Hannah Simons
The ability to optimise business costs is a valuable trait for any organisation. Costs are traditionally associated with having direct monetary value, with hidden costs such as resource and time, often overlooked, despite their impact and scale. Both cost considerations are crucially important to the success and sustainability of a business, to ensure the real cost of recruitment is not underestimated and meets recruitment budget requirements.
People are one of the most valuable assets to a company, making the hiring process of employees, key. As the driving force behind a business, those who are put at the helm have great influence and responsibility in determining the business’ trajectory.
For many businesses, recruitment fees can be hard to justify or determine. It can be a difficult decision between a larger upfront investment for a premium service and time-saving, or low-cost recruitment fees which can be labour and time intensive. Either way, recruitment budgets, available resource and the demand for the role, all need to be considered.
What is Included in Recruitment Costs and What do Recruitment Costs Mean?
Simply put, recruitment costs reflect the costs incurred when finding talent, undertaking the hiring process and onboarding new staff.
The monetary cost of recruiting an employee or even cohorts of staff, are more apparent and easily identifiable due to the price tag attached to them. These tasks are often the responsibility of your hiring manager or talent team to find the right candidate.
For example
- Job listing and advertising costs for the position
- Salaries of recruitment teams and HR support
- Cost of employee referral bonuses
- Recruitment software and candidate application tracking software fee
The Hidden Costs of Recruitment
Finding Talent
Whilst posting a job listing and advertising through various platforms comes with an often-scaling price tag, there are other hidden costs of recruitment that aren’t as obvious, such as the time and resource required to find the right employee for your business.
- Crafting job specifications and posting then online takes time out of your team’s day-to-day tasks.
- Sifting through candidate CVs can take up a lot of time and multiple team members may need to be part of the process to review candidate compatibility, especially for more complex or diverse roles. This may include hiring meetings and other collaborative sessions.
- Interview rounds may also be lengthy. Many companies have multiple interview stages and perhaps even activity rounds which require assessments or third-party input.
Hiring Talent
The recruitment process does not end at the selection of a candidate.
- The negotiation period of contracts may lengthen the process, and additional HR support may be required to support these conversations in accordance with your policy, further broadening the salary-pool with which time is allocated to recruitment.
- Dependent upon the level of hire, notice periods may delay their start date.
- In most cases, there will be little to no productivity within the open position you’re hiring for whilst recruitment is in process. This ‘lost time’ may be detrimental to a business or it’s projects, dependent upon how urgent the post is to fill.
- Current employees may have increased workloads due to the time taken to hire, as they attempt to bridge the gap. Productivity could be impacted, causing more stress than output.
Training and Onboarding
Onboarding a new employee tends to be another hidden and overlooked cost for a company, perhaps due to the costs involved no longer being external, however the time taken to onboard and train your new employee should be factored in, of both your new hire and their manager/s.
Time spent on administrative and paperwork costs
Dependent upon the size of the company, these may be absorbed by dedicated teams, but for many, these tasks fall to managers and HR staff.
Workspace and equipment set up
The cost of equipment doesn’t come cheap. Many businesses may also include a complimentary welcome kit or gift to settle in the new starter. Both the monetary cost and the time spent planning these tasks, all add up for your business. Not to mention, the potential courier fees for remote workers.
Productivity
New employee productivity could fall during their first month in the role as they settle in to their new position. A new starter can even take up to 6 months to feel fully onboarded into the company. There is not only a productivity impact within the new role, but on the surrounding team and management as time is taken from their day-to-day tasks to support them.
Recruitment Cost of Bad Hires
Recruiting the wrong talent is another hidden, unforeseen cost. The hiring expenses spent to bring them into the business may be devalued should they not fulfil the position, of if they leave.
This includes costs for:
- Inactivity if they are not fulfilling the role's objectives or duties you will not be receiving the expected level of work for their salary.
- Team morale if the team is frustrated by the new starter's lack of input or performance this can have a negative effect on the wider team and result in a decrease in productivity.
- Time, if additional support is required from the wider team to help and guide the new employee can become a drain on resources.
- Recruiting again if your new employee isn't able to fulfil their role despite the training and guidance given, or they decide to leave the business due to their inability to settle into the role.
How to Calculate Your Recruitment Costs
With these hidden and consequential costs in mind, the question “what does it cost to recruit a new employee?”, has a different response to one with a pure monetary value.
A cost-benefit analysis may be one of the most capturing ways to determine what your real costs of recruitment are.
What is a Cost-Benefit Analysis?
A cost-benefit analysis is a business process that determines which decisions a business should proceed with by analysing the opportunity and assessing whether the time and resource required is justifiable, commercially.
Typically, for recruitment, a cost-benefit analysis looks at direct costs incurred and tends not to monitor the indirect, tangible or intangible costs that have been identified as hidden. The intention is to calculate the total cost of the investment to compare with the predicted return, but as it’s been concluded, this is tougher to identify than it first seems.
What are the Most Cost-Effective Recruitment Strategies?
Social Media
Social media is a proven cost-effective recruitment strategy for many organisations. It is free to use and free to post but also:
- Job advertisements can be crafted in a visual and exciting way, rather than in long form written content.
- Current employees and your wider online network can share and engage with the post to increase visibility.
- Posts can be targeted using hashtags, tags and alt text.
Referrals
Utilising your current workforce and their contacts can be a great way for swift advertisement of the open role and trusted references. The referral scheme may offer a monetary incentive to employees for this recommendation, meaning it will almost always be lower than the costs incurred through traditional job boards and online advertisements.
Third Party Solution Finders
Industry expert teams are ideal, cost-effective strategies for businesses looking to recruit employees or even teams. They offer strategically designed recruitment functions that harness the process of finding talent, screening candidates, and training new hires in accordance with an organisation’s industry and department.
The Furza Solution
Contact our team today to discuss a tailored sales recruitment and training programme.
