The hidden costs of internal hiring – and when a recruiting partner may make business sense.
As business leaders, weighing what activities happen internally versus where to spend resources to outsource is a consistent decision process. Sometimes, it’s easy to know which way to lean; other times, what may seem like the right decision isn’t when looking closely at the numbers and skillsets of an organization’s workforce.
An open position costs more than the salary you aren’t paying.
While the role remains unfilled, managers may be covering day-to-day responsibilities. Employees are taking on extra work. Overtime may increase. Projects can slow down, customers may wait longer, and business opportunities can be missed.
That’s the first part. Then there is the hiring process itself.
Writing job advertisements, reviewing applications, screening candidates, conducting interviews, checking references, negotiating an offer, and coordinating onboarding can require 25 to 40 hours, or more, of leadership and administrative time for a single hire.
Those costs rarely appear together on a financial statement. But your business is still absorbing them.
What Is the True Cost of an Open Position?
The cost of an open position can include:
- Leadership and staff time spent recruiting
- Job advertising and screening expenses
- Overtime and temporary coverage
- Lost productivity
- Delayed projects or production
- Additional pressure on existing employees
- Onboarding and training costs
- The business impact of a prolonged vacancy
That is why evaluating hiring costs requires more than adding up job-board fees and background checks.
The better question isn’t simply, “How much will it cost to fill this position?” It’s also: “What is this open position already costing our business?”
Hiring Yourself Isn’t Free
Handling recruitment internally may appear to be the least expensive option because many of its costs are absorbed rather than invoiced.
Consider this example: If members of your leadership team collectively spend 30 hours filling one position and their average fully loaded labor cost is $70 per hour, your organization has already invested $2,100 in leadership time.
That is before advertising, screening, overtime, onboarding, training, lost productivity, or the cost of keeping the position vacant.
Internal hiring may still be the right choice. The purpose of calculating the full cost isn’t to assume every organization should outsource recruitment. It is to help business leaders make that decision using a more complete picture.
A Business Leader’s Guide to the Cost of Hiring
Our free white paper, The Real Cost of an Open Position, examines the visible and hidden costs of hiring, including:
- The work involved in filling one position
- The value of leadership time devoted to recruiting
- The operational effects of an unfilled role
- The opportunity costs that rarely appear in a hiring budget
- When a staffing or recruiting partner may make business sense
It also includes access to our Open Position Cost Calculator, which businesses can use to estimate their own vacancy, hiring, onboarding, and productivity costs.
Frequently Asked Questions About the Cost of an Open Position
What is the cost of an open position?
The cost of an open position includes more than recruiting expenses. It may also include lost productivity, overtime, delayed work, leadership time spent hiring, reduced customer service, employee burnout, and missed business opportunities.
How do you calculate the cost of a vacant position?
Start with the position’s estimated daily or weekly value to the organization. Multiply that amount by the number of days or weeks the position remains vacant. Then add recruiting expenses, employee and leadership time, overtime or temporary coverage, and onboarding and training costs.
What are the hidden costs of hiring an employee?
Hidden hiring costs often include time spent reviewing applications, scheduling and conducting interviews, checking references, preparing an offer, completing paperwork, and coordinating onboarding. Organizations should also consider the work leaders and employees cannot complete while focused on hiring.
How much time does it take to hire an employee?
The total varies by position and organization, but even a relatively straightforward hiring process can require 25 to 40 hours or more across HR, managers, supervisors, and administrative staff. Hard-to-fill or leadership roles can require substantially more time.
How does an open position affect a business?
An open position can increase workloads and overtime, delay projects, reduce productivity, slow customer response times, and place additional pressure on the existing team. The impact often grows the longer the position remains vacant.
When does it make sense to use a staffing company?
A staffing company may make sense when an organization needs to hire quickly, has limited recruiting capacity, is struggling to find qualified candidates, or determines that its leaders’ time would create more value elsewhere. The decision should consider the full internal cost of hiring—not just the staffing company’s fee.
Download The Real Cost of an Open Position and take a closer look at the costs your business may be absorbing.