Why Hiring You is More Expensive Than You Think
Everyone knows it’s difficult to get a job these days – very difficult. And yet, it’s likely even harder than you think.
Most people think unemployment is high because so many jobs are outsourced or mechanized, and business is bad so companies are laying people off. As a result, there are more job seekers than jobs.
These are certainly contributing factors, but as usual, there’s more beneath the surface.
Basically, it’s expensive as hell to hire you.
Why you need to understand how expensive you really are
It’s important for you as an employee or prospective employee to know about these costs for the same reason empathy is important in everyday life. You need to understand where your employer is coming from if you want to speak his or her language. If you want to sell yourself as someone who will add value, you need to be aware of how much you cost before you can begin to make a value proposition. If you’re unaware of how truly expensive it is to hire someone, it’s tough to show your employer how much you will add to that company.
For example, if you go into an interview assuming your cost to the company would only be your salary, say $60,000 per year, but the cost is actually $100,000 or more, you’ll likely underestimate the value you need to add.
The missing piece
Most employees and prospective employees have no idea what costs go into hiring a single employee, let alone several dozen or hundred, because they never see the costs first-hand. Keep in mind that all of the expenses listed below are in addition to your salary. Most people think their salary is the main expense, and while it’s probably the largest, it’s just one of many costs to hire.
When you get your paycheck or direct deposit stub, you see your gross earnings, net pay after taxes, and any other deductions you pay into (401K, benefits, etc.).
What you probably don’t see is that the employer matches your social security and Medicare payments. If you pay $150 per pay period in social security and Medicare, then your employer also pays that amount, or $300 per month (though, because of a recent payroll tax break, employees actually pay less now. But for easy math, let’s assume it’s a 1-1 match). For this example, if the company has 10-20 employees, they are paying $3,000-6,000 per month, just in payroll taxes.
Issuing paychecks costs your employer a lot of money too. They either staff a payroll department, hire a payroll processing company, or both – and both are expensive. Obviously these things are not put in place just because of you, but costs add up as the employee count grows.
Here’s an area that’s grossly misunderstood. In my Brazen post about how to make money during your job search, one commenter thought employees “pay into the system,” despite having just read that unemployment insurance is an employer-funded program.
To be clear, unemployment insurance is an extra expense that only employers pay. Simply put, employers contribute to a state-level pool (though there is a federal pool as well), and when unemployed people file for or collect unemployment benefits, the state pays them from that pool. It’s a way for the state to ensure it doesn’t bear sole responsibility for supporting unemployed people.
Workers compensation insurance
Again, this is a cost the state requires employers to pay. Depending on what kind of work you do, your employer almost certainly has a state-mandated workers comp insurance policy that covers you.
Each state’s requirement is different, but some states require a policy on even the lowest risk office workers. Depending on the kind of work being performed and the number of workers, workers comp insurance can be a few hundred dollars or thousands per year.
Health insurance, 401ks, paid time off – these are even more costs your employer faces per employee that go unseen. And benefits are usually much more expensive than payroll taxes or unemployment insurance. For example, Starbucks spends more on employee health insurance than on coffee and in the past General Motors spent more on healthcare than on steel. The incendiary politics of healthcare insurance aside, employers generally pay a ton of money for this employee benefit.
It’s easy to take your 401k for granted, but the programs are expensive for your employer just to set up. Then, if the employer matches employee contributions (which many companies do), that’s another per-pay period, per-employee cost the employer faces. 401k administration fees and matching expenses are yet more costs associated with hiring, and because they never see or hear about those expenses, employees tend to be ignorant about them.
Every company has their own protocol when it comes to document management, expense reimbursement, customer relationship management (CRM), sales calls and countless other policies. As a result, most new jobs involve a lengthy training session, where new employees are sequestered for a few days or weeks to learn all the ins and outs of the new company. For larger firms, this might even mean the employee(s) traveling off site to corporate headquarters for training. These training programs are very expensive, both in time and money.
A company has to pay a dedicated team to teach new employees – meaning salaries, benefits and additional payroll expenses (see above) for each of the trainers. Then they have to pay for teaching materials and, in some cases, travel for the employees to the training location. Some people receive full pay during training, some get minimum wage until they’ve passed certain tests to prove their training was successful. Training is a long and expensive per-employee cost.
It’s important to understand why hiring you is so difficult, not as an exercise in negativity, but so you know exactly what you’re up against. If you know why something might be keeping you back, you can pivot, adapt and overcome. Keep these costs in mind when interviewing and you’ll be able to pitch yourself as a value-add, rather than simply another cost.
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