What is Hiring Plan Cost?
Hiring plan cost calculates the total investment required to recruit, equip, and onboard new employees. Beyond salary, each hire incurs recruitment fees, equipment purchases, training costs, and a productivity ramp-up period. Accurate cost forecasting prevents budget overruns during growth phases. Budget recruitment with the Recruitment Cost Calculator and model the impact on your burn rate.
The Formula
Total Hiring Cost = Number of Hires × (Recruitment Cost per Hire + Equipment + Onboarding Training + First 90 Days Reduced Productivity)
Worked Example
5 new hires planned: $6,000 average recruitment cost, $2,000 equipment, $1,500 onboarding, $3,000 estimated productivity ramp cost per person.
- Cost per hire = $6,000 + $2,000 + $1,500 + $3,000 = $12,500
- Total for 5 hires = 5 × $12,500 = $62,500
- Plus 5 new salaries ($40,000 avg) = $200,000/year
- First-year total cost = $62,500 + $200,000 = $262,500
📌 Hiring 5 people costs $62,500 upfront before any salary, $12,500 per hire. The true first-year cost is $262,500, not the $200,000 salary budget alone.
Why This Matters
Budget accuracy
Startups frequently budget only for salaries when planning hiring. The $12,500 per-hire overhead means a plan to hire 10 people needs an extra $125,000 beyond salaries, a material amount that can shorten runway by 2-3 months.
Timing decisions
Understanding the full cost per hire helps decide between hiring 5 people in Q1 ($62,500 immediate outlay) vs 2 in Q1 and 3 in Q3 (spreading the cash impact). Staggered hiring is often smarter for cash management.
Headcount-to-revenue alignment
Hiring plans disconnected from revenue targets lead to over-hiring in good times and painful layoffs in downturns. Tying each new role to a revenue milestone (e.g., hire a second sales rep when ARR hits $500K) ensures the team scales proportionally and each hire is justified by business capacity to support them.
Common Mistakes
❌ Forgetting the productivity ramp
New hires aren't fully productive for 3-6 months. A developer hired at $50K salary produces roughly $25K of value in their first 6 months while consuming full salary. This "ramp cost" is real and should be budgeted.
❌ Not accounting for failed hires
Not every hire works out. Industry data suggests 15-20% of new hires leave or are let go within 12 months. Factor a 15% "miss rate" into hiring plans, plan to hire 6 to end up with 5.
❌ Hiring for current needs instead of future demand
By the time a position is approved, posted, filled, and ramped, 4-6 months have passed. If you hire only when the team is already overwhelmed, you are always understaffed during the gap. Plan hiring 1-2 quarters ahead of projected demand based on growth forecasts.
Industry Benchmarks
| Category | Good | Average | Poor |
|---|---|---|---|
| Cost per hire | Below $5,000 | $5,000-10,000 | Above $15,000 |
| Time to hire | Below 30 days | 30-60 days | Above 75 days |
| New hire 12-month retention | Above 85% | 70-85% | Below 70% |
Source: Bureau of Labor Statistics & SHRM Human Capital Report
Benchmark data sourced from Bureau of Labor Statistics & SHRM Human Capital Report.