The Hidden Costs of Onboarding a New Employee 

So, you have decided you want to onboard a new employee for your organization after conducting an in-depth analysis of your human resources requirement, launching a recruitment drive, running background checks, conducting interviews, and getting the associated paperwork done. But have you considered the estimated hidden hiring cost per employee?

According to a survey conducted by SHRM, the average hiring cost can be around $4129 per employee. Of course, the number can go up or down based on your requirements and the quality of human resources you are looking to employ. However, it is important to consider that hiring an employee can cost not just monetarily but even non-monitory, including varied visible and invisible costs.

Why must we look into the hidden hiring costs of onboarding an employee? Because like any other business decision, hiring too comes with its own financial cost. By getting a clear idea about the varied hidden costs of onboarding a new hire, we can plan more systematically without leaving any blind spots.

If we try to enquire deep into the question what are the various factors that contribute to the overall hiring cost, then we will be able to not only plan better, but we will also be well prepared the next time we hire someone new.

The following are some of the factors that can indirectly affect the hiring cost and some ways you can reduce them:

Administrative and onboarding procedures

When you decide to onboard an employee, you have to undertake a grueling paperwork process that includes documenting tax details, preparing employee handbooks, filing NDAs, agreements with third parties, and more.

Documentation and paperwork turn out to be an administrative expense and cost a lot of time that can cause an increase in the overall hiring cost, not to mention there is an increased risk of loss of essential documents. The process of documentation coupled with other administrative procedures can add more to the time loss.

According to a SaplingHR report 2021, onboarding an employee involves around 54 activities. One way to solve this is by digitizing the paperwork as much as possible. This will not only save you time but also keep a backup of your documents. For an innovative approach, integrate a human resources management system that is a comprehensive solution that encompasses all the administrative tasks involved in onboarding. Another thing that you can do is to ask new joinees to complete their paperwork a day before their joining such that their paid time is not wasted.

Delayed productive outcomes

There is a hidden hiring cost associated with deferred productivity that happens as a result of new employees taking the time to get familiar with the work environment, network and set up new communication channels, and build relationships.

These ‘launch’ processes take up their time. For example, they might want to get familiar standard operating procedures before they get ready to operate or perform their actual duties.

This might take some part of employee’s paid time before they become fully productive and speed up their process. Due to this, it is difficult for them to deliver productive outcomes and get more work done.

What the organization can do to solve this and decrease this hiring cost is to design an onboarding plan that includes fixed period that is set for the employee for probation. During this period, the employee is to be trained vigorously. This means imparting them with the duties and procedures that he or she is responsible for.

A feedback mechanism is to be established with them to make sure that they get the resources they need at times and are self-sufficient in delivering and getting back to their productive work system.

Cost associated with early turnover of new hires

One of the most immediate problems that organizations face is early attrition caused due to improper onboarding processes. According to a research report, over 4% of new hires leave their job due to bad onboarding experience.

This points towards how important it is to provide a new hire with a smooth onboarding process that is designed to cater to each and every training and resource need of the employee by conducting an onboarding needs analysis.

A Gartner research report says that only 40% of employees feel a sense of belonging in the organization they are working in, and only 32% of the new employees that are hired within 12 months feel a sense of belonging.

Another research report by Glassdoor, an effective onboarding process can improve retention of new hires by over 82 percent and productivity by over 70 percent. It can significantly reduce the hiring cost by over 30% since the first six to eight months determine whether an employee will be an early leaver or a long-term loyal member of the organization.

Therefore, it is very important to structure onboarding processes to avoid early turnover. With the pandemic and the regulations that organizations are liable to comply, virtual onboarding is the next challenge that organizations need to solve since there is a significant reduction in opportunities to garner organic culture.

Resourcing cost on onboarding

Onboarding an employee is an investment that organizations make; therefore, it is critical for them to make sure that the overall process doesn’t cost them more than they intended.

However, it is implicit to assist the new joinee with all the necessary resources such as workstations, laptops, permits, accesses, and others which is an expense that organizations have to incur, thereby becoming a hidden hiring cost.

If you are to hire a new technological worker, you have to invest a significant amount in the acquisition of technology which will also become part of this expense.

Adding to this, the organization also has to take care of the resources needs of remote workers, which is also an expense, for example buy an extension of a software license that supports remote platforms that could turn out to be an additional expense for the organization.

Learn how to carve an effective onboarding plan for your organization with VM Consultants. We offer a range of consultation services that helps organization executive effective growth.

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