Whether your company has just started or if you have hundreds of employees, you know your staff will expand or change at one point. In other words, you need to recruit and hire. Unfortunately, the cost of recruitment can quickly add up. Job advertisements, recruitment agencies, applicant tracking systems(ATS), and bad hires consume money.
A recruitment budget builds a plan for the recruitment process and helps you save time and money. If you're starting, your question may be: How can you create a recruitment budget that meets the current market needs and makes sure you find the talent you need? Read on to find out.
The first step to creating a recruitment budget is understanding your current recruitment costs. No matter how coin-savvy you are, there are costs you cannot eliminate without affecting your recruitment process. According to SHRM Human Capital Benchmarking Report, the average cost of a new hire is $4,129.
The cost is based on factors such as:
Many recruitment-related tasks consume money or consume time, which also costs money. According to SHRM, it takes approximately 42 days for businesses to fill a position.
Among other costs, you need to consider the costs of retaining the employee. The Human Capital Benchmarking Report also found the following:
There are several ways to find the talent you need, including conducting in-house recruitment, hiring a staffing agency, advertising on job boards, or posting on social media. Whatever approach you take has an accompanying cost. You don't have to employ all tactics to hire workers, but you need a plan.
How much does it cost? You can start by calculating your cost-per-hire (CPH) and use this cost as the basis for your recruitment budget. CPH is found by adding external costs and internal costs and dividing them by the total number of hires in a given period.
Your external costs include:
Your internal costs include:
GlassDoor advises adding 30% of the total cost to the final sum to account for other costs such as benefits, taxes, and allowances. You can run these costs based on previous hires to help you determine how much you may spend on each potential employee.
In this day and age, hiring without automatic tools is retrogressive. Tools save time, make it easier to save and manipulate data and also track your recruitment budget. There are several tools you may interact with during recruiting:
Since the amount of money you spend on recruitment is directly related to the number of hires, you need to estimate the number of potential hires in a given period. For example, if you are setting a recruitment budget for one financial year, calculate the number of open positions in a year.
Break down the annual hires into quarterly hires to ensure that each budget meets your recruitment needs. Then, use the cost per hire and the number of hires to estimate your total recruitment cost.
Besides recruitment, you need to train an employee before they become productive members of your team. While you can choose to count this cost elsewhere, remember that an untrained employee costs you more, which being unproductive.
According to Training Magazine, it costs $1,286 and 42.1 hours to train each employee. Generally, it's best to calculate the cost of training materials such as programs, external agencies, and onboarding programs and the cost of other employees and supervisors training new workers.
Hiring new workers may often include events such as conferences and webinars or attending career fairs where talented employees can become acquainted with your brand. Whether you are hosting or attending, physically or virtually, factor in the annual cost of events.
Once you have all the costs, add them up and use them to create a recruitment budget.
Having a recruitment budget is critical before you begin any hiring process. The recruitment budget helps you execute each strategy correctly, attract the best talent, and provide a benchmark for comparing and estimating costs once the recruitment process is over.
Recruitology provides your business with the right tools to find the best candidates for your job positions. Whether you are trying to find the right job sites to use, networks, organize virtual fairs, launch a career page, or run a social media recruitment campaign, we have the solution for you.
Contact us today to get set up.