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Shallow Pockets: Tips for Hiring Employees on a Limited Budget

Larry Alton
Feb 18, 2016

If you’re currently operating within the constraints of a small budget, you’ll have to get creative when hiring new employees.

While hiring top talent may be easy for large, established brands with deep pockets and access to recruiting pipelines, it’s sometimes challenging for small businesses to even carve out enough money to hire the next employee.

If you’re currently operating within the constraints of a small budget, you’ll have to get creative and maximize your resources.

The Cost of Hiring the Wrong Employee

The key to hiring when on a budget is to remove the financial aspect from the equation, at least in the beginning. If you spend all of your time and energy focusing on the fact that you need a cheap hire, you’ll wind up with the wrong hire.

Frankly, this is the one thing you can’t afford to do. In the long run, it’s better to spend a little bit more for the right hire than to save a few bucks on someone who really isn’t the right fit for the job.

According to research, the cost of onboarding an employee can run as high as $240,000 in some organizations. But it’s not just the cost of bringing that employee on.

The bottom line cost of a bad hire includes hiring costs, total compensation, the cost of maintaining the employee, disruption costs, severance, mistakes, failures, and other missed business opportunities.

In the end, this can run as much as $840,000. Yikes!

But that’s not all. (Does this sound like an infomercial yet?) In addition to the financial costs, you also have to consider productivity costs, employee morale costs, and larger reputation costs.

According to research conducted by Robert Half International, the world’s largest staffing firm, 39 percent of CFOs surveyed said a bad hire has cost them productivity.

Eleven percent said a bad hire actually resulted in fewer sales. Furthermore, supervisors spent approximately 17 percent of their time managing poorly performing employees. In other words, almost one-fifth of their salary is going toward correcting hiring mistakes.

As far as employee morale goes, the same Robert Half International study discovered that 95 percent of those surveyed stated that a bad hire directly impacts the morale of the team.

And finally, you have to worry about your reputation. If you continually make the wrong hire, your talent pool will quickly shrivel up.  

5 Tips for Making the Right (Budget-Friendly) Hire

As you can see, making the wrong hire is costly on many fronts. You want to keep this in the back of your mind as you seek out budget friendly hires. Are you hiring an employee simply because they come in below your financial limitations, or are they actually a smart hire?

With all of this being said, let’s now dig into the meat of the issue. How can you maximize the resources you have and cost-efficiently make the best hire? Let’s take a look.

1. Know When to Outsource 

While there are certainly benefits to having people on your payroll, it’s not always necessary to bring someone in house. Certain jobs and tasks can be outsourced much more efficiently.

Not only does this save you money on payroll, but it also mitigates the risk associated with making the wrong hire. After all, if an independent contractor isn’t doing a good job, you can simply cut ties without any questions.

One of the more popular trends is to actually hire virtual assistants. This is something a number of leading companies are currently doing. By hiring assistants from other countries, companies can save a considerable amount.

For example, based on the number of hours you request, you may be able to hire an employee for as low as $4.95 per hour.

These numbers obviously scale when you’re talking about skill-specific jobs, but the rates are almost always more cost effective than onboarding a full-time employee.  

2. Use Small to Your Advantage

Being small is one of your biggest advantages. People enjoy working for small businesses. In fact, people leave jobs at big businesses for similar positions at small businesses, not the other way around.

And when they do so, it’s less about the money and more about the challenge.

“All of that is great news for small recruiting teams, and should help inform your messaging,” says Paul Petrone of LinkedIn.

“When crafting your job postings, your employer branding, your InMails and when talking with candidates, remember to emphasize the fact that new hires at your company, specifically because it’s small, can have a major impact and shape the future of your business.”

3. Offer Competitive Non-Salary Benefits

While a challenge is great, most employees aren’t going to accept a lower-paying job simply for the adrenaline rush. You’re going to need to make up for this lack of payment with other forms of compensation.

As a small business, non-salary benefits must be extremely competitive. Some of the things employees want include childcare support, transportation reimbursement, flexible schedules, bigger/cooler offices, remote working opportunities and more.

Spend some time working through these things. What can you do to enhance the allure of working for your company?

If you’re trying to accomplish this in a cost-effective manner, think about work-life balance.

Most employees are willing to sacrifice a bigger paycheck if they have the opportunity to stay home with a sick child, take off early on Friday afternoon for a weekend trip, or work from home when they’re feeling under the weather.

4. Clearly Set Expectations

Whenever you venture into the hiring process, it’s important that you clearly set expectations from the beginning. Talk salary at the beginning of the interview process, not at the end.

By getting the salary issue out of the way, you give yourself time to make your case as for why the salary is only part of the equation. If you wait until the end of the interview process to mention the salary, you may blindside potential hires.

In addition to setting salary expectations, it’s also smart to clearly outline job duties, office culture, and more. By establishing these facts early on, you can ensure your time is well spent on people who are in line with your vision.

5. Leverage Existing Employees

One of the first places you should start when hiring new employees is with existing employees. If your employees are satisfied and proud of where they work, they’ll give you some pretty good referrals.

On top of putting you in contact with these referrals, they’ll also likely provide a favorable view of what it’s like to work for your business.

It’s also reasonable to expect that employees will only refer people they get along with. If you end up hiring these individuals, it’s likely that your office environment will improve.

Hiring Top-Level Employees on a Budget

In the end, hiring top-level employees on a budget is an art form. It takes time to learn about the intricacies of recruiting and staffing.

While cost is certainly a limiting factor in your situation, you can’t let it be the only factor. As previously mentioned, it’s much better to spend money on the right hire than to save money on the wrong one.

After all, any savings you enjoy on the payroll will be lost when it comes to productivity, morale and reputation.

Using the five tips outlined in this article, you can begin to make smart hiring decisions without breaking the bank.

Keep them in mind as you continue the hiring process. Over time, you’ll begin to master this art form.

Image Credit:

AndreyPopov / Getty Images

Larry Alton
Larry Alton is a professional blogger, writer and researcher who contributes to a number of reputable online media outlets and news sources. A graduate of Des Moines University, he still lives in Iowa as a full-time freelance writer and avid news hound. Currently, Larry writes for,,, and among others. In addition to journalism, technical writing and in-depth research, he’s also active in his community and spends weekends volunteering with a local non-profit literacy organization and rock climbing. He pursued his undergraduate degree in English Literature and transitioned to freelance writing full-time upon graduation. The years he spent studying and working the corporate daily grind prepared him well for his work with,, and A featured writer with, and, he’s positioned himself at the top of the tech writing field and is known for “translating” industry jargon into easily digestible, readable content. Particularly interesting fields for Larry include digital media, thought leadership, any and all things Android and iOS, entrepreneurship and social media. Connect with Larry on Google+ or in the comments section on any of the sites where he’s featured.