Employee Benefits

Companies must consider many personnel costs. These costs include employee benefits, such as health insurance and vacation days.

What are other employee benefits?

Lesson Objective

Calculate the cost of recruiting new employees.

Content Vocabulary

recruitingrecruiting

The act of soliciting qualified people to work for a company.

recruiting

The act of soliciting qualified people to work for a company.

Talbot Manufacturing Company is searching for a person to head its production department.

The personnel department placed advertisements for a total cost of $6,495, and employed Empire Executive Search Company to locate candidates.

Example 1Example 1

Empire recommended Alice Welch, Tomas Valdez, and Cleveland Adams. Talbot paid for the candidates travel expenses (i.e., transportation, lodging, and meals) for interviews.

Alice Welch Total travel expenses: $517

Tomas Valdez Total travel expenses: $735

Cleveland Adams Total travel expenses: $674

Example 1 (cont.)Example 1 (cont.)

After the interviews, Talbot hired Cleveland Adams at an annual salary of $154,900.

Talbot paid these expenses to hire him.

Moving expenses $3,600

Sale of home (real estate broker’s fee) $9,470

Empire’s fee (25 percent of Adams’s first salary) $38,725

Example 1 (cont.)Example 1 (cont.)

Step: Find the total recruiting cost.

Advertising + Interviewing + HiringExpenses Expenses Expenses

$6,495 + ($517 + $735 + $674) + ($3,600 + $9,470 + $38,725)

$6,495 + $1,926 + $51,795 = $60,216

Example 1 AnswerExample 1 Answer

A financial services firm searched and found a senior-level investment banker. Advertising for the position totaled $12,500.

The firm narrowed the search down to 3 finalists. It spent $3,890 on interviewing expenses.

Example 2Example 2

It decided to hire Jane McNally.

The firm paid $5,000 in moving expenses and a 6 percent realtor’s fee on the selling price of her home.

The home sold for $348,000.

What is the total recruiting cost?

Example 2 (cont.)Example 2 (cont.)

Step: Find the total recruiting cost.

Advertising + Interviewing + HiringExpenses Expenses Expenses

$12,500 + $3,890 + [$5,000 + (6% × $348,500)]

$12,500 + $3,890 + [$5,000 + $20,910]

$12,500 + $3,890 + $25,910 = $42,300

Example 2 AnswerExample 2 Answer

Trebor Technology is recruiting for a programmer position that pays an annual salary of $38,000.

The company spends $859.50 in advertisements and hires the Quality Employment Agency to search for candidates.

Practice 1Practice 1

Quality’s fee is 25 percent of the first-year salary.

Trebor spends $1,287.98 on interviews and hires one of Quality’s candidates.

What is Trebor’s total recruiting cost?

Practice 1 (cont.)Practice 1 (cont.)

$11,647.48

Practice 1 AnswerPractice 1 Answer