Top talent is the backbone of any company. Hiring the right people for the job is a fundamental necessity. Companies strive to invest in recruitment strategies to ensure a profitable return on investment and attract top-notch personnel for specific positions. This involves crafting an appropriate recruitment budget and having proactive conversations. Without the right tools and analytics, this can prove a costly and time-consuming task. However, when created properly a hiring budget can save the company both time and money when acquiring high-quality talent. Here’s how you can appropriate an accurate recruitment and employee acquisition budget.
Estimate your recruitment costs
When attempting to estimate your recruitment costs, it is important to consider job boards, recruiter salaries and even employer branding. These are the basic internal recruiting costs for most companies, and the amounts can vary. For instance, not every job board will work for every company. Use statistics from past hires to see which boards work best for your particular company. You’ll want to see how much you spent on each board or platform and how many quality hires came out of it. Then you should move on to your recruiter salaries. Whether you are using an in-house or external recruiter, it is necessary to calculate in those salaries and associated costs. Of course, company branding expenditures must be part of the equation, too. This includes company branding materials, events and even social media. Only after you have generated these numbers will you start to get a basic estimate of your recruiting costs. These costs can vary with inflation, economic trends and other things. They are not fixed costs, but they are a good starting point. According to recent studies, the average employee acquisition cost in the United States is estimated to be around $4,000. This is an average that varies with the position being filled.
Don’t forget to incorporate fixed costs
Some recruiting costs are fixed and easier to calculate. Many companies prefer to source personnel from external recruiting agencies. Agency fees are typically a fixed cost. There could also be partnerships with institutions of higher learning since they are a great place to find top-notch talent. There may be fees associated with this partnership, such as career fairs and recruitment events. At the very least you must account for the man hours it takes to set up and work these types of events. Other fixed costs can include community hiring events and job fairs. You can plan how many and which ones you want to attend for the year based on the number of people you need to hire annually. Combining these total associated costs should give you a fixed dollar amount for the year.
Technology comes at a cost, too
Don’t forget to include technology in your annual recruitment costs. Unfortunately, many companies forget to cover this. Technology includes things such as background checks, applicant tracking systems and even video interviewing tools. If your company utilizes virtual career fairs or specific recruiting and application apps, those costs must also be included. Companies rely heavily on technology for daily operations and recruiting, so it has got to be part of the equation. It is necessary to factor in the cost of software and technology when you are creating a hiring budget.
Estimate miscellaneous hiring costs
The strongest plans are the ones that include contingencies and miscellaneous items. This may include things like travel and relocation costs for new hires. You must decide if your company is willing to foot the bill for a new employee to relocate or travel for training. If so, what is the maximum amount your company is willing to pay for these expenses? Will your company be updating systems or making changes to attract new candidates? These are miscellaneous costs that may not occur with every hire but must be accounted for. Your team should have these conversations in advance so that you can budget accordingly.
Compute cost per hire
Calculating your average cost per hire isn’t difficult, but it does take all these numbers. The rule of thumb is a given equation utilized by most companies. In this equation, you add your company’s total internal and external recruiting costs together. Divide the sum by the number of people hired in a year. This is your average recruiting cost. Of course, a larger number of hires means a lower cost-per-hire. This is because the fixed costs are spread out over a larger number of people lowering the per person average. The more detailed and inclusive you are with your beginning numbers, the more accurate your recruiting budget will be. Knowing how many people your company needs to hire in an average year also helps you calculate a realistic budget. These statistics must be based on experience and future company plans, but they must be included.
Cost-per-hire numbers can be divided up quarterly or even by department. They can be used for benchmarking and tracking purposes. Not only does a recruiting budget allow the company to allocate resource intelligently, but it can also show when cost-cutting measures are in order. Budgeting and allocating company resources are no easy tasks. However, when done correctly they can strengthen a company financially.