The True Cost of Recruitment
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People often believe that the cost of recruiting is purely the cost for advertising or using a recruitment agency. They rarely consider the other common costs such as management time or loss in production.
Unfortunately most companies underestimate the cost of recruitment by 90-95%. This can often lead to terrible decisions that can increase costs, even when the original intention was to reduce them.
What are the costs involved with recruitment?
- External expenditure such as recruitment agency costs. These can 15%-30% of salary involved – higher using an executive search company.
- Subscriptions to social media and database aggregators
- Attendance at recruitment shows
- In-house recruiters
Many companies seek to reduce their headline costs by taking recruitment in-house, hoping to avoid agency costs. They often deliver 8-15% costs compared to salaries – less of a saving than intended. Over 70% of in-house solutions fail to source all – this can reach 90% placement failure. This subsequently leads to working with agencies, driving the average cost up to 12-20%.
Cost of Recruitment
Assumes £40,000 average salary
Agency led solution (22% average)
£8,800 per head
In-house solution (12% average)
£4,800 per head
When is the right time to hire?
Many companies record how long it takes to recruit new members to the team, but fail to recognise it as a cost. Actually this is a huge business overhead.
The average hiring time is 10-12 weeks (from job opening to an accepted offer), during which time the role is unfilled. For that period there is either no productivity, or it is provided by diverting someone else, (if possible).
All these options have a tangible cost, plus if the hiring timeline slips the cost goes up. In-house recruitment teams take longer to hire with an average 12-16 weeks. This is due to a lack of extensive databases and wider industry contacts. This has a significant impact on the cost involved.
How can hire costs be reduced?
Proactive recruitment planning
Move away from the purely reactive model and understanding your recruitment demand. This can reduce the typical hiring times by 4-6 weeks. For the best results, operate a Talent Warehouse. By pro-actively sourcing and managing candidates before they are needed, hiring times can be cut by to 3-4 weeks.
“This approach offers a huge saving,” says Matthew from Consensus HR. “We actively encourage our clients to maintain a database of applicants – people who have been recruited and interviewed previously, but not offered a role at that time. These applicants should be told that that their details will be maintained on a database and contacted immediately should a suitable vacancy arise.”
Effective management involvement
Management time within the recruitment process is a major cost. This typically involves:
- Specifying roles
- Reviewing CVs
- Repeating the process as over 50% of offers made are rejected
This cost is the same whether candidates are sourced by agency or in-house. A Talent Warehousing approach is the only cost-cutting option, reducing management time invested in recruiting by an average of 70%. Consensus HR offers effective recruitment support by:
- Writing a detailed job description and advertisement for the role
- Reviewing CVs received
- Producing a detailed recruitment process and selection criteria
- Attending interviews as required
These activities significantly reduce the management costs involved within the hiring process.
How could you reduce the recruitment costs in your business? How could you introduce Talent Warehousing?
YOUR OUTSOURCED HUMAN RESOURCES DEPARTMENT.
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