Businesses are made up of people. Hiring new employees come with more costs than just their salary.
Businesses are made up of people. Hiring new employees comes with more costs than just their salary.
When you start building your small business, a big question pops up early on. You’ll find yourself asking, “Is it time to hire a new employee?” Whether the answer is yes or no at any given time, it pays to know how much it’ll cost you to bring on a new employee.
Of course, everyone’s job titles and salaries vary. But there are associated (and often hidden) costs to hiring a new employee. In fact, Deloitte reports that the average cost of a new hire is $4,000,—though this amount can vary depending on your industry, location, and hiring practices.
Here, we’ll break down everything you need to know about the hiring process, how to hire the right person, and the total cost of hiring a new employee for a small business in 2025.
Recruiting Has a Price
It would be great if the right candidate naturally showed up at your door when you’re ready to hire. But the truth is, while there are effective ways to find the right person, they require time—and that means costs.
The first step is writing a clear job description. This should include a summary of the position, a breakdown of responsibilities, and the required experience or education. You can post this on job boards (which may charge posting fees) or on social media (which can be free unless you sponsor the post). Another option is hiring a recruiter—but that comes at a premium. In 2025, the average cost of a headhunter is approximately $20,283.
Once you’ve found the right person, training begins—and it’s not a one-day Hollywood montage. You’ll need to invest time, money, and effort to fully prepare your new hire. Training is one of the most expensive parts of the hiring process.
Think of training as an investment: money spent now in hopes of future performance. As of 2025, the cost of training a new hire is just over $1,200. This includes the cost of materials and the time required from managers and coworkers to help the new hire ramp up to full productivity.
The Price Behind Paperwork
Onboarding also involves managing important documents: payroll, health insurance, benefits, tax forms, and more. You’ll need a process in place to handle approvals and reviews. Larger companies often use internal or outsourced HR teams, but small businesses can manage costs by handling this in-house or using HR management software. There are now more affordable, automated HR tools available in 2025 than ever before.
The Cost of Turnover
Customer satisfaction may be your focus, but employee satisfaction is just as critical. Like acquiring customers, it costs more to hire a new employee than to retain a good one. High turnover means money lost. You’ve invested in recruiting, onboarding, and training—and if the employee leaves too soon, those costs are sunk.
Retention matters. Companies that offer structured onboarding programs see stronger results. In fact, Corning Glass Works found that employees who attend formal orientations are 69% more likely to stay with the company for at least three years.
The Obvious Costs: Salary and Benefits
As a small business hiring a new employee, you’ve likely spent the most time calculating the cost based on salary and benefits. But the full picture includes more than just a paycheck.
In 2025, benefits still play a major role in overall cost. Be sure to account for expenses like medical and dental insurance, retirement contributions, disability coverage, life insurance, tuition reimbursement, and other perks. These costs can add up quickly but are essential for attracting and retaining quality talent.
When Do Costs Even Out?
So when does a new hire start paying off?
According to Harvard Business School, the break-even point typically occurs around month six for mid-level managers. This is when the cost of training, salary, and lost productivity levels out—assuming the employee has reached full capacity by that time.
How to Decrease Hiring Costs
Hiring costs aren’t fixed—they vary based on role, experience, location, and your hiring process. Still, as a small business, any added expense matters. While hiring is often unavoidable, smart strategies can help reduce the overall burden.
Here are a few cost-saving tips for 2025:
-Advertise job openings on social media to increase reach without added fees
-Use automated HR software to streamline onboarding and documentation
-Tap into your existing network for quality referrals
-Choose a cost-effective provider for background checks
-Offer referral bonuses to current employees
-Attend job fairs or connect through alumni networks
-Write clear and detailed job descriptions to attract the right applicants from the start
Make Your Money Work
Small business owners have a lot to manage, and hiring is a decision that deserves careful consideration. Devoting the right time and resources to finding the ideal candidate can actually save money in the long run.
While the hiring process may not be the fastest part of running a business, it’s often one of the most impactful. Take the time to clearly define the role, determine a competitive salary and benefits package, plan your onboarding and training process, and create a strong employee experience. The ultimate goal is to hire someone who not only fits the role—but sees your business as the right place to grow and thrive.
