Employers paying hidden costs for recruitment in tight labor market

Tight labor markets that have persisted since the beginning of COVID are forcing American businesses to spend more and face greater costs of recruitment of hourly employees.

A new report from Bluecrew called, The True Cost of Recruitment and Employment, shows the real-life mark-up on recruiting and employing one $15/hour employee for a year is around 63%. Employers spend nearly $19,400 on taxes, insurance, benefits, recruiting, and ongoing management in one year.

Also, to hire a 50-person workforce and stay fully staffed, an employer would have to conservatively hire 90 workers over the course of a year; the total cost of which could be upward of $603,000.

“While the job market has rebounded in recent months, many of the industries most impacted by the hourly workforce –– including retail, manufacturing, and hospitality –– are still struggling to find employees,” says Bluecrew’s Chief Customer Officer Matt Laurinas. “As experts remain split on the exact timing and severity of a potentially impending recession, inflation and employee desire for higher wages make it more important than ever for employers in these and other sectors to retain talent and minimize company expenses.”

The report also shows that a vacancy for a single worker earning $15/hour costs businesses at least $5,832 annually in missed revenue and underutilized resources alone, and the cost of a bad hiring decision can be as high as 30% of the worker’s annual wage. Every $15/hour employee hired has to work for approximately six months to break even on recruiting cost alone.

Between HR’s time spent and basic hiring tools utilized, employers spend at least $889 filling just one position. With added costs for missed productivity and workplace impact, it’s no surprise how quickly the expenses climb when recruiting new employees – and the costs don’t stop when the position is filled.

Read more: 2023 HR and recruiting predictions: A Q&A with Will Laufer

“The price of hiring or replacing employees is no minor line item, yet it’s often ignored. The high costs associated with recruitment shouldn’t just be accepted as a part of doing business,” adds Laurinas.