.)
How much are you spending? In general the cost is 2-3 times the salary of the person leaving the job. Applying actual costs, the average American business spends $57,000 to hire a new employee when factoring in hiring costs, compensation, and cost of covering position while vacant. For small business the cost is about $8,000. To put in to further perspective, the average cost to replace an $8 an hour employee is about $5,500, not including benefits.
Where should the bulk of your recruiting time be spent? Paryzek believes business need to spend more time on application review and prescreening steps to weed prospects and avoid bad hires. According to industry experts 43% of applicants misrepresent themselves on their resume such as their credentials, length of employment, skills, responsibilities, and salaries.
How can your business improve their hiring practices? The first place to start streamlining your hiring practices is the job description. “The job description is a living document,” says Paryzek. “It forms the basis for job ads, interview questions, candidate expectations, training, performance evaluations, and compensation.”
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