What’s the Average Cost of Hiring a New Employee?

Hiring employees with the right qualifications and experiences is essential to keep businesses on the path to success. However, the average cost to hire a new employee is a major factor businesses need to be aware of. Many factors, such as experience, annual salary, benefit packages, and the role in question, influence the total hiring cost.

When employers and hiring managers know what factors influence cost per hire, they better navigate the recruitment process and find top talent for their organization. We gathered the most recent statistics to find out how much the average cost per hire is in the United States.

Cost of onboarding a new employee

New employees cost money. Not only do businesses need to pay the new employee’s salary, but they also need to pay for job advertisements, onboarding processes, bonuses, payroll taxes, and more. So, how much does an employee cost?

• According to the most recent report from the Society for Human Resource Management (SHRM), the average cost per hire is nearly $4,700.
• It takes an average of 41 days to complete the new hire process.

The exact amount listed in the report sat at $4,683 to hire a new employee. This amount is the national average, however. The actual cost varies greatly for each company.

• Many employers estimate hiring a new employee can cost 3 to 4 times the position’s salary.

For example, if a business hires for a job that pays $60,000, it could cost up to $180,000 or more to fill that role, according to SHRM. However, the cost of hiring a new employee is unique to the company in question.

The actual cost-per-hire will vary depending on a few factors, some of which can be controlled to reduce final costs:

• Company size
• Hiring volume
• The seniority of the positions being filled
• Location and role
• Response time to candidates
• Access to talent pools
• Hiring process

With a simple, in-house process already equipped with the supplies the employee needs, a business can spend as little as $2,000, as reported by Indeed. However, most companies should expect to pay anywhere between $4,000 and $20,000 to hire a new employee. This range does not include salary or employee benefits, which will add to total business expenses.

The U.S. Small Business Administration shares a good rule of thumb to remember about the cost of hiring a new employee:

• The cost is typically 1.25 to 1.4 times the position’s salary.

Interestingly, the SHRM Foundation chair-elect, Edie Goldberg, believes that 30% to 40% of hiring costs are hard costs and 60% are soft costs. Soft costs include the time managers and department leaders spend supporting the HR team in the hiring process.

Unfortunately, the average cost of hiring an employee in the United States has increased within the last decade. A SHRM report with data gathered from 2016 and 2017 shows that the national average to hire new employees was $4,425 at that time.

Part of this increase can be attributed to rising wages. The Employment Cost Index (ECI), which measures the change in the hourly labor costs to employers over time, demonstrates the increase.

• From June 2023 to September 2023, compensation costs increased by 1.1% for civilian workers.
• However, from September 2022 to September 2023, compensation costs rose 4.3%.
• In that year, salaries and wages increased by 4.6%.
• Benefits costs rose 4.1% in the same period.

If cost-per-hire relates to salary, then it is no surprise that the national average has risen along with wages and inflation.

The average cost-per-hire should be used as a guidepost, not as a standard for all companies. Luckily, tools are available that help businesses see what their actual costs might be. They can use a cost-per-hire calculator online or the equation below.

Costs after Hiring

Once the employee is hired, they will need to be onboarded. Onboarding is another expense a business should expect to pay for a new hire. Training the new employee accounts for some of those expenses.

• Businesses spend an average of $1,111 to $1,252 per employee on training.

Training costs vary depending on the new hire’s experience and the role’s position, but businesses should expect to spend some money on training. Also, training takes time. So, in addition to money, companies can also expect to spend time.

• One study found that the average employee spends more than 30 hours in training each year.

Training usually involves the new hire and an established employee, meaning that both employees will show a drop in productivity. Once the new hire can work on their own, however, productivity should increase.

In addition to training, businesses will need to pay their share of payroll taxes as well as for any benefits given to employees

• FICA taxes: Employers pay 7.65% of employee compensation up until the taxable maximum, which is $168,600 for 2024.
• Federal unemployment tax (FUTA): The FUTA tax rate is 6%. However, some businesses can receive a credit of up to 5.4%, reducing the FUTA tax rate to 0.6%.
• Employers must also pay state unemployment tax, which varies from state to state.

Additionally, depending on the size of the company, business owners need to pay for the benefits of the new employee.

• In fact, the U.S. Bureau for Labor Statistics (BLS) states that benefits can make up 31% of total costs for new-hire expenses.

Benefits can range anywhere from simple perks like free coffee and parking to large expenses like medical plans and health insurance.

Employers with 50 or more employees are required by federal law to offer health insurance or else pay a penalty. Some states require businesses to offer paid leave, while others do not. Additionally, employers can choose to contribute to retirement savings for employees via 401k plans.

All of these benefits will increase the cost of hiring a new employee. So, employers need to be aware of both required and optional expenses.

Hiring Freelancers

Freelancing has become more common in recent years, and many companies are utilizing new talent to remain competitive and reduce costs. According to Upwork’s most recent survey:

• 62% of companies already hire freelance talent.
• 56% of businesses increased their use of freelancers over the past 12 months.
• 58% plan to use more freelancers over the next 6 months.
• 66% of businesses plan to use more freelancers over the next 2 years.

Upwork explains that freelancers are cheaper than hiring full-time employees. Not only do businesses not have to worry about the average cost of $4,700, but they also don’t have to pay the normal share of FICA taxes.

Many independent contractors are just as experienced as any employee, if not more so, since they focus on one skill.

• Nearly 4 in 10 people in the U.S. workforce are freelancers.
• Over half have post-graduate degrees.

Freelancers typically are already skilled and experts in their field, so little to no training is involved. Employers only need to pay freelancers the agreed-upon rate and no more.

Companies that contract independent talent are generally more confident in their ability to find the talent they need when they need it.

• 78% of companies that hire freelancers are confident they can find the talent they need.
• 63% of companies that don’t hire freelancers are confident in their ability to find talent.

Freelancers give business owners an alternative route to employment. They are especially helpful if the budget doesn’t allow for too many full-time employees. However, there are pros and cons to hiring freelancers, and it’s important for businesses to consider those.

Hiring Costs and Experience Level

The national cost-per-hire average is nearly $4,700, but this cost is proportional to the search duration, job role, and salary range. Put simply, filling a higher-level position (i.e., mid-senior or executive) with an equally qualified candidate will cost more than filling an entry-level position. The time it takes to find the right person will also increase costs.

The average cost to hire employees based on experience:

• Entry-level employees cost about 20% of their salary.
• Mid-level employees can cost 1 to 1.5 times their salary.
• Executive-level employees can cost over 200% of their salary.

These estimates show the average cost-per-hire relative to experience. However, actual costs are dependent on the characteristics of the individual business. Executive positions in one company may cost less than those in another.

In an interview with SHRM, Nick Marshall, director of strategic solutions at ManpowerGroup in Milwaukee, cautioned against averaging the cost-per-hire across a whole organization. He said, “It may result in a number that is too simplistic and may not account for the nuances of the different roles you hire for.”

Instead, Marshall suggests businesses create sub-teams based on similar roles in the organization and find the average cost-per-hire for those.

Associated Recruiting Costs

Hiring employees is a complex task with various expenses. Upwork states that the common costs include the salaries of your recruitment team, marketing expenses, and background check payments.

• Sourcing a new employee with benefits can cost a company up to 40% of an employee’s base salary.

Some businesses go to external recruiters or recruiting agencies to help with the process. They take the time to look for potential candidates for the business. The associated cost depends on the specific agency.

• Employers can expect to pay a commission of 15% to 30% of the hired employee’s first-year salary.
• For example, if the new hire gets paid $50,000 annually, the recruiter will receive between $7,500 and $15,000.
• Some recruiters will have higher commission rates, depending on their experience and the industry.

Some businesses have internal recruiting teams. Quantifying the costs associated with internal teams is more difficult as they often handle many HR responsibilities, not just recruiting. But the average HR specialist’s salary is around $53,130 a year. So employers can expect to pay the salary costs as well as the associated recruiting costs.

Glassdoor compiled a list of external and internal recruiting costs, giving employers a better grasp of all the areas that will cost money during the recruitment phase.

Background checks are essential when bringing a new team member on board. Luckily, most are not very expensive.

• Simple background checks start around $10.
• More complicated background checks can cost more than $100, depending on what information the employer needs.

Businesses that are interested in more extensive background checks will have to pay more money, but they will provide employers with:

• Employment history
• Education verification
• Drug testing
• Eligibility to work
• Visa status
• Criminal history

Where to Look for Candidates

Talent acquisition can be difficult. Millions of people are looking for jobs every day, and businesses have to find ways to attract the attention of the right candidates.

Businesses have a few options for finding new employees. The best way to find potential candidates is through job posting platforms. Posting jobs on these job boards costs money, which varies by platform.

• On average, businesses should expect to pay around $300 a month.
• Though some places are as low as $99 a month, while LinkedIn charges nearly $500.

Career fairs and other employment events are other great places to meet prospective candidates.

• Businesses can expect to pay a fee of around $100 to participate in an event.
• Businesses will also need to pay for the booth and the staff’s time, creating additional costs.

Advertising on social media has become more and more common in recent years.

• 63% of businesses allocate 5%-40 % of their advertising budget to social media ads.
• 48% typically spend $1,000 – $25,000 per year on social media advertising.

The great thing about advertising on social media is that businesses can promote job openings and their brand at the same time, consolidating expenditures.

The Bottom Line

The onboarding process is vital to running a business, and ensuring it is run efficiently and cost-effectively is necessary. Hiring a new employee costs $4,683. That means businesses spend, on average, nearly $4,700 every time they hire an employee.

This cost varies greatly, however. Some new hires will cost more depending on their skill level, how long it takes to onboard and train, and how long the recruitment process lasts.

Businesses must also pay 7.65% of FICA taxes, advertisement fees, and benefits. In fact, the Bureau of Labors Statistics says that benefits can make up 31% of total costs for new-hire expenses. Employers and HR professionals need to keep track of all the candidates in the hiring process to ensure expenses are spent correctly. Applicant tracking systems are a helpful tool businesses can invest in to ensure the recruiting process goes smoothly.