This is how much it really costs to hire a new employee

As the talent shortage accentuates in Australia, employers are looking at what they can do differently to attract top talent to their company.

The competitive nature of most industries means that employers are always looking for an advantage to secure a top level executive over their rivals and there often has to be an ‘x’ factor to get the required person over the line.

“The talent shortage has been in the making for a number of years and is not new,” Roxanne Calder, founder of Sydney recruitment agency EST10, said. “The pandemic accelerated the trend, so we felt more acutely what was already well in motion. There is no one actual cause but a myriad of influences; an ageing population exiting our workforce, reduced birth rates and economic growth. The pandemic's contribution caused a shift in beliefs and how, when and why we work and thus exasperated and accelerated the talent shortage.

“With the shortage of talent, prolonged hiring times and the agonising cost of an empty seat, businesses are turning to temporary hires to fill the gaps. Temporary workers are also in short supply, and it is a classic supply and demand scenario. Temporary workers provide options for businesses recovering from the lockdowns and COVID-19 who are not yet sure of their hiring needs. This will continue throughout 2022.”

EST10 surveyed 1200 job seekers and hiring managers to form their 2022 salary guide, which revealed that salary increases across the board were expected throughout Australia with team assistants expecting rises in the realm of 30%.

“Two issues are occurring concurrently, inflation and fierce competition,” Calder added. “Existential costs are hard to ignore. The Consumer Price Index (CPI) rose 3.5% over 12 months to the December 2021 quarter, and November 2021 reflected a seven-year high.

“The supply and demand equation demonstrates clearly just how competitive our talent market is. Record high job vacancies and too few job applicants. Escalation, and like any bidding war, the price goes up. It's a global issue too. In the U.S, job vacancies have outnumbered job applicants since 2018.”

For businesses to retain and attract top talent there is a myriad of options available to them such as non-financial benefits including extra holidays, volunteering days, assistance with extra-curricular education studies.

“Understand your workforce's top priorities,” Calder added. “Whilst salary is paramount, post-pandemic and our workforce is seeking more purpose-led work and values-based actions from companies. Have regular conversations with your team, listen, be alert and in touch with their reality.

“Where applicable, apply changes even if incremental to your work environment. Businesses that grasp well workforce needs will go a long way to satisfy their employees and, at the same time, attract new talent.

“Look to provide benefits beyond salary. Additional superannuation contributions, health care, extra annual leave, travel allowance, educational rebates etc. The hybrid model is highly sought after for flexibility. However, it also puts money in your employee's pocket via reduced costs of wardrobe, food, travel, and tax incentives.”

The true cost of hiring someone can almost be double that of the salary when you take into all the costs from job ad placement, interviewing, office space and the list goes on. This needs to be taken into consideration before you go to the market with a vacancy.

“The cost of hiring includes much more than the salary and statutory costs,” Calder said. “Take into account recruitment costs, on average $23,800, training at approximately 1.5% of salary, equipment, office space and onboarding, and you are close to the actual cost to hire. Build retention into your recruitment strategy, and your costs are reduced significantly. 

“The work to retain employees starts as soon as an employee is hired. With turnover rates for new hires within their probationary period at 14%, organisations' sell' during the hiring process must be delivered. Policies and procedures, employee culture, performance reviews and salary increases are keys to retention.

“Having an environment/culture that offers predictability, safety, recognition, progress, and flexibility are some of the crucial points. Addressing and implementing strategies for better home-life balance and mental health, inclusion and diversity.”

Talent may be thin on the ground but that doesn’t mean you can’t access with the right strategy and tactics in place.