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How long does it take a new hire to pay for themselves?
Add the recruiting cost and the trainer's lost output to the front of the calculation, and the answer moves by months.
Drafted with AI assistance. Not yet independently checked. Nobody has verified the claims on this page against a source, so treat the figures and legal points as a starting point rather than as settled, and confirm anything you are about to act on. How we check things.
How long does it take a new hire to pay for themselves?
Count from the money spent before they start, not from their first day. In an illustrative production role costing 5,100 a month fully loaded and contributing 7,900 a month at full productivity, with 3,100 of recruiting and 1,900 of lost output from the person training them, the cumulative position turns positive in month five. A sales role with a longer ramp takes longer and digs deeper — around month five for the worst point and beyond twelve months to recover. Model the ramp explicitly, fund the trough, and set a leading indicator that tells you by month two whether you are on the plan case.
The payback on a hire is usually quoted as a rule of thumb — three months, six months, a year — and the rules of thumb are all wrong for the same reason. They start counting on the first day, at full productivity, and they ignore what the hire costs the people already there.
Count the front-loaded costs first
- Recruiting: advertising, agency or referral fee, and management time: 3,100
- The trainer's lost output: the person training them loses about 25 per cent of their own productivity for six weeks — 1,900
That is 5,000 spent before the new person produces anything, and both figures are usually left out entirely.
The ramp
Fully loaded cost: 5,100 a month. Contribution at full productivity: 7,900 a month. Productivity by month: 40, 65, 85, then 100 per cent.
Cumulative position, starting from the -5,000 hole:
- Month 1: contribution 3,160, net -1,940, cumulative -6,940
- Month 2: contribution 5,135, net +35, cumulative -6,905
- Month 3: contribution 6,715, net +1,615, cumulative -5,290
- Month 4: contribution 7,900, net +2,800, cumulative -2,490
- Month 5: net +2,800, cumulative +310
The hire pays for themselves in month five. Their monthly contribution turns positive in month two, which is the number most people quote, and the gap between those two answers is the whole point.
At steady state they produce 2,800 a month of net contribution — 33,600 a year against a fully loaded cost of 61,200. That is a good hire. It just took five months to become one.
Why a sales hire is different
Sales roles have longer ramps because the output is a pipeline that has to fill before it converts. A salesperson at 6,116 a month fully loaded, producing 1,450 of gross profit per deal on a ramp of 0, 1, 2, 3, 4 then 5 deals a month, reaches a cumulative hole of 16,080 in month five and is still about 8,100 behind at month twelve — despite being individually profitable from month six.
Two different roles, the same nominal cost, payback in month five versus payback beyond the first year. Never apply one role's rule of thumb to another.
Inputs people get wrong
The replacement case is different again
When you are backfilling a departure rather than adding a head, the arithmetic changes in two ways. The contribution is not new — it is restored — so the comparison is against the position while the seat is empty, which may be worse than the steady state because other people are covering badly. And the cost of the vacancy runs from the day the previous person left, not from the day the new one starts.
The practical consequence: for roles you expect to have to refill, the speed of hiring is worth real money, and paying a fee to fill a seat three weeks earlier is often cheaper than the three weeks.
What to do with the number
Before you post the job
- Write down the fully loaded monthly cost using your actual burden percentage.
- Write down the monthly contribution at full productivity, and how you will measure it.
- Write down the ramp, month by month, with percentages.
- Add recruiting and the trainer's lost output as a starting hole.
- Build the cumulative line and find the month it turns positive, and the month it is deepest.
- Check you can fund the deepest point without borrowing, or arrange the facility before the person starts.
- Rerun the whole thing with the ramp half as fast. If that version is unaffordable, hire later or hire someone who needs less ramp.
Where this applies
Related questions
How long does it take a new hire to pay for themselves?
Count from the money spent before they start, not from their first day. In an illustrative production role costing 5,100 a month fully loaded and contributing 7,900 a month at full productivity, with 3,100 of recruiting and 1,900 of lost output from the person training them, the cumulative position turns positive in month five. A sales role with a longer ramp takes longer and digs deeper — around month five for the worst point and beyond twelve months to recover. Model the ramp explicitly, fund the trough, and set a leading indicator that tells you by month two whether you are on the plan case.
Which funding products does this apply to?
Working Capital, Business Line of Credit, Payroll Financing. Each has its own page listing the funders in this directory that offer it and what each one publishes about its terms.
Is this specific to construction?
It is written around how a construction business actually generates and collects cash, which is what makes its funding problem different. The mechanics transfer; the arithmetic may not.
Who writes this?
The Find Me Funders research desk. Some drafting is AI-assisted, and every page that is says so at the top, including whether a person has checked its claims yet.
How do I know a figure here is right?
Where a page carries the green notice, its claims were checked against the sources listed at the end and a reviewer is named. Where it carries the amber one, nobody has verified it yet and you should confirm anything you plan to act on.
Are the examples real deals?
No. Every worked example is labelled illustrative and exists to show the arithmetic. What any particular lender charges is on that lender's page, where it publishes it.
Why do you never say what a typical rate is?
Because we cannot source it. A market average assembled from lenders who do not publish prices is a guess with a decimal point on it. Where a lender publishes a figure, we show that figure and say where it came from.
Is this financial or legal advice?
No. It is general information about how these products work. Outcomes depend on your contract and your state, and a lawyer or accountant licensed where you are is the person to ask about your situation.
Can I reuse this content?
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