The Cost of Onboarding a New Employee

Employee onboarding, the process by which new hires are integrated into an organisation, involves several processes. What’s the cost of onboarding a new employee? 

Why Is It Important To Determine The Onboarding Costs

Determining the cost of onboarding a new employee is necessary for your organisation for several reasons, namely:

Budgeting

Understanding the average cost to onboard an employee allows you to allocate resources effectively and ensures that you have the necessary funds to cover the expenses associated with bringing in new talent.

ROI Analysis

By comparing the costs with the benefits, such as increased productivity and reduced turnover, you can determine the overall value of their onboarding efforts.

Resource Allocation

Knowing the cost breakdown of onboarding (e.g., training, administrative tasks, materials) helps you prioritise and allocate resources appropriately. This can lead to more efficient processes and better use of time and money.

Benchmarking

Comparing the cost of onboarding with industry benchmarks provides insights into how efficiently you are managing your onboarding process. This information helps you stay competitive in attracting and retaining talent.

Continuous Improvement

Regularly evaluating onboarding costs allows your organisation to identify areas for improvement. You can refine processes, update training materials, and enhance the overall onboarding experience to maximise the value of their investment.

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Breaking Down The Cost Of Onboarding A New Employee

After explaining why it’s crucial to determine the onboarding cost, let’s now break it down to its specifics. In this section, we’ll consider the common necessities involved in onboarding and highlight their costs: 

Background Checks

Some companies extend conditional offers contingent on the result of background checks. The cost of screening depends on some factors, such as the types of background checks you want to conduct, how comprehensive they are, and whether or not you want to outsource it to an expert background screening platform like Veremark. 

At Veremark, screening for essentials costs £46 per candidate. This includes the legally-required right to work check in the UK, DBS (criminal history) check, and identity check. 

Hours worked on paper and administrative work

Employees need to accomplish numerous paperwork and administrative tasks throughout onboarding. On top of the formal offer and contract, there are also forms for payroll, personal information, taxes, and documents for training. 

Reports say these tasks take about 10 hours of HR time per hire, so the cost depends on your HR’s hourly rate and how many hires you have. Another said it costs around £1,000 per employee. 

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Work set up

Onboarding costs also include the provisions new hires need for their work. This includes equipment such as a computer or laptop, headset, office chair and other access to certain software. 

Of course, in many cases, you don’t need a new set of everything, but in case you do, expect to spend anywhere up to £4,800. 

Training

The cost of onboarding a new employee includes expenditures for training. The cost depends on the number of new hires, hours spent on training, resources you need, and other factors, such as the industry or role. Reports say training one new hire can cost £1,530. 

Welcome kit

A welcome kit is essentially a small gift or package provided to each new hire. This is usually different from their work essentials, but may include some items they can use at work, such as a tumbler or mug, company shirt or sweater, and some snacks. 

The cost depends on the items you include, but it can be between £25 – £55 each pack.

So let’s say based on the figures above you spent the following:

• £46 for background checks
• £1000 on admin work
• £4800 for workplace setup (assuming you need a new setup)
• £1530 for training
• £25 for a welcome kit

This means the cost of onboarding a new employee (not a replacement) is around £7,401. If you don’t need a new full work setup, the cost would be around £2,601. But, these are not the only costs you need to consider. 

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How Much Does It Cost To Onboard An Employee? The Hidden Costs

The above figures aren’t the only things you need to keep in mind when thinking about onboarding costs. As employers, you also need to take the following into account:

Lost of productivity

Onboarding means your new hires are still getting accustomed to their new workplace, colleagues, culture, and role. Hence, they haven’t achieved their full productivity yet. Reports say it takes an average of 26 weeks before new employees reach the expected performance level (time to productivity). Before that period expect that your new hires may initially only function at around 25% productivity. 

Mental toll on HR and management

Human Resources professionals often shoulder the responsibility of coordinating the onboarding process, which involves intricate tasks such as paperwork, training schedules, and assimilating the new hire into the company culture. Simultaneously, management faces the challenge of ensuring a smooth integration while managing their existing workload, which may contribute to heightened stress levels. 

Impact on company morale

Why you’re hiring may have an impact on employee morale. If you’re onboarding new hires because you’re expanding, this may boost positive morale. However, if you’re onboarding a new batch because of employee turnover, this may reflect negatively on the organisation. 

How To Bring Down Onboarding Costs Without Cutting Corners

The cost of onboarding a new employee can be reduced with the following practices:

Establish a repeatable and adaptable onboarding process

Develop a standardised onboarding process that is repeatable but flexible enough to accommodate changes. Create a detailed onboarding checklist that covers essential steps, and see which ones you can make repeatable and adaptable contents for - from paperwork to training - ensuring consistency while allowing for easy updates to adapt to evolving organisational needs.

Think about online onboarding

You may be able to reduce the cost of onboarding a new employee by conducting online onboarding. New hires can meet their colleagues virtually, review documents digitally, or get some of their training through online platforms. 

Learn more about Remote Onboarding here. 

Invest in an onboarding software 

An onboarding software can streamline and automate administrative tasks including digital document management, electronic signatures, and centralised communication platforms. 

Such tools not only reduce the risk of errors but also enhance the efficiency of the onboarding process, freeing up HR and management time for more strategic activities.

Conduct robust training

Enhance employee readiness and reduce time to productivity by implementing effective training programs. This can include a combination of role-specific training, mentorship initiatives, and e-learning modules.

Don’t skip background screening

Enhance your recruitment process by implementing comprehensive pre-employment screening. By ensuring a good fit from the beginning, you minimise the likelihood of costly turnover and the need for frequent onboarding cycles.

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Avoid Bad Hires and Reduce Onboarding Costs with Veremark

Pre-employment background checks are necessary not only to assess a candidate’s suitability for the position but also to help avoid bad hires. Through criminal history checks, you can reduce the risk of hiring someone that may eventually pose a threat to company and client safety. Reference checks can further verify details about the candidate’s education and experience. Overall, conducting comprehensive background checks can improve employee retention, reducing turnover and need for onboarding a replacement. 

Veremark can conduct the checks you need to make informed hiring decisions. After you’ve provided the candidate details and background check requirements, we can proceed with the verification and deliver the reports in a shareable format. Our system can also easily integrate into your current workflow, readily combining the necessary information so you can hire the right talents At Veremark, we also have the legal framework to ensure that we’re conducting the checks in compliance with the relevant laws and regulations.