Employee Benefits

Calculating the Full Cost of Recruiting and Retaining Employees

recruit and retain

In the past, people had one or two jobs during their working career. Today most individuals hold 10 to 15 jobs before retiring, with many spending five years or less at each position.

Recruiting talented employees is a challenging task for employers, often taking several months to find the right people. Depending on the business size, when associates resign their departure can create a gap in business operations, so employers need an effective retention program to keep employees at work.

Recruiting new workers


When an employee quits, management often focuses on the time required to advertise and interview job candidates. However, there are many other hidden costs, such as these five areas:

  1. Budget – The University of California Berkeley Institute for Research on Labor and Employees reports that on average employers spend $4,000 outside of salary and wages to hire a new employee. Depending on the position level, employers should plan to invest a percentage of the job’s salary for recruitment:

    • Entry-level or low-pay workers – 16 percent
    • Mid-range associates – 20 percent
    • Highly educated employees – up to 213 percent
  2. Advertising, interviewing and screening – Most employers spend less than $100 to advertise open positions, usually through social media posts and job boards. Research shows that small businesses may spend more to attract good workers.

    Professional positions may require contracting with a recruitment firm to identify qualified candidates. The pay structure can vary depending on the services provided:

    • Search firms – These businesses provide a full range of services to assist employers in finding professional candidates. They are available on a retainer or contingency basis:

      • Retainer – Payment required for 30 to 33 percent of the position’s first-year cash compensation plus expenses (travel, meals, supplies), regardless of whether a candidate is hired.
      • Contingency – About 20 to 25 percent of the position’s first-year base salary is charged upon placement.
    • In-house services – Many large employers have dedicated internal recruiters and search teams. However, to assist them with the hiring process, they may use an external firm to provide:
      • Lists of qualified candidates – available at $30 to $50 per name
      • Initial interview screenings – charged at $90 to $150 an hour, or retained for $20,000 to $40,000 a month.
  3. Training – Finding the right employees is critical, but training and helping them succeed in the job is just as important. Employers must commit time and leadership resources to educate new employees about their responsibilities, so they get engaged with their work.

    • Employment expert Bersin by Deloitte advises employers to expect to train new employees for one to three years, depending on the complexity of the position. They also should be prepared to spend 10 to 20 percent of the position’s salary for training.
    • Corning Glass Works found that employees who attended a structured orientation program were 69 percent more likely to stay for many years.
  4. Productivity – Employers need to realize that it can take years before a new employee reaches the productivity level of a veteran team member.
  5. Lost engagement – While employers are busy hiring and training new employees, management must remember to recognize and support current employees who take on extra work to maintain smooth operations. Otherwise, these individuals may feel unappreciated and look for other jobs.

Keeping top talent


Losing talented workers can drastically impact business operations and employee morale. Employers should focus on creating a supportive work environment, keep communications open and offer benefits and perks employees want, such as assistance with student loan repayment.

About 20 percent of employees have college debt of $35,000 or more. Since only 4 percent of employers offer this benefit, it’s an excellent recruitment and retention program. A recent survey showed that 76 percent of prospective employees would accept a job with an employer that assists them in repaying student loans. Find out more about the BenefitEd program available from Ameritas through its joint-venture with Nelnet.

Learn about more employee retention ideas by reading this blog.

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