The process of recruiting new employees is among the most crucial investments a business can make. However, hiring new employees cost money. Indeed, The Society of Human Resource Management estimates that the cost of hiring new employees is $4,425!
That’s a lot of money.
This is the amount of $14,000 for executive hiring.
Whatever the cost is It’s evident that not only does recruiting require time, but it’s also costly. That’s why you should make sure you do the job done right the first time, and to stay within your budget.
What’s the cost of recruiting?
In simple terms, a recruitment budget is an all-inclusive annual estimation of the total expense of hiring within your organization. It consists of both internal (e.g. salary of recruiters) as well as external (e.g. recruiting tech stack, advertising expenses) expenses. These include unplanned costs because of the departure of staff. Naturally, your budget for recruitment must be in line with your company’s annual and long-term business strategies and plans for the future established by your Board of Directors and CEO.
1. Plan your annual recruitment strategy for new employees
You will need to devote a lot of time working on this task.
To avoid a scattergun approach to recruitment , we suggest determining the following:
- How many new employees your company is planning to recruit?
- Determining if some jobs are more difficult to fill as compared to others. If they are, will these roles cost more?
- Are there seasonal hiring opportunities?
- What are the best practices for hiring high volume for example, recruiting for graduate students?
- What is your staff turnover?
The answers you get to these questions will allow you to create your recruitment strategy for at the very least one quarter in advance. In addition, you’ll know the number of annual employees you’ll need to plan for each department.
Talking with your department head and hiring managers to figure out the number of new hires the company is planning to make over the next financial year is vital to this process.
2. Divide your expenses into smaller chunks
Find out how much you pay for recruitment by category as well as on a month-to-month basis. It is possible to find the following sections to be helpful to help you with the calculations:
- Cost per hour
- Costs of advertising on job boards (e.g. Indeed, Career Builder, industry-specific boards)
- Costs for hiring professionals on social networks (e.g., LinkedIn)
- Software for recruitment costs (both the initial and ongoing costs)
- Networking events and recruitment, including fairs for graduates
- Branding (such as videos for companies or social media) banners, printed materials, and more)
- Background checks for potential employees
- Costs of external agencies for recruitment (if you employ them)
- Costs for interviews (candidate expenses for accommodation and travel in the event that you are able to offer the opportunity to candidates)
- The salary includes a separate heading for employing temporary staff from an agency
- Costs for onboarding, including relocation costs for applicants (again should you provide them)
- Costs of training (during onboarding and the annual training for development)
If you’ve got what appears like a massive annual number of recruits do not be deceived. Incorporating everything into step 3 (more on this in a minute) and then estimating the way you’ll split the monthly expenses, which includes the fixed and recurring costs is crucial. The devil’s in the details it’s true.
3. Be vigilant about your historical/fixed costs
Take a look at your fixed and past costs in particular if you’re committed to more extensive recruitment campaigns like graduate fairs. This will enable you to comprehend the most costly elements of your recruitment expenses which include things such as tools for recruiting such as agency costs and job fairs and HR tech.
Additionally, you’ll have more insight into which channels of recruitment worked and yielded results and even more important the ones that did not.
When you are analyzing your fixed expenses, make sure to consider what did you pay for your annual recruitment and do you anticipate that it will increase? If yes, then why?
Be sure to take into account the cost for events in your calendar of recruitment like the days of recruitment for universities as well as job fairs. If you are aware that the events are a great source of applicants (this is often the case when you’ve formed partnerships with reputable universities) it is important to consider these expenses. For instance, you may need to pay for banners, stands, flyers and more.
It is best to allocate funds to strategies to recruit that have proven successful previously. An annual or quarterly review of these strategies gives you the overall picture you require to make sure your budget is put to the best usage.
Additionally, your business may have been involved in a massive recruitment drive prior to. If it was an event that happened once the budget you are planning to use must be adjusted accordingly.
It’s also worth notingthat historical expenses may also comprise costs of agencies. If, for instance, your business utilizes agencies to hire temporary employees, you’ll have to take into account the fees. There are also agencies that you can use to recruit more difficult or niche post. In general, agencies charge about 20 percent of the base salary however, they could be twice that amount if you’re in an executive job.
4. Don’t forget technology costs
Embrace innovation. Technology is the best friend of recruiters. With the best recruiting software in your arsenal you will save time and effort , and also improve the hiring quality while at the same time. The investment in quality tools for recruiting that can help you filter out bad applications is worth the price of gold. Don’t lose out on the top candidates by not putting this expense into your budget.
There’s a good chance that you’re employing various recruiting tools during the hiring process. They are Applicant Tracking Systems, Candidate Relationship Management tools, programming software for job advertisements as well as pre-employment assessment tools and other types of technology.
Create a list of all the tools you use. When calculating their costs be sure to consider the pricing structures. Are you paying a monthly, or an an annual cost? Do you pay per applicant? Have you paid one-time fees?
Top Tip: Ensure your software is compatible with your existing tools. For example, background check tools you use to determine your candidate’s criminal history, education level and prior employers must be connected to your ATS and CRM to update the profiles of your current candidates.
5. Keep track of your time and expenses
Keep in mind that your time and the time of your department for recruiting costs money as well. Your budget will be more effective for you if you understand what time it takes to get your company hired by anyone. Research has shown that the smaller a company is, the longer it takes to recruit. For instance, a business with a workforce of 1500 takes 41 days in the average for hiring, while a company with 5,000+ employees only requires 25 working days.
You can determine the length of timing to hire using this formula:
Timing to Hire = Day the candidate accepted offer plus day candidate enrolled in pipeline
Begin by calculating the costs per employee. Calculating this is among the most crucial calculations you’ll have to have to calculate in establishing your recruitment budget. It is possible to, of course look up budgets from the past to assist you and then just add in any current costs.
Once you have figured out the external and internal recruiting costs, you can use this formula to calculate the cost per hire
Cost per hire Cost per hire = (internal cost of recruitment plus external recruitment cost)/total quantity of employees
6. Bring your team members on the board
Your staff members represent your brand. Therefore, you should plan the possibility of a bonus for referrals from staff. In the event that you’ve established a strong system you use internally to promote and inform candidates about it when they first join your company this could be an amazing incentive. Rewards can include cash or a day off tangible gifts like gift card or holiday/gymnastics voucher or an experience reward like a cooking course or wine tasting. All of these are excellent incentives for your current staff So make sure that everyone is aware of them. The posting of the referral bonus scheme on your internal communications channels such as the newsletter for staff and intranets, is a great start.
7. Have your budget approved by the leadership
Prepare to present your budget, present your case, and prove to your management team how involved you are in attracting top talent. Keep the information in your possession. It is possible that you will require clarification of your goals So, keep the specifics of your budget and ROI on the forefront of your thoughts. This way you’ll be more ready for any difficult issues that might arise.
It’s no surprise that you’ll have to prove the benefits of hiring a top-quality employee to your top management team. How will this expenditure contribute to the company’s bottom-line/corporate revenue? If you can prove that your business’s goals and objectives can be achieved through an investment in recruiting then you’re already halfway there.
Additionally, if you’re informed of how your competitors are recruiting they could be able to be in a position to be ahead of them. Be prepared with information regarding the tools that your competitors employ, their hiring strategies and the ways they’re profiting from these strategies.
Be able to show your management team how much potential you can earn from your investment (ROI) can help you get approval for your budget. That is, what the cost of recruiting is per employee and. the value that hiring will be financially beneficial to your business.