Some companies have a crude idea of the cost of their recruitment, many don’t have a clue. Most recruiters know what they spend on external recruitment partners or direct advertising, but that’s not the full story.
The truth is this: most companies underestimate their recruitment costs by over 90%. So, how do you calculate your recruitment cost, what do the figures tell you, and most importantly, how can you reduce them?
This is the money that actually leaves your company’s bank account, and is thus easiest to calculate. In fact, many companies know very clearly what their direct recruitment costs are.
These direct costs include fees for external recruitment agencies or advertising partners, social media or job platform subscriptions and fees, possible employer branding activities and the salary costs of your in-house recruitment team. Even without accurate data, these costs are quite easily determined!
In the IT industry, external headhunting partners usually take around 17-25 % of salary, or between 12 000 - 20 000 € per recruitment. Advertising costs are usually ~ 1000 € per job opening, but can be significantly more if advertising partners are used.
Do you have continuous subscriptions to job platforms, deals with student organizations or other recruiting communities or an ATS to manage your recruitment flows? Add all of these costs up. This is the first part of your recruitment cost function.
The second part of the function is more difficult to calculate - and thus often neglected. Ask: how much time do our employees spend on recruiting, and what is the value of this time. Companies usually have a hunch of how long filling a single role takes, but do not take it into account as a cost.
For a quick guestimate, estimate this:
Take into account that different roles may require radically different approaches and time spent. As a crude estimation, filling one tech role takes around 50 - 150 hours of work from an experienced tech recruiter. For a recruiting rookie the amount can easily be doubled.
To make the estimate more accurate - and complicated - you will also want to include the cost of having an unfilled role in your team. Do you know how long it takes your company to hire people?
Usually this figure is around 10 - 16 weeks (from job opening to accepted offer) or 14 - 20 weeks to the new hire actually starting in their new position. During these weeks, the need and work tasks are either not completed or are completed by the hiring manager, an overworked team member or, perhaps, a costly freelancer. The longer the hiring time, the higher the cost.
For a super-crude estimation, this is the calculation to use:
Reducing the cost?
Not satisfied with the numbers you got? Looking for more robust cost-cutting solutions? Here are our best tips:
Ready to start saving on your recruitment costs and begin investing in your future growth, instead? Give us a call today!