How much does a new employee cost?

Cashflow & Forecasts, Planning, Videos,

‘How much does recruitment of a new employee cost?’ is a question we’re often asked.

The answer is ‘often less than you think!’

In this episode of BaranovTV, we’ll talk through why the actual  cost is often less than you imagine, ways to make the cost of that recruit less daunting, and to improve the chances of that recruitment being a success.

Watch this to find out more!

(Transcript below.)


Hi and welcome to another episode of BaranovTV, designed to demystify the world of accounts and tax and to help your business grow.

Today I wanted to talk to you about a new employee. We have quite regular conversations with clients about whether they should or whether they shouldn’t recruit, what level they should recruit at and how they should plan for that investment in a new recruit.

Quite often there there are very similar concerns and questions about recruitment and about taking on a new member of staff. So I thought what I’d do is actually talk some of those through because they may be helpful.

First off is the cost of a new recruit to the team. Quite often people are thinking well I can’t afford £25,000, £30,000, whatever it may be when you take into account the salary costs, the national insurance costs, pensions costs and the investment in actually setting a new member staff up, things like their infrastructure in terms of PC or MAC or whatever it may be.

But, what you need to think about is that if you take a new recruit on a probationary period, actually all you’re looking for is to be able to fund that first month, that first three months because by the end of that period they should be paying their own way.

For example, you need to work out how much you or whoever they are going to be supporting is going to be able to earn the business in that probationary time and going forwards.

It may be that actually you are going to be offloading or delegating a chunk of your time to that new member of the team, that may free you up for two days a week, three days a week. What can you achieve in the business in those two or three days a week?

Realistically you are going to be able to earn at a much higher rate than they’ll be costing you. So actually there is an incremental benefit to the business there of having them in.

You also need to think about maximizing your chances of success for a new employee.

  • You need to have things in place before they join you.
  • You want to think about having a clear induction process whether that’s you completing that or another member of your team.
  • Making sure that they know exactly what they’re letting themselves in for, what’s expected of them, what the rules are around your office in terms I think, things like lunch breaks and logging on and log-ons and security and confidentiality, and all of those sorts of things.
  • You also need to think about a staff handbook. Now whether that’s a formal staff handbook that’s produced with an HR consultant’s support or whether that’s just an informal staff handbook, a few things that you’ve got jotted down.
  • Make sure that they know that and they understand and make sure that you communicate the culture and values of your business.
  • You need to make sure throughout the process and throughout their probationary period in particular, but probably ongoing, that you have regular update sessions with them, on a monthly basis, just like a temperature check to make sure that they’re happy, make sure that everything’s okay. Find out what their thoughts are about the business, about the challenges that the business is facing and your goals and how they can help towards those.
  • And make sure that you’ve got the training continuing for them. Even if they’ve got experience within your industry, you need to make sure they understand how you do things within your business because no two businesses will operate in the same way because they’re led by very different people.

But before you even get to that point you need to make sure that you’re actually devising a clear job specification for anybody that’s coming in. And that really you’ve got a person spec. So what sort of characteristics are you looking for in terms of attitude, experience, ability and those sorts of things.

And if you’re going to use an agency, which would be a really good idea, make sure that your agency understands the job spec and the person spec and what the basis of those are, but also understands your business, your culture and your values to make sure that they’re finding the right person for you. It’s like registering with an estate agent in days gone by, you want to make sure that if you register for a three-bed semi, they’re not sending you one-bed flats and those sorts of things. You want to make sure they’re actually saving you the time that you’re paying them to save you in terms of the sifting process.

Another thing that I would strongly recommend is that you trust your gut if you’re recruiting.

Over the 14 years that we had our last business we recruited quite a lot of people because we had quite a lot of significant growth, but on two occasions in that period we had to let people go during their probationary period. The one commonality between the two of them was that we weren’t comfortable with those recruits at the time we made them.

We should never have done it and we really learned the lesson on the second one. We had to absorb the sunk costs of having invested time in them and having to go through the recruitment process again.

It’s a lesson we learned and one that I’d like to pass on to all of you.

And finally if you can’t find the right person, recruitment can be really hard.

It may be that you may have to increase your budget to get the right person but by doing that you might actually just open up the next level of candidates which may give you the exact person that you want. If by upgrading your person spec slightly you can get somebody who’s going to be of more value to the business, quicker, then actually you can recoup that additional budget fairly quickly.

So there is more at play in the value and the cost of bringing in an employee into the business than just their salary costs and those sorts of associated costs, and that’s a whistlestop tour of them from our perspective.

If you’re thinking about recruiting then please do get in touch and we can help you make sure that the budget works for that.

Otherwise I’ll see you all very soon.

Business News

We send regular updates that keep clients aware of changes and suggestions on a wide range of subjects; if you’d like to receive those too, just add your details below and we’ll do the rest! We promise not to bombard you and you can unsubscribe at any time.

  • This field is for validation purposes and should be left unchanged.
If you've found this post helpful, please share it with others…