What it Truly Costs to Onboard a New Employee: Breaking Down the Numbers

The cost of onboarding an employee can add up quickly when you factor in recruitment fees, training programs, tools, decreased productivity during ramp-up periods, and potential turnover from unhappy or uncommitted staff. Cutting corners to save money upfront often leads to higher expenses down the line.

But here’s the thing: onboarding costs aren’t just numbers on a budget sheet—they’re investments in your company’s future success. How you integrate new employees impacts their productivity and how long they stay with your organization. SHRM says it costs about $4,129 to hire someone on average. This covers things like job ads, interviews, and background checks. But that’s the beginning—when you add in training, equipment, and the time it takes to become productive, the total cost can go up fast.

So, how can companies manage these expenses without cutting corners on quality? The answer lies in optimizing your onboarding process by leveraging technology, streamlining tasks, and exploring alternative hiring options like bringing in remote and global talent. By embracing remote work and hiring the right people from the start who are the perfect fit for your company—regardless of their location—you not only save on upfront costs but you reduce the time and resources spent on training and integration. 

In this article, we’ll take a closer look at what onboarding costs and explore ways to make it both cheap and effective.

Why Investing in Onboarding Pays Off in the Long Run

Investing in onboarding has a big impact on how long employees stay and how much they get done. Bad onboarding can make a lot of new employees leave quickly – up to 20% of new hires quit in just 45 days. When people leave so soon, it costs more to hire replacements, lowers productivity, and messes up how teams work together. This shows why it’s so important to do onboarding well from the beginning.A well-organized onboarding process can boost new hire productivity by 70%. This means new employees start to perform faster, which cuts down on training time and expenses. It also allows them to help achieve company goals earlier. When companies put effort into onboarding, they don’t just keep their talent – they also set themselves up for success in the long run and lower their costs.

Breaking Down the Costs of Onboarding

You can split onboarding costs into two main groups: direct costs and indirect costs. Direct costs are easy to spot—hiring, training, and equipment—but indirect costs, like drops in productivity and staff turnover, often slip under the radar despite being important. Both types add up to the total investment needed to bring new employees on board.

Grasping these costs and comparing them to the cost per hire gives businesses a complete financial overview. By looking at both direct and indirect factors, companies can fine-tune their onboarding process and boost long-term savings and output.

Direct Costs of Onboarding

Direct costs include the expenses that businesses face right away when they hire a new employee. These cover:

Recruitment Costs

Recruiting has costs such as job ads, interviews, and background checks. Specialized roles often need more resources, which leads to higher recruitment fees. Working with staffing agencies or headhunters can make this process smoother and cut down on wasted time, which lowers overall costs.

Training Costs

After the new hire joins, the next big expense is training. This can differ based on the industry, with fields like tech and healthcare needing more thorough training. Using structured programs and onboarding software can speed up the process and cut costs.

Indirect Costs of Onboarding

Indirect costs are not obvious but can have a big effect on the total budget. These include:

Lost Productivity

New employees need three to six months to become productive. During this period, team efficiency can drop as experienced staff members help new coworkers get up to speed. However, companies that use onboarding tools see a 20% decrease in time-to-productivity.

Well-planned onboarding programs can cut down this adjustment time and boost productivity more effectively.

Turnover Risk

Ineffective onboarding makes employees more likely to quit . Workers who don’t feel supported tend to leave, forcing companies into expensive rehiring cycles. Onboarding has a big impact on keeping employees around. When companies manage it poorly, 20% of new hires leave within the first 45 days.

Companies can cut these risks and encourage long-term employee loyalty by creating a well-planned and interesting onboarding process. Putting effort into a strong onboarding program doesn’t just reduce turnover. It also keeps employees engaged and in line with what the company wants to achieve over time.

Onboarding Costs vs. Cost per Hire

You might ask yourself—what’s the actual difference between cost per hire and onboarding costs? 

Well, cost per hire is just the beginning. It covers things like job ads, interviews, and background checks—the upfront expenses to get someone on board. 

But onboarding costs? That’s where the big money comes in. We mean training, equipment, and the time it takes for your new employee to get up to speed and become effective.

If you look at the cost per hire, you miss the big picture. The onboarding process covers the key time when new employees adjust, learn, and get comfortable in their jobs. Making both recruitment and onboarding better not helps control these costs but also ensures you get the most from your new team members right away.

Factors that Affect Overall Onboarding Costs

A few things make onboarding more expensive. These include:

Company Size

Big companies can spread out onboarding costs over many new hires because they have set processes and resources. Small companies often pay more per employee to onboard because they can’t save as much on scale.

Organizational Structure

Flat organizations might onboard faster and cheaper. But companies with lots of layers often take longer to onboard, which costs more. This happens because it takes more time to get approvals and train people.

Remote vs. In-Person Processes

The way companies bring new employees on board—whether from a distance or face-to-face—has an influence on expenses in different ways. Getting people started might mean spending more on digital tools and sending out equipment, while doing it in person involves setting up workspaces keeping facilities running, and covering travel costs for new hires.

Industry-Specific Factors

Various industries face their own set of challenges when it comes to onboarding. The tech world might need to provide specialized training, while healthcare requires strict compliance certifications. Retail and hospitality known for their high staff turnover, have to deal with the cost of onboarding new people.

Geographic Location

The cost to bring new employees on board changes based on where you are. Big cities with higher living costs and salaries will see bigger expenses compared to rural areas where costs tend to be lower.

These factors help us see why new employee onboarding costs can vary so much between companies and industries.

The Real Price Tag: How Much Does Employee Onboarding Cost?

Onboarding a new employee often costs more than just recruitment and salary. It involves many parts such as paperwork, training, setting up a workspace, and possible drops in productivity. You might ask, how much does it cost to onboard a new hire? Let’s look at the numbers to get a better idea.

The cost of bringing new employees on board changes based on the job and field, but main expenses include paperwork, learning programs, and tools. As an example, the time people spend on forms and office tasks alone costs around $400 per employee. On top of that, fresh employees work at 25% efficiency in their first month, and it can take up to 26 weeks for them to reach their best performance.

Companies also need to consider costs for setting up workspaces. The price to create a working area can range from $500 and $1,000 or more, depending on the business and job type. This covers home office or in-office gear such as dual screens, keyboards, webcams, and comfy chairs. Plus, don’t overlook extras like welcome packages, which can cost $20 to $100 for each new hire.

For businesses moving employees, the money involved gets even bigger. Relocation expenses can range from $21,327 to as much as $79,429, based on how far and complex the move is. Plus, there’s the training part: companies spend about $1,300 per employee to train them.

Knowing these startup costs helps companies plan better and make sure new hires have what they need to start strong and do well in their jobs. If you ignore these costs, you might mess up your budget and underestimate how much you need to invest in each new employee.

When businesses consider these factors, they can make their processes more efficient and provide a hassle-free, budget-friendly introduction for new employees.

Onboarding Across Borders: Cost Considerations for International Teams

When companies grow beyond their borders, onboarding costs can change a lot based on the country local rules, and cultural aspects. Companies need to think about these cost differences, as they can affect the total money needed to get a new employee ready for work. Here’s a breakdown of average onboarding costs across different regions based on country-specific information:

Global Onboarding Costs per Country

*The USD equivalent costs are rough estimates based on general exchange rates. These numbers can change depending on how currency exchange rates move, so companies should look up current rates to get more accurate conversions when figuring out onboarding expenses across different regions.

When companies grasp the expenses unique to each nation, they can create better worldwide recruitment plans and use their resources.

5 Tools and Calculators for Estimating Onboarding Costs

Businesses need to estimate onboarding costs to manage their budgets. Here are five handy calculators that help companies forecast these expenses:

1. Academy Ocean Onboarding Cost Calculator: This easy-to-use tool estimates both direct and indirect onboarding costs such as the number of hires and training length. It works well for simple cost analysis.
2. HR Cloud Onboarding ROI Calculator: This calculator aims to measure the return on investment (ROI) by looking at turnover rates and productivity gains. It helps businesses see how onboarding affects their finances.
3. Qualee Onboarding ROI Calculator: It helps HR pros evaluate how fast new hires become productive, how many leave, and what training costs. It gives deep insights to improve long-term strategies for bringing new employees on board.
4. Tinqwise Onboarding Cost Calculator: Shows all the costs, both direct and indirect, including hiring and training. It also estimates how getting new hires up to speed affects how engaged and likely to stay employees are.
5. Appcues User Onboarding Cost Calculator: Made for SaaS companies. It looks at how much it costs to get new users started. It helps product managers boost customer engagement by spotting weak points in the process.

When companies use these calculators, they can make their onboarding better. This cuts down on hidden costs and makes their investment pay off more.

Cutting Onboarding Costs: Ways to Save Time and Money

Companies can lower onboarding expenses without compromising on quality. A few smart changes can help businesses reduce costs while still offering a captivating and complete onboarding process. One key method to do this is to boost hiring practices through Applicant Tracking Systems (ATS). An ATS cuts down on time and work spent on paperwork by automating job listings, sorting resumes, and monitoring applicant progress. This not only makes hiring faster but also helps pick the right candidates more , which lowers the chance of expensive staff turnover.

Another budget-friendly option is onboarding software. Using a digital onboarding platform helps companies simplify tasks like submitting documents, planning training, and checking policy compliance. These tools also give new employees self-paced learning modules, which help them adapt quicker without needing lots of hands-on training. Companies that use onboarding software can boost productivity by up to 20% shortening long training periods and saving important resources.

Also, peer mentorship programs have an impact on cutting down training costs. When companies pair new hires with seasoned staff, they create a more natural onboarding process to speed up integration. Mentors show new recruits the ropes of company culture and processes giving on-the-spot help without needing formal training programs. This helps new employees get up to speed faster and builds strong relationships within the company, which leads to better retention.

Automating administrative tasks is another way to cut costs. Paperwork, compliance checks, and payroll setups done by hand can waste time and money. But when you automate these steps, HR teams can spend more time on important parts of onboarding, like making sure new hires feel welcome and happy. This leads to a smoother process that cuts down on mistakes and makes the whole onboarding experience better for everyone.

Hiring globally can also help you save a lot of money. Why bring on staff from the U.S. where it costs about $1,200 to get each new employee started when you could hire people from countries like India or Brazil for much less? By looking at the global talent pool, companies can find skilled workers in places where salaries and startup costs are lower. This doesn’t just cut down on expenses, but it also gives you a chance to hire different kinds of experts from all over.

Lastly, working with staffing agencies or recruiters can make your onboarding better by cutting down hiring times and helping you find top-notch talent. These pros know how to match people to specific jobs, which lowers the chances of hiring the wrong person and helps keep employees around longer.

When you put these plans into action—using tech, setting up mentors, hiring from all over, and teaming up with hiring experts—companies can spend less on onboarding while still giving new hires what they need to do well in the long run. Using tech, having mentors, and planning smart leads to a smoother process that saves time and money.

Our Advice to You: How we Cut Down Onboarding Costs with a Worldwide Approach

At DistantJob, we’ve fine-tuned our onboarding process to make it both quick and cheap. We know that every cent matters when you bring new talent into your company so we’ve created a system that focuses on both quality and saving money.

Global Hiring for Cost Savings

Rather than confining your talent search to nearby areas, which often bring higher onboarding and salary costs, we look into global talent pools. When we hire skilled workers from places like Brazil or India, we help cut costs a lot while keeping quality high. This worldwide approach lets us bring on talent for much less compared to usual hiring methods in pricey areas. It’s a clever plan for companies that want to reduce their spending.

Using Recruiters and Headhunters to Find the Best Employees

To cut down on long-term training expenses, it’s crucial to hire the right person from the get-go. We team up with skilled recruiters and headhunters who focus on spotting top-notch talent that’s a perfect match for both the job and the company’s vibe. This helps lower the chance of pricey staff turnover and makes sure each new hire is a smart long-term investment. As a result, we don’t have to keep hiring and training new people all the time.

Technology-Driven Onboarding to Boost Productivity and Cut Costs

We also rely on technology to simplify and decrease onboarding expenses. By using tools like HR Cloud and Basecamp, we’ve made our onboarding digital, getting rid of the need for face-to-face meetings, paperwork, and setting up physical offices. This method not speeds up the process but also has a big impact on reducing costs linked to travel, relocation, and other logistical hurdles.

Pre-Onboarding and Structured Learning 

We start a pre-onboarding process before a new hire begins. This lets us give key company info and job-specific materials making sure new employees are ready to go on their first day. We also provide structured learning paths, with courses and study resources, so employees can start to master their role before they begin the job. This head-start approach helps to cut down on idle time, boost productivity, and shorten long training periods.

Mentorship and Continuous Feedback

Our onboarding continues after the employee begins. We pair new hires with mentors to help them settle in quicker and better during their first few weeks. We give ongoing feedback after each big task and offer constant support. This cuts down the need for long formal training sessions. Our hands-on method speeds up learning and keeps training costs down while building strong relationships within the company.

By zeroing in on these approaches—hiring worldwide, using tech to our advantage, and offering well-planned guidance—we’ve created a system that not only helps employees thrive but also has a big impact on cutting down onboarding expenses. At DistantJob, we think that smooth onboarding doesn’t mean taking shortcuts. Instead, it’s about using clever methods that bring both quality and savings to the table.

Conclusion: The ROI of Investing in Onboarding

To wrap up, putting money into a good onboarding program isn’t just an expense—it’s a long-term plan to keep skilled workers, boost output, and cut down on staff turnover costs. By zeroing in on getting things done and keeping workers engaged, companies can turn onboarding into a strong tool for growing their business.

One of the best plans is to tap into worldwide talent. Hiring from places with cheaper onboarding costs, like India or Brazil, lets businesses get top-notch pros while spending less. Also, using digital onboarding tools can handle paperwork, speed up training, and help new hires get up to speed faster, which cuts down the time it takes for them to start producing.

Another crucial approach involves pre-boarding and structured learning programs to get new hires ready before they start speeding up how they blend into the team. This, along with ongoing feedback and guidance from experienced staff, ensures employees receive support throughout the process cutting down the need for long formal training.

At DistantJob, we excel at building effective remote teams from a worldwide talent pool helping companies cut down the time, expenses, and hassles of hiring. If you want to simplify your onboarding process while tapping into top global talent, reach out to us today to find out how we can lend a hand.

Luciana Pirk

With a decade of experience in remote work, Luciana Pirk is the Content Manager at DistantJob. She combines her expertise in SEO copywriting with leadership skills in managing remote teams. Luciana is dedicated to promoting remote work, focusing on mental health and enjoying activities like meditation and yoga in her free time.