Hiring a new employee can be expensive.
There are a number of hidden costs associated with hiring new employees. From the recruitment fees to the basic salary, benefits, employment taxes, equipment and more; hidden fees can quickly add up.
To prevent these costs from impacting your business it’s important to consider all the expenses. The article below outlines these costs with an explanation of the most common you may incur.
Recruitment Fee’s
Companies will often forget to consider the recruitment fees associated with finding a qualified employee. However, finding a qualified candidate can take an extensive amount of time and money.
Therefore, it’s important companies carefully analyze their budget to allow for recruitment. For example, you may need to pay recruiters to locate individuals, for the cost of advertisements (and postings) as well as time and labor spent interviewing candidates that can take away from company time.
Basic Salary
Another hidden cost that’s associated with hiring a new employee is their basic salary. Basic salaries can vary depending on a variety of factors including the type of job it is and the industry their being employed in.
Therefore, it’s critical for employers to analyze the position to ensure they can afford to pay an appropriate salary to the individual.
Benefits
Employers will also need to consider the additional cost of employment benefits that a new hire can have. These benefits tend to vary depending on the type of position, industry, and location of the job.
However, the most common types of benefits that companies should budget for include: life insurance, health coverage (for the individual and their families), long-term disability insurance, dental plans, retirement offerings and more.
Further, there are also ‘self-funded’ plans where the employer contributes to the administrative costs at approximately 1.25 to 1.4 times the base salary range which should be budgeted for.
Employment Taxes
It’s also important that owners prepare their budgets to include any employment taxes. It’s vital that employers include in their budget an allowance for Social Security/FICA, Unemployment/FUTA, and Medicare in addition to their base salary
These types of expenses can easily be forgotten by employers and end up costing businesses more than anticipated. Plus, it’s important to note that workmen’s compensation premiums will vary depending on the category of the new employee which can increase the cost significantly.
For example, the premium on clerical employees is only about 0.3% whereas a manufacturing position can be closer to 7.5%. Therefore, all employers will want to verify the added taxes new employees will have to ensure the company budget allows for it.
Equipment
The final hidden cost that employers will need to consider before hiring a new member is the equipment fees.
New employee will often require some form of physical space to work (which will include a cost per square footage for their office or desk location), furnishing for the space to allow them to work, computers, laptops, training manuals, phones, and mobile devices will all need to be taken into consideration before agreeing to hire on a new employee.
Further, any type of specialty or safety equipment that may be required to do the job needs to be considered to prevent overspending.
Overall, there are a number of hidden expenses associated with hiring a new employee. Employer will, therefore, need to consider the costs carefully by analyzing their budgets to ensure they can afford to hire a person for the position. If you’re a small business owner that’s interested in hiring new personnel to consider getting in touch with a member of our team for some personalized advice on the hidden fee’s associated with doing so.
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