How to Reduce Hiring Costs in 2023

Hiring managers meeting at an office punching numbers on a calculator to determine how to cut their recruiting costs

According to Glassdoor, the average cost of hiring an employee for a U.S. company is approximately $4,000. It Is a necessary investment and worthwhile if you select a candidate who becomes a high-performing employee. Hiring costs are part of doing business. Learn how to reduce hiring costs below!

Then there are the costs associated with hiring the wrong employee; these can be even steeper. When you have to let a bad hire go, you know all the work assigned to them is no longer being done. This means you may have to contract temporary or freelance employees, pay other employees overtime to help make up their work or fail to deliver on client deadlines. These can all result in lowered employee morale and negatively affect your bottom line.

However, there are also hidden costs of a vacant position that can be easily overlooked. When you make a new hire, you probably are not anticipating it to go wrong. After all, you would not have hired them in the first place if you knew they would not work out, right? When you have already spent valuable time and resources on interviewing, hiring, and onboarding an employee you thought was the right fit, it can be a shock to realize they actually are not. Now, you will have to repeat the whole process to find their replacement — which you likely did not factor into your budget or timelines.

How to Calculate Cost Per Hire

You can’t reduce your hiring expenditures if you don’t know how much each new hire costs you in the first place. So, let’s start with calculating your cost per hire. To find your cost per hire, take the total dollars spent on hiring and divide it by the number of hires within that same time frame like this:

Total hiring costs for Jan – Dec / Number of hires for Jan – Dec

The equation is the easy part. The trickier part is adding up all the expenses of hiring, both internal and external. Here are some examples of items to include when adding up hiring expenditures.


  • Salaries of in-house recruiters
  • Software (ATS, email marketing platform, etc.)
  • Recurring fees (subscriptions, job board memberships, etc.)
  • Employee referral bonuses


  • Third-party recruiters
  • Ads on job boards
  • Job fairs
  • Candidate assessments
  • Background checks
  • Drug testing

Once you’ve factored in all of these costs and divide them by the number of new employees you onboarded during the same time frame, you’ll have a firm understanding of exactly how each of those new hires impacts your budget.

What is the True Cost of a Bad Hire?

According to a Harris study, 41% of employers said that the cost of a bad hire was greater than $25,000, and 25% said it was greater than $50,000. This was greatly dependent on the position — a role with a higher salary that requires more specialized skills and experience will have a greater cost of employee turnover because it will likely take you longer to find a qualified replacement.

Now that you know the true cost of a bad hire, you understand that hiring the wrong person for the job is not just a harmless mistake. You are probably asking yourself: “How can my business avoid these costly consequences and minimize our hiring costs overall?

Turning to professional staffing agencies drastically increases your chances of placing the best candidate in the right position the first time around — effectively minimizing the risk of dealing with the cost of a bad hire. Between speeding up timelines and increasing cost efficiency, there are numerous benefits from a financial perspective as well.

While some companies may believe that external staffing services are more expensive than in-house recruitment initiatives, utilizing professional recruiters or headhunters can help you reduce the high cost of hiring a new employee. Here are a few examples of how this works. 

How to Reduce Hiring Costs

Avoid turnover

New hire turnover is incredibly costly and often an expense not factored into your hiring budget. When a new hire does not work out, you have lost the money you put towards recruiting costs, such as interviewing, hiring, and training them. Then, you have to do it all over again. According to research by SHRM, it can take up to 50-60% of an employee’s annual salary to find their direct replacement.

Professional staffing agencies and headhunters help minimize the risk of new hire turnover by using their proven methods, vast resources, and staffing expertise to place the right candidate in the right role the first time around. This way, you are more likely to avoid paying the cost of hiring a new employee again.

Related: Highly Effective Strategies for Employee Retention

Recruit from within

Your existing staff roster is the first place you should turn when sourcing talent for an open role. Internal candidates require much less ramp-up time than brand-new ones, and they don’t add any additional benefits or onboarding costs since they’re already on the payroll. 

Not only is it more cost-effective to recruit internally, but it’s also great for morale. Promoting from within shows employees you’re invested in their professional development, which in turn helps keep them from leaving the organization.

Related: Hiring From Within: The Dos and Don’ts

Ramp up referrals

Referrals are notorious for producing strong hires. Yes, they come with the cost of a referral bonus, but they eliminate much of the heavy up-front work of sourcing and screening. Plus, referred candidates tend to have more longevity than those who come to you without a connection to the company, which helps lower the potential expense of making a poor hire.

Related: How to Make Your Employee Referral Program a Powerful Recruitment Tool

Optimize the interview cycle

Professional recruiters and headhunters can help get your ideal candidate sourced, placed, and started on work more quickly through a streamlined hiring process. At 4 Corner Resources, we aim for a fully screened and qualified candidate for any role within 48 hours. How do we do this? By:

  • Maintaining relationships with passive candidates;
  • Leveraging our Applicant Tracking System (ATS) and resume database to maintain detailed records of all interactions with candidates and job seekers; and
  • Staying up to date with a vast and constantly growing network of active job seekers.

This optimized hiring process results in top candidates being placed faster — which means your new hire can finish their training and actually start producing value for your business sooner. When the average company loses anywhere between 1% and 2.5% of its total revenue on the time it takes to bring a new hire up to speed, you definitely don’t want to have to extend or repeat this costly process.

Go virtual

Career fairs and similar recruiting events can effectively spread awareness about your company and generate leads, but they’re also expensive to attend. You can reap many of the same benefits while dramatically lowering your event expenses by participating in virtual versions of these events. 

Virtual career fairs and professional networking events spiked during the pandemic and have remained popular as many found they enjoyed the simplicity and low barrier to entry offered by online events.

Related: Tips for Hosting Virtual Hiring Events

Avoid a bloated tech stack

Technology is a valuable recruiting tool, but the cost of all those different apps and gadgets adds up. Each year, you should carefully analyze your recruiting tech stack to ensure you’re still getting your money’s worth from each component. Also, shop around regularly to ensure you get the best deal. 

The same concept can also be applied to other parts of your recruiting process. For example, many companies are still doing routine drug testing even though their state’s laws around recreational use have changed. Assessing whether this type of testing is still a priority may yield cost savings that can be redirected to other, more important candidate assessment tools.

Free up your in-house resources to be used more effectively

You and your employees are already incredibly busy. When someone in-house has to post job descriptions on 20 different platforms and rifle through an endless stack of resumes, it takes even more of their time and energy away from the day-to-day responsibilities of their role. In fact, it is estimated that small business owners spend around 40% of their working hours on tasks that do not directly generate income — such as hiring.

Instead, consider contacting professional staffing agencies to conduct these often tedious and time-consuming front-end recruiting processes. You and your employees will then be able to focus on other revenue-driving ventures for your business, positively impacting your bottom line.

Related: The Top Recruitment Assessment Tools and Technologies

Have access to more recruiters

Many businesses may only have one person or a small team dedicated to handling HR and/or hiring tasks, and recruitment is likely not their expertise. On the other hand, professional staffing agencies will have a large team of recruiters on-hand who are highly-skilled, experienced, and passionate about recruiting.

They can help you address unexpected or volume-based needs that your in-house team may not have the capacity to handle, such as hiring multiple people at once or bringing on contractors immediately for a project-based need.

Consider utilizing professional recruiters or headhunters to work hand-in-hand with your HR professionals rather than having them go at it alone. This way, you can produce the best, most cost-effective results while taking the brunt of recruiting tasks off of your HR department’s shoulders.

How Staffing Agencies Can Help You Reduce Hiring Costs

Gain access to in-depth recruiting experience and expertise

As a business owner or manager, recruiting and hiring are likely not your exact area of expertise. However, recruiters at professional staffing agencies maintain extensive knowledge of recruiting best practices and hiring trends from working with various clients and candidates. One of the major benefits of working with a staffing agency is that they can bring these insights directly to your business.

Working with a recruiter can help you identify your workforce goals to form a recruitment strategy that aligns with them. Then, the professional staffing agency will source and screen candidates on your behalf that match your requirements and expectations. This way, you are not just making hires to fill open desk spots — you are making strategic hires backed by experience and expertise.

Have partner that will solely focus on recruiting

You and your employees already have a lot of day-to-day business responsibilities to worry about, meaning that certain internal recruitment tasks often fall by the wayside. This behavior may seem minor at the moment, but it can add to the cost of a bad hire later. For example, 11% of respondents in the Harris study claimed that a bad hire was made because the candidate’s references were never checked.

In this case, a time crunch likely caused these employers not to check the candidate’s references. If they had taken the time up-front, they may have caught wind of an issue that would have prevented them from selecting this candidate in the first place. 

Third-party recruiters can be a valuable partner for your business because they are solely focused on recruiting — unlike your internal employees who are busy working on numerous ventures and tasks simultaneously. Professional staffing agencies will have the proper time and resources to source and screen candidates, ensuring that no necessary steps are missed simply due to time constraints.

Choose from a wider pool of qualified candidates

Reputable professional staffing agencies attract top-tier talent and therefore have access to a vast pool of qualified candidates. Working with a recruiter constantly expanding their professional network and maintaining relationships with active and passive job seekers means they can connect with those job candidates on your behalf.

For example, we often source and screen hundreds of candidates’ resumes for a single job opening to find the best fit. A job posted by an internal recruiting team may not yield nearly the same volume of applicants, meaning you could be missing out on your ideal employee simply because they never saw your job posting. When you can place the most qualified candidate in any position the first time, turnover or the associated costs are unnecessary.

Experience an expedited hiring process (without sacrificing quality!)

According to the Harris study, 38% of respondents who made a bad hire identified the need to fill the job quickly as the main reason behind hiring the wrong candidate. While your business wants to minimize the lost productivity from a vacant position, settling for just any replacement instead of the right placement can actually cost you more in the long run. If an employee is let go or leaves for another opportunity and you rush to find their successor, who then has to be replaced again, you have now spent double on recruiting and onboarding costs.

Working with a recruiter can help you get new hires up and running more quickly through an expedited and streamlined hiring process. With this optimized hiring process, the right new hire can be placed and onboarded faster — meaning they will not need to be replaced soon after and can start actually producing value for your business.

Related: Ways to Reduce Your Average Time to Hire

Lower Your Cost of Hiring an Employee By Partnering With The Right Recruiting Firm

Overall, partnering with professional staffing agencies or headhunters tends to be more cost-effective and efficient in the long run than exclusively using in-house recruiters. Whether your company is large or small, hires frequently or infrequently, turning to professional recruiters can save you money, time, and headaches.

Suppose you want a partnership to provide you with the best candidates cost-effectively and efficiently. In that case, choosing a recruitment agency that puts your needs first is necessary.

Headquartered in Orlando, our team at 4 Corner Resources continually ranks among the top employment agencies in the nation — but we can use our proven recruiting strategies, resources, and extensive candidate networks to place the best applicants in companies operating in various industries all across the nation.

Contact us today to learn more about how our services can help you lower the cost of hiring an employee without sacrificing quality!

Pete Newsome

About Pete Newsome

Pete Newsome is the President of 4 Corner Resources, the staffing and recruiting firm he founded in 2005. 4 Corner is a member of the American Staffing Association and TechServe Alliance, and the top-rated staffing company in Central Florida. Recent awards and recognition include being named to Forbes’ Best Recruiting Firms in America, The Seminole 100, and The Golden 100. Pete also founded zengig, to offer comprehensive career advice, tools, and resources for students and professionals. He hosts two podcasts, Hire Calling and Finding Career Zen, and is blazing new trails in recruitment marketing with the latest artificial intelligence (AI) technology. Connect with Pete on LinkedIn