How Much Does an Employee Cost? Details of the True Cost of Hiring an Employee

How much does an employee cost? We answer this question a lot. Hiring a new employee is not as simple as anyone thinks it is – aside from the salary itself, there is the cost for the recruitment, training, equipment, taxes, benefits, and the list goes on and on. Hiring is the most difficult and most important task as a business owner. We are only as good as the people we hire. Yet, most people don’t really consider the full cost of hiring an employee.

  • Recruitment Expenses

The cost of simply finding the right person to hire can be hefty – there are potentially high costs in the process of recruiting alone: advertising, the time cost of all the people involved in the head-hunting (human resources and/or manager who post ads and review prospective applicants), the time it takes for interviewing, background checking and sometime travel/relocation costs.

  • Training Expenses

After the person has been selected, employers need to provide adequate training so new hires can do the work and start producing for the company. This turns out to be the costliest investments a company can make. Statistics show that on average companies spend $1,200 annually per employee, but that is higher for new employees as there is the costs of the training and then add the manager’s time on top of that. Investing in your staff can payoff big time, but the startup costs can be quite costly.

  • Basic Salary and Benefits Expenses

This depends on the industry and the position that the new hire applied for. But the cost of salary should not be the only one to consider – benefits such as free coffee, life insurance premiums ($150 for a typical $50,000 salaried employee), health coverage premiums (ranging from $2,000-$3,000 for single persons; $6,000-$7,200 for families – (source:, paid vacation and sick days all come at a premium. Other potential benefits include long-term disability insurance ($250), dental plans (ranging from $240-$650), tuition reimbursement, retirement plans, and more. In a study done by Joe Hadzima, he said that the salary plus benefits usually totals in the 1.25 to 1.4 times the basic salary range. So, a salary plus benefits package of an employee earning $50,000/year could equal to $62,500-$70,000.

  • Workspace and Equipment

As an employer, you may be required to provide physical space to your new employee. While some employers are embracing a remote workforce, some positions don’t lend themselves to this option. The rent per square foot varies on the location and the quality of the facility. Work cubes are typically 8’ x 8’ in size. Furnishing the space (even with used work cubes) will cost you at an estimated amount of $2,000 at a minimum. Also, there is the monthly rent, which is dependent on the location, but even in a less desirable area is typically a minimum of $100/staff member per month and oftentimes, much more than that.

The essential equipment for office workers would include a computer and a telephone. Even at discounted rates for bulk orders, a computer would cost at about $1,000+, $500 at minimum for the software and other programs that need to be installed, and $250-$350 initially per telephone handset. You also need to include the periodic expensive upgrades to your LAN and voicemail systems.

In a nutshell, hiring an employee is a large expense and most people don’t even know if the person they are hiring will work out. They don’t hire regularly and don’t know what to look for in a new team member. At HireSmart Virtual Employees, we turn the hiring system around. We provide our clients with 3 highly motivated, highly educated, ready to work staff members, that we personally would use in our own business. We help save our clients a ton of time and money. In addition, because our staff members are home-based, they are responsible for their own equipment, internet access, and software.

We provide all the tools to our clients to help them navigate the pitfalls of hiring remote staff and we save our clients on average $25,000 – $30,000 per year in employee costs. We are certain we can help you too with your next hire. Want more details – book a call with us. Ready to try a new way? Order now.

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