If your business is evolving and you're looking to expand your workforce, it's time to hire new staff. This article outlines five direct and indirect costs associated with the hiring process that business owners commonly fail to observe. Then, we offer tips on how these expenses can be managed, so you can hire new staff in the most economical and effective way possible. Finally, we lay out our final thoughts and answer some frequently answered questions to make sure no stone is left unturned.
At some point in your business's lifecycle, you'll need to onboard some new talent. Hiring employees is exciting, and it often represents an exciting turning point in a company. However, despite the benefits of adding fresh faces to your team, the process can come at a cost. From payroll to sign-on bonuses, most business owners are familiar with the standard expenses that come with hiring. But beneath these obvious costs lie many hidden costs that have the potential to trip up business owners who are less financially savvy.
To help you avoid any nasty surprises when you're searching for the best candidate, this article outlines five commonly overlooked costs associated with hiring. Then, to help you assuage this potential fallout, we cover various ways you'll be able to manage these expenses, so you can build your team without draining your finances.
5 COMMONLY OVERLOOKED HIRING COSTS
1. Recruitment software
Whether you opt to hire in-house or use external recruiters, chances are you’ll be relying on some form of recruitment software to guide you through the process. Recruitment software can be used for everything from finding prospective employees to sending out offer letters. For businesses looking to cut costs during the process, this technology can be a valuable tool. However, despite its relatively low price point, the cost of recruitment software shouldn’t be disregarded.
Depending on the scope of your company, your chosen software and its type of pricing model, the cost of these services can vary. If your company chooses to buy the software outright, you can be looking at forking out anywhere between £500 to £2,000 for a permanent licence. Alternatively, if you’d rather pay for the service on a recurrent basis, it’s common to pay around £10 to £50 per month, depending on your software of choice.
2. Background checks
Advertising your company’s job openings to the public can be daunting. Therefore, when fishing in the talent pool, you need to find a way to verify the legitimacy of potential candidates. Not only does this ensure the safety of your company, but it also prevents unnecessary time and resources from being wasted. An effective way to screen prospective employees is by conducting DBS checks.
Carrying out Disclosure and Barring Service (DBS) checks are not mandatory, but the vast majority of employers request them as part of their recruitment process. There are three different types of checks, basic level disclosure, standard level disclosure and enhanced level disclosure. The type of test you choose to issue will vary depending on the job and the duties in question. At the time of writing, these checks cost £39.40, £51.80 and £69.80, respectively.
3. Staff time
Finding the right candidate for your company can take time. And unfortunately, for many small businesses, time is money. From writing job posts to screening CVs and scheduling interviews, recruitment activities take a large chuck out of your workers day. And even after you’ve identified a perfect match, your team still needs to spend their time and resources onboarding and training the employee up to a suitable standard.
If you’re a small business, it’s likely these duties will fall on a member of your HR team. While this saves on outsourcing costs, it takes away from the time they could use working on other key areas of the business. While these costs aren’t concrete, they can impact your business in the long run, especially if the recruitment process drags on for longer than anticipated.
4. Lost productivity
When talent leaves your company unexpectedly, it can be hard. Not only is it bad for team morale, but it can also harm a business financially. This is because when a role remains vacant, output reduces and a company’s bottom line can become affected. Therefore, another indirect cost associated with hiring is lost productivity.
Whether you’re out a project administrator, salesman or HR professional, every role services its specific purpose. If you choose to keep these roles empty until you hire a full-time replacement, you may lose out on precious revenue-generating opportunities. Alternatively, if you hire freelancers or get other members of your team to pick up the slack, you could face ongoing payments or sacrifice productivity in other areas of your business.
Whichever way you play it, your business will be out of pocket until your new recruit takes up their new position. Therefore, it’s always best to make your recruiting process as streamlined as possible so you won’t need to waste more productivity than is necessary.
5. Unsuccessful hires
When searching for talent, every employer wants to find the perfect candidate. But while acquisitions are successful more times than they are not, ‘dud hires’ do happen. Even after all of the time spent narrowing individuals down, there are a number of reasons inadequate workers can fall through the cracks of the hiring process.
They could have lied about their experience, oversold their skills, or simply perfected the art of coming across well in interviews. Whatever the reason, they can cost a company a lot of money. And after they’ve signed an employment contract and been welcomed into your team, it isn’t always easy to replace them with more efficient workers.
In addition to the costs of new recruits underperforming, there’s always a chance that employees won’t stay at your business for long. Research shows that 22% of workers who leave their jobs do so within their probationary period. Not only does this waste the company’s time and money they spend on the initial recruitment, but it also leaves them in square one, with an empty position to fill.
HOW CAN YOU MANAGE THESE EXPENSES?
As you can see, the hidden costs of hiring can burden businesses in more ways than one. To help you scale back the expenses and deal with their potential fallout, next, we cover various ways you can manage these outgoings.
Advertise your job accurately
With all of the time and money your business invests into hiring, you want to get it right the first time. If you’re serious about finding the best fit for your company, you need to advertise your job correctly.
An effective job post will clearly outline the job vacancy, its key responsibilities, a bit about the organisation and company culture, and a vision of where the company is expected to be heading in the future. To cover all bases, it's also recommended that employers offer an overview of the application process, so candidates will know what's expected of them.
By being completely transparent about what you’re looking for, you’re less likely to attract time wasters or ill-fitting individuals. Not only does this save your company time and money, but it also prevents job seekers from pursuing a job that’s not right for them.
Streamline the process with technology
The recruitment process is filled with tedious, time-consuming tasks. Whether you outsource these duties to third-party recruiters or handle them in house, it may be worth seeing what practices can be automated through recruitment software.
Recruitment software can streamline almost every stage of the hiring process—from sourcing applicants to onboarding and everything in between. As we've covered earlier in the article, most recruitment technology comes at a premium. However, by improving the efficiency of the process and sparing up employee time, the service's return on investment makes it a no-brainer for any small-to-medium-sized enterprise (SME) looking to recruit new talent.
Seek alternative financing
Even after taking every precaution necessary, the costs of recruitment can still be daunting. But don’t worry, if the price of hiring new staff is too steep for your business, there are options out there.
Whether you’re after a short-term cash injection to cover initial recruitment costs or more consistent funding to contribute towards your new employee's payroll, alternative financing can support your business in its quest to find new talent. And if you’re worried about the risks involved with borrowing, rest assured. Business owners can then pay back these loans in instalments once their investment in a new hire starts paying off.
If you’re considering using alternative finance to manage the costs of hiring, you should only pursue accredited lenders like Kriya. Kriya offers a range of solutions that are designed to remove cash flow barriers from SMEs. By choosing a trusted provider like Kriya, you can fund your hiring efforts while keeping risks to a minimum. If this is something that interests you, you can learn more about our offerings here.
Whether you’re looking to replace former workers or expand your team, it’s imperative that you factor in the hidden costs of hiring. By doing so, you can recruit new talent in the most cost-effective way possible. This being said, the most successful way to cut the cost of hiring is to eliminate the need for recruiting in the first place.
By checking in with your team regularly and rewarding hard work, staff retention can be kept as high as possible. Not only is this the secret to a happy, united workforce, it also frees up money that business owners can invest into other key areas of their enterprise.
FREQUENTLY ASKED QUESTIONS (FAQS)
What are the hidden costs of hiring? Aside from more generic hiring costs like outsourcing recruiters, sign-on bonuses and employee payroll, there are a number of hidden costs associated with hiring. These include monetary costs like the price of recruitment software, background checks and less direct costs linked to lost staff time, reduced productivity and unsuccessful hires.
How much does recruitment software cost? Depending on the scope of your company, your chosen software and its type of pricing model, the cost of these services can vary. If your company chooses to buy the software outright, you can be looking at forking out anywhere between £500 to £2,000 for a permanent licence. Alternatively, if you’d rather pay for the service on a recurrent basis, it’s common to pay around £10 to £50 per month, depending on your chosen software.
What types of DBS checks can employers use? There are currently three different types of checks available from GOV.UK. They include the basic level disclosure check, the standard level disclosure check and the enhanced level disclosure check. The type of test you choose to issue will vary depending on the job role and the duties in question, and they cost £39.40, £51.80 and £69.80, respectively.
Why should you advertise your job role accurately? With all of the time and money your business invests into hiring, you want to get it right the first time. By being completely transparent about what you’re looking for, you’re less likely to attract time wasters or ill-fitting individuals. Not only does this save your company time and money, but it also prevents job seekers from pursuing a job that’s not right for them.
What essential features should a job post include? An effective job post will clearly outline the job vacancy, its key responsibilities, a bit about the organisation and company culture, and a vision of where the company is expected to be heading in the future. To cover all bases, it’s also recommended that employers offer an overview of the application process. This way, candidates will know what’s expected of them.