How much does it cost to hire a new employee?

There is a charity in my town that is always churning through door-to-door fundraisers. They set unrealistic fundraising goals for their new employees, and fire the majority of them within a week. I’ve read a number of articles that say that employers in general suffer an expensive process when they have to hire someone.
This seems like a very ridiculous and expensive way to go about things, which is why I will never donate to this charity.
How much money are they wasting every time they hire someone and fire them a week later?

It depends on the lengths they go to hiring them. If they’re just posting ads as a cattle call and hiring everyone who shows up with shoes and and not drooling, it’s basically the cost of filling out a W-4 and getting the person on payroll and whatever benefits. If they’re recruiting for a professional position requiring specific qualifications, experience, skills, or talents, the cost of a nationwide search can be many tens of thousands of dollers in travel, backgound checks, clearances and verifications, and of course incentives and relocation packages. For most unskilled and basic sales jobs (which matches your description) its just cheaper to hire a gaggle of workers and sift through the few who don’t quit or commit fireable offenses than to try to do some kind of special interview magic which picks out the diamond from the rough.


I will also mention that this charity advertises these jobs very heavily, which must cost them a fortune.

I agree with Stranger. I also happen to help run a charity in the process of hiring a new employee. Out of pocket costs are probably much less than $100. We need to give them an email address and pay a few bucks to our payroll processor to bring them on board. We will have some unbudgeted labor costs for recruitment but probably not too much.

High turnover in solicitors is a feature, as is the unrealistic quotas. Some charities will hire enthusiastic people and hand them the unrealistic target. (Not mine - we have a purely volunteer development campaign.) The solicitors will contact everyone they know - a “warm” contact - and ask for money. Once they’ve exhausted their friends and family, they will have to move on to cold contacts. They either succeed in which case, they will likely continue to do so, or they will fail, in which case they will be replaced with a new solicitor with a new set of warm contacts. In either case, the charity figures out very quickly how to get the most money out of the person. It costs them very little. Multilevel marketing basically works the same way. Wells Fargo employed a similar method with bank reps opening accounts. It led the bank reps to fraudulently open accounts to keep their jobs.

Charity ≠ Ethical

That practice alone should set off a fire department’s worth of mental sirens. You are probably right not to donate to them. An unfortunate number of charities are just scams. False hope plus unrealistic goals for new employees is a big tip-off.

As to the question, if they are legit, that is what temp agencies are for. Temp to hire is one way that legitimate companies give people a tryout period that isn’t exploitive. It typically isn’t good business practice to hire and then fire people right away but it sounds like they have gotten really good and efficient at it so maybe it doesn’t cost them much. I wonder how they deal potential lawsuits and unemployment claims?

For the more general question, the cost to hire an employee can be all over the place but it can be extremely expensive. In my field, the general rule of thumb is 6 months salary just to recruit and hire the right person which is usually in the many tens of thousands of dollars range. Executives can be much more. That does not include productivity losses to give them time to learn the job. However, that doesn’t apply if you are running a scam that treats people like illegal immigrants waiting for any work outside of Home Depot.

You’d have to do a break down of the activities and costs to determine this. First is time, the amount of hours spent as administration to procure someone and then assign a dollar per hour cost to each phase of it. This would include any sort of on-boarding and training this person. But the bigger cost would be to the organizations mission being delayed by constantly firing and hiring new people. This also hurts morale and recruitment, and their reputation which you’d have to assign a cost to those things as well in missed opportunities.

Frequent turn-over is sign of really bad management for an organization. The causes could be many things. Not hiring the right person, not training them, not having a good work environment in place so they can be effective. Bad managers don’t realize these things and blame the people they fired constantly that they were some how flawed. In general, bad leadership is the cause of this.

Not necessarily. It depends a very great deal on the industry. Fast food and construction have far higher turnover than the legal profession, for example.

Door to door fundraising is like door to door sales. Most of the people hired will be fired or quit. A few are good at and will keep doing it. The costs are negligible or they would change the model. A few people who are successful short term or long term will bring in the most sales or donations. It isn’t necessarily effective, the model might only bring in a little more than it’s costs but for a charity they may consider putting those people to work part of their mission, and even a for-profit business may see continuing benefits from the exposure.

This is fairly common for entry-level sales jobs.

There’s a cost to advertise, and a cost from turnover, but it turns out that it’s really hard to predict which people will be good at sales. It’s often easier to hire a bunch at low base pay with commissions, and see which ones can actually sell.

What kind of hiring process do they go through? The steps below all cost something.

  • advertising
  • reading applicants materials
  • phone interviews
  • in-person interviews
  • reference checking
  • negotiation and hiring
  • orientation and HR paperwork
  • on-the-job training

Correcting your list for press-gang cold call type jobs:

[li][DEL]advertising[/DEL] Classified ad in the Penny Shopper[/li][li][DEL]reading applicants materials[/DEL][/li][li][DEL]phone interviews[/DEL][/li][li]in-person interviews[/li][li][DEL]reference checking[/DEL] Ask candidate, “Have you ever been to prison?”[/li][li][DEL]negotiation and hiring[/DEL] Tell candidate, “Make this quota or you’ve fired in the first week.”[/li][li][DEL]orientation and[/DEL] HR paperwork[/li][li][DEL]on-the-job training[/DEL]Viewing of the “Coffee is for closers!” scene from Glengarry Glen Ross[/ul][/li]

A B C!

A - Always
B - Be
C - Cobbling

I work for a major corporation that sends you boxes with smiles on them and I’m fairly tight with our sites staffing team. We’ve never turned on the No Vacancy light even when we only had a couple slots available. All the time it seems we’ve got big ads everywhere; which made me curious enough to ask. It seems the philosophy coming from Seattle is that big recruitment ads are just as good for drawing customers and making us look even more important than we are and not all of it comes through the budget as staffing costs. I don’t know how many other companies follow this sort of model but for us, to those of us who last more than a year, it becomes pretty obvious that its pretty much what’s being done.

Rough guess from our site (seeing this thread yesterday made me ask today) is about $90 per head to get them in the door for detailed presentations and drug testing, say another $150 to get them to Day One. Most of our application process is online and all the initial sifting is done by computer so until the swab goes in their mouth, its all pretty cheap and easy.

Wow. (repeat about 10 times)

What planet are you from?

I’ve worked for national, well-known, reasonably well-respected chains. I’ve interviewed for several others. I have interviewed for local companies that are very well respected. I have NEVER had both a phone interview and an in-person interview. It’s always one or the other.

I would also like to know what companies you think actually go to the time and trouble of actually checking references. I’ve gotten hired at more than one job without even giving references.

I think this probably varies a lot between industries and even jobs within industries: It’s been my experience that it is very common in both IT and medical fields to expend a lot of time and effort on the pre-employment side of recruitment: one phone interview, a couple of rounds of in-person interviews, and fairly extensive background checking (generally including criminal history, credit check, reference checks, and drug testing) is pretty typical.

On the other hand, for something like Customer Service or Retail, it seems like one interview, nominally running a background check (maaaaybe with criminal history and drug testing), and getting you on the floor as quickly as possible is much more common.

It costs as much as HR can convince management to spend on it.

Hiring an employee costs virtually nothing.

You need to advertise the position, and you need to take some time for an interview, so it’s not exactly nothing, but it’s not a significant cost either. If all you need is warm bodies with a heartbeat, you can put a Craig’s list ad out for $25, and then just hire anyone who shows up. If you hire 25 people, then you’ve invested maybe $1.25 in each one.

If you actually have a payroll company, you may need to pay them to add or remove employees, but not all do this (mine doesn’t, just charges per employee to cut a check for), and many charities and other small orgs don’t even use a payroll company, but just write out their own paychecks.

From your description, they probably get less than an hour of group orientation, then they are out the door selling their wares.

As training is really the main cost of turnover, and training is something that they likely do not spend much on, I doubt that their practice costs them much. In fact, it probably works out well for them, because one out of so many will be good at it, even without any training, and they will keep that one around.

The cost of turnover is really in lost opportunity cost of not having someone doing the job, cost of training a new hire (including other employees showing them the job), time lost while the person learns specifics, and things like that. For a professional job where there are a small number of people doing specialized work, and you have to spend time finding a replacement, those costs can be devastating. But if you’re just churning people who get maybe an hour of training through a generic ‘go get people to donate money’ job, it’s really not expensive to keep hiring the next batch.

I work for the provincial government; when we have a job competition for a mid-level position, we’d typically interview up to 6 people (and most positions have far more applicants than that). Interviews last about 1 hour, and we have to have at least 3 interviewers (the position’s supervisor, their manager, and an HR rep). So the bare minimum it cost to hire me just in interview time would be about $50/hr * 3 people * 6 hours = 900. If you factor in all the other steps it's probably a few thousand .

I can easily imagine very high level positions costling an order of magnitude more to recruit. On the other hand, once when I was unemployed I walked up to a guy directing a couple other guys shoveling snow. After about 30 seconds of chatting I could have had a job. Hiring me would have cost that guy about 17 cents assuming he was himself netting $20/hr and just paid casual laborers under the table. There’s a really big spread of how much it can cost to hire someone.