What is the Cost of Onboarding an Employee? [Calculator]
While considering the cost of hiring an employee is important, it shouldn’t be the only consideration. Going beyond the easier cost-per-hire calculations and analyzing the cost of onboarding helps put things in perspective and gives you context for better staffing decisions.
What Is Onboarding?
The onboarding process is the period of learning and training after an employee joins the organization. As we’ve interviewed HR experts, their onboarding advice highlighted the same main point: paying attention to the employee experience during onboarding can lead to higher retention, improved employee satisfaction, and more productive collaboration between new employees, managers, and coworkers.
BambooHR found that employees who felt that they received effective onboarding are 18 times more likely to feel committed to their organization than employees who felt their onboarding process was less effective.
Executing an onboarding process is key to developing a strong infrastructure in an organization. As with many components of a business, there are costs involved in onboarding. Onboarding costs comprise all the equipment and manpower involved to help a new hire successfully transition into the company.
Specifically, costs can entail the following (these may vary across industries/organizations):
- Costs of laptops, monitors, phones, and other devices/office supplies that new hires will be using.
- Tools and software employees need to do their work.
- IT effort and time.
- First-day orientation and lunch.
- The time that managers and relevant employees spend training new hires.
Average Cost for Onboarding New Employees
The starting point for the cost of onboarding is an average cost-per-hire. It’s important to differentiate between the average cost for onboarding and average cost-per-hire. While onboarding costs entail the cost of employees transitioning into the company, the cost-per-hire is the cost a company spends on filling an open position. This may include advertising expenses, recruiting events, recruitment software fees, relocation expenses, and more.
The average cost per hire is $4,125, according to a benchmark report from SHRM. But the cost of onboarding a new employee also includes several other factors, such as:
- The hours managers spend training new employees—average cost: $1,296 per employee
- Paper, printing, and office supplies—average annual cost: between $922 and $1,106
- Training—$1,252 per employee on average
- Tools and software employees need to do their work
- New office equipment
How to Calculate Onboarding Costs
To determine the cost of onboarding a new employee in your organization, you’ll need to start with a few pieces of information. Here’s an onboarding cost calculator to help you develop a baseline cost for your onboarding process:
You can apply this formula of hours and salary to determine cost-per-hire for your existing employees during your onboarding process.
Let’s take the example of an onboarding program that includes 20 hours of dedicated, one-on-one mentoring from a manager or coworker. If a manager earned $60,000 annually, then these 20 hours would add up to $600 per new employee who joins the team.
How many hours will IT spend putting together workstations? How many hours will HR spend processing paperwork? Getting accurate figures for the hours and resources that go into onboarding a single employee can give you a clearer picture of the real cost of hiring a new employee.
How to Onboard Effectively
SHRM identified four elements employees need to develop during the onboarding process: self-confidence, role clarity, social integration, and knowledge of culture. None of these attributes appear in the offer letter or the first paycheck, and unless you hire internally, even your best candidates will need to spend time developing them.
It’s essential to provide time and structure for new hires and current employees to develop these connections. As you develop an onboarding process (and formalizing an onboarding process is an important first step), ensure that the managers and co-workers who need to participate have the space to do so. This may mean adjusting workload expectations as a new employee’s mentor helps them go through training.
Additional Onboarding Resources
Of course, the cost of onboarding a new employee isn’t the only factor when you’re considering how to onboard effectively. Paying attention to the other ways onboarding improves the employee experience can help prevent your new employees from jumping ship in the first six months.
Consider the following resources as you flesh out how to calculate onboarding costs:
- The New Definitive Guide to Onboarding– This BambooHR ebook provides a comprehensive walkthrough of calculating onboarding costs, both in hours and in money.
- 5 Ways to Onboard New Employees to Your Company’s Culture– This article explores the cultural connections that lead to lasting engagement (despite not appearing on the balance sheet).
- The Many Purposes of the Onboarding Process– This walkthrough of the onboarding process illustrates five essential goals for your onboarding to produce an excellent new-hire experience.
- Companies That Really Get Onboarding– This list of examples can help spark ideas to use in your own organization.
Onboarding will be a recurring cost for your organization. How you handle onboarding plays a part in determining whether it happens due to growth or turnover. Taking the time to explore the many benefits of effective onboarding can help you make the right choices for your organization’s future.