Onboarding Cost Calculator: What It Is and How It Works
Chad Burggraf7 min read
Onboarding new employees is a necessary part of growing a business, but the recruitment and training costs can add up quickly. Many companies underestimate the true price of onboarding, which may lead to budget deficits and financial strain.
An onboarding cost calculator helps you estimate onboarding expenses in advance. It allows you to plan budgets with accuracy and reduce your organization’s average cost to onboard a new hire.
In this article, you’ll understand how an onboarding calculator works and why you need one. You’ll also learn how to use it.
What Is an Onboarding Cost Calculator?
An onboarding cost calculator is a tool that helps your business estimate the total cost of bringing in a new hire.
It breaks down onboarding expenses, such as recruitment, employee training, administrative tasks, and lost productivity.
Since onboarding costs vary by industry, role, company size, and the number of people involved, the tool provides a tailored estimate based on specific hiring needs.
You can also use this calculator to evaluate the full cost of onboarding vendors into your supply chain.
ezOnboard provides an onboarding calculator that helps you compute the indirect costs of manual onboarding processes. It can even show you how much money you can save from using onboarding automation. Book a demo to learn more!
How Does an Onboarding Cost Calculator Work?
An onboarding cost calculator computes the total expenses of bringing in a new hire by factoring in multiple cost categories.
You simply enter specific details, and the tool calculates the costs related to onboarding programs.
Below are the key factors influencing the price of employee onboarding:
- Recruitment costs: These include job advertisements, recruiter fees, and background checks. You often pay to list job openings on hiring platforms or use recruitment agencies to find the best talent.
- Training expenses: These refer to online courses, in-person workshops, certifications, and mentorship programs that help new hires learn job-specific skills and your company culture. The average training costs are higher for more specialized roles or executive positions. For example, training an office manager is more expensive than onboarding an entry-level IT technician.
- Administrative costs: Handling paperwork, setting up payroll, and tracking cybersecurity onboarding compliance cost money. Although these expenses may initially seem small, they add up quickly, especially when there are more employees involved.
- Equipment costs: You need to provide new hires with hardware equipment (laptops, monitors, etc.) and handle access provisioning for software licenses. These tools require a significant investment.
- Relocation costs: If a new hire is moving for the job, your company needs to cover expenses like travel, temporary housing, and moving services. You may also offer relocation bonuses or reimbursements for transportation and accommodation during the transition.
- Lost productivity: Onboarding takes time, and new employees are not immediately fully productive, there are steps each new employee must take to learn about the company, processes and supporting systems. You should consider the time spent on orientation, training, and shadowing before a new hire reaches full efficiency. This loss in productivity impacts team output and business performance.
Why Do You Need an Onboarding Cost Calculator?
After understanding how an onboarding cost calculator works, you might be curious to learn about its importance. Here are the reasons why this calculator matters:
Reduce Employee Onboarding Costs
Onboarding and hiring employees can be expensive. Without a clear breakdown of expenses, costs can quickly spiral out of control.
An onboarding calculator helps you track every dollar spent, from the hiring process to IT user management. This data helps you cut down on unnecessary expenses and allocate resources wisely.
For example, if managing users takes up too much time from your current processes, you can automate employee onboarding. This frees up valuable IT teams to focus on business-critical projects instead of administrative tasks like account creation and user provisioning.
Manage Budget Effectively
An onboarding cost calculator helps you allocate budgets wisely by estimating all onboarding-related expenses in advance.
This prevents financial surprises and ensures that your company doesn’t overspend on unnecessary processes.
The calculator can also compare actual onboarding costs with projections, making it easier to refine budgets over time. If expenses are consistently higher than expected, you can quickly adjust your onboarding strategies.
Identify Hidden Costs in the Onboarding Process
Many onboarding expenses are not immediately obvious. Most businesses often focus on direct charges like recruitment and training costs per employee.
In doing so, they might overlook indirect expenses, such as lost productivity, software licensing, and administrative workload.
An onboarding cost calculator helps you uncover these hidden expenses and adjust budgets as needed.
For example, if your IT team spends more time reducing onboarding tickets, the labor cost and lost productivity should be accounted for.
By identifying these costs early, you can optimize your onboarding process and prevent financial surprises.
Improve Employee Retention
An onboarding cost calculator helps you invest in the right areas, like structured training programs and mentorship initiatives. These can build a stronger and more effective onboarding process.
Having a well-supported onboarding experience helps new employees feel valued from day one. This improves new hire retention and reduces costly turnover.
Enhance Decision-Making
An onboarding cost calculator provides a detailed breakdown of expenses. This makes it easier to compare different onboarding scenarios to prevent overspending or underinvesting.
For example, if you’re thinking of expanding to new locations, you can use the calculator to compare onboarding costs in different regions.
Thanks to the calculator, you can discover that some areas may have higher training expenses or administrative costs due to labor laws and compliance requirements. You can then invest in locations with cheaper onboarding expenses.
How to Use an Onboarding Cost Calculator
After learning the importance of an onboarding calculator, it’s time to focus on how to use it properly. Here are some tips you can follow:
Gather Important Data
Start by collecting all relevant employee onboarding expenses. These include training costs, equipment purchases, licenses, lost productivity, and average annual salary rates.
If you hire remote employees, consider remote onboarding expenses like software licenses and home office stipends.
Meanwhile, if your organization offers relocation assistance, you should also include moving and travel costs.
The more detailed your data, the more accurate your cost estimate will be.
Input Values Into the Onboarding Cost Calculator
Once you have all your data, you can enter the values into the onboarding calculator.
Most calculators will ask for specific figures, such as the overall cost of job postings, hardware equipment, and payroll setup.
Some tools may also allow you to customize fields based on your industry or company size. These enable more tailored computations.
Make sure to double-check each value you enter to avoid miscalculations.
Compare Estimated Onboarding Expenses Against Budget Allocations
After entering the data, you can immediately get results from the calculator. Review the total onboarding cost and compare it with your existing budget.
If the estimated cost is higher than expected, identify which areas are driving up expenses. This will help you decide whether to adjust your onboarding plan, reduce unnecessary spending, or allocate more resources to onboarding.
Identify Cost-Saving Opportunities
You can also use the onboarding calculator to uncover cost-saving opportunities.
For example, if training costs are high, you can switch to self-service portals and knowledge bases. These empower new hires to learn on their own without consuming valuable HR hours.
On the other hand, if your company has high turnover rates, automating repetitive onboarding tasks can reduce administrative workload and save time.
These minor adjustments can lead to significant savings over time.
Reduce Onboarding Costs With ezOnboard
ezOnboard offers an automated onboarding solution that can lower expenses related to bringing new employees into your company. It works by integrating Microsoft Active Directory and Entra ID with your HR software.
Once fully integrated, ezOnboard's onboarding software can reduce manual workload and human errors. It can automatically handle repetitive tasks and improve IT productivity. This can significantly cut down on onboarding expenses.
ezOnboard also provides an onboarding calculator that helps you compute the indirect or soft costs of manual onboarding processes. It can even show you how much money you can save from using onboarding automation.
Book a demo today to enjoy increased cost savings!
FAQs About Onboarding Cost Calculator
How much does an onboarding program cost?
The cost of an onboarding program can range from $500 to over $5,000 per employee, depending on your industry and organizational structure. This includes expenses like training, admin time, software, and lost productivity.
An onboarding calculator helps both IT and HR professionals manage these costs more accurately.
How much does a $20 an hour employee cost an employer?
A $20 per hour employee costs more than just their wage. You should consider payroll taxes, employee benefits, Social Security, training, licensing, equipment, and recruiting costs. Depending on the company and the employee payroll amount, the true cost could be 30–50% higher than the base salary.
How much do you get paid for onboarding?
Onboarding pay varies by role and company. Some businesses offer full pay from day one, while others may pay a training rate.
What is an onboarding charge?
Onboarding charges refer to the total expenses associated with bringing a new employee into your organization. This includes paperwork, equipment setup, orientation, and training fees.