Updated on 1 August 2024

When your small business starts thriving, you may realize you must bring workers on board. But before posting those job ads, you need to know the cost to hire employees for your business. Assessing the cost of hiring staff involves more than just the salaries and wages. Many direct and indirect staffing expenses, such as staff benefits, advertising, employment, and training, significantly increase employer costs. This article provides a guideline on the cost of recruiting and hiring an employee today.

What is the Cost of Hiring an Employee?

Employing workers needs preparation and planning, like building a solid, long-standing investment portfolio. Knowing the costs to hire employees will help you save money, time, and other resources. Here are some of the expected costs of hiring a new worker in Canada:

The Cost of Salaries and Wages in 2024

Signing a new employee will cost your business more than their salary and wages. And for your business to keep going, you need adequate sales to cover the additional expenses and salaries for the new employees. Although the average minimum wage in Canada is $17.30 CAD per hour, recruiting and hiring qualified personnel is more expensive, especially if the job needs special skills or experience.

Reports from the CPRH show that hiring a fresh worker costs about $4,129 CAD, executive roles need over $28,000 CAD, and filing for a position takes about 42 days. Although the annual leave is built in, you must effectively pay your employees' salary for 48 weeks annually. Even if you have an idea about the base salary of the fresh employee, you should consider all associated recruitment expenses, including:

• Core salary
• Benefits such as Pension, maternity leave, sick leave
• Taxes such as Social Security or National Insurance, payroll taxes
• Bonuses Both signing bonuses and yearly performance bonuses

Job posting fees

The best way for businesses to find potential candidates is by posting on virtual job boards. Most job seekers utilize these job boards when looking for advertised positions, so you should expect several applications. However, every job board has a unique payment scheme, and you should expect to pay approximately $300 CAD monthly per job posting, which will raise the cost of a new hire. You can utilize job boards such as:

• LinkedIn
• SimplyHired
• JobBank Canada
• Indeed
• CareerBuilder Canada
• Glassdoor

Recruitment Team and Internal Human Resource Team

An external staffing team can help find potential candidates if your internal resources are limited. Handing over recruiting to third parties can help your business save time for existing workers. However, you will have to pay the cost to hire employees.

Depending on the recruiting company you choose, you should expect to pay a commission of 15% to 30% of the first-year salary of the hired employee. Some recruiters will charge higher commissions based on the industry and experience level required, increasing the cost of a new hire.

Your business will still need an internal human resources team of one or more professionals to handle in-house human resource responsibilities. They may also manage the recruiting or internal training and onboarding process. Human resources salaries and other expenses will vary, but you can expect to pay about $53,130 CAD annually.

Background Checks and Security Clearances Costs

After finding a person you want to hire, you need to learn more about them before making your offer. That is why running background checks on new hires is essential. This is a significant cost of recruiting and hiring because a standard background check may cost about $20 to $100 CAD per hire, depending on how detailed you want the process to go. You can verify their education and previous employers and look at criminal databases. You must apply for security clearance for specific industries like Defence, which may need thousands of dollars.

Employee Onboarding and Job Training Costs

Onboarding a new hire takes time. Depending on the job role, the process may take one or several days. Your new personnel will not produce any value for the business during this time.

In addition, the person handling the onboarding also loses the time they spend handling other company tasks. Onboarding expenses will vary based on the staff and supervisor’s salaries. On average, the cost of hiring an employee will vary, but you can expect a potential loss of about $1,000 to $5,000 CAD.

Job training is another substantial cost of hiring a new employee in Canada. This expense will also take significant time, particularly when employing for roles that need specific compliance requirements or skills. Some workers may require weeks of training before they become fully productive. Your business will lose the employee's productivity, and you will also have to pay for the training. You can expect an average training cost of between $500 and $1,438 CAD per personnel based on the industry and company size.

Frequently Asked Questions (FAQs)

How Much Does It Cost a Business To Hire a New Employee?

The cost of recruiting and hiring new employees involves more than the salary. You need to also factor in benefits and other compensations such as equity and the considerable time investment you use when employing. You can expect six months or even more before you start seeing a positive return on your investment in the new employee regarding full productivity. However, this will depend on the investment and nature of the hired worker.

How Can You Calculate the Cost of Hiring a New Employee?

To determine the cost of a new hire, you should consider more than just the salary paid. As an employer, you should look at the worker's base salary and benefits, including the payroll taxes they must pay and the equipment they need to perform their core job. In addition, you should consider any costly training materials they will require and the loss of productivity your business suffers when the employee is being trained or learning. The truth is that even if you hire the most skilled employees, they need time to adjust to the new bosses and processes, which uses the company's money and time.

Is It Cheaper to Train Existing Employees or Hire a New One?

Based on the cost of a fresh hire, it is cheaper to train your current worker for the new role. By training existing employees, you will avoid paying staffing and relocation costs. In addition, your business will experience a miner dip in productivity as the employee integrates into their role. The difference in recruitment expenses will depend on the type of training needed and the employee's current and expected salary.

What are the basic costs involved in hiring an employee in Canada?

Basic costs include salary, benefits, taxes, and additional expenses such as recruitment, training, and onboarding.

How much does recruitment typically cost?

Recruitment can cost between 15% to 30% of the employee’s first-year salary, depending on the recruiting agency and job role.

What are the costs associated with job postings?

Job posting fees vary, but can be around $300 CAD per month per posting on popular job boards.

What are the costs of background checks and security clearances?

Background checks can cost between $20 and $100 CAD per hire, while security clearances for specific industries can cost thousands.

How much does employee onboarding and training cost?

Onboarding and training can range from $1,000 to $5,000 CAD, depending on the complexity and duration of the training required.

Are there any ongoing costs after hiring an employee?

Yes, ongoing costs include salaries, benefits, payroll taxes, and additional training or development programs.

How do benefits and payroll taxes affect the cost of hiring?

Benefits such as health insurance, pension contributions, and payroll taxes significantly increase the total cost of hiring an employee.

What is the impact of hiring costs on small businesses?

Hiring costs can be substantial for small businesses, impacting their cash flow and requiring careful financial planning.

How do industries vary in terms of hiring costs?

Industries requiring specialized skills or security clearances typically incur higher hiring costs due to the need for extensive training and background checks.

Can technology help reduce hiring costs?

Yes, using automated recruitment tools and online training programs can help streamline the hiring process and reduce associated costs.

Conclusion

Hiring new employees is a decision that should be taken seriously because it significantly impacts the company budget. Although remote working is now becoming the norm, the increasing costs of employing staff will still remain. Fresh staff will still need equipment, training, and onboarding to assist them in settling into their job roles and set them up for success. However, not much work will be done without workers and this may affect your business. Therefore, even though the cost of hiring a new employee in Canada will leave your company accountant cringing, the return on investment on good personnel is still worthwhile.