The Break-Even Point

So all this investment leads to increased production, hopefully, at least that's why businesses make the investment. But it can take a while for the cost to get covered and companies to see a return on their investment. According to the Studer Group, "A survey of 610 CEOs by Harvard Business School estimates that typical mid-level managers require 6.2 months to reach their break-even point."

Bliss breaks down the productivity scale into three periods: during the first month or so, after training is completed, new employees are functioning at about 25% productivity, which means that the cost of lost productivity is 75% of the employee's salary. The level goes up to 50% productivity for weeks 5 through 12, with corresponding cost of 50% of employee salary. Weeks 13 -20 usually bring the employee up to 75% productivity rate, with the cost being 25% of employee salary. Around the five-month mark, then, companies can expect a new hire to reach full productivity.



Read more: http://www.investopedia.com/financial-edge/0711/the-cost-of-hiring-a-new-employee.aspx#ixzz3Xa7JZhDC
Follow us: @Investopedia on Twitter

 

The Bottom Line

According to Eric Koester of MyHighTechStart-Up, "estimates range from 1.5x to 3x of salary for the 'fully-baked' cost of an employee - the cost including things like benefits, taxes, equipment, training, rent, etc." Hiring a new employee isn't a decision that should be taken lightly, as it doesn't fall lightly on the company budget. But without workers, there isn't much work done. And that's the bottom line for businesses; even though the investment may make the company accountant cringe, the potential in return on a good new hire continues to make the investment worthwhile.



Read more: http://www.investopedia.com/financial-edge/0711/the-cost-of-hiring-a-new-employee.aspx#ixzz3Xa7B1vuS
Follow us: @Investopedia on Twitter

 

ROI on Hiring

Corporate Talent, Inc         timp@ctisearch.com         303-886-0405

Executive Search Firm

26

Years

  • LinkedIn Social Icon
  • Facebook Social Icon
  • Twitter Social Icon