No business can expect growth without the help of talented, skilled employees. But hire them wrong, and they can cost the company a lot of money.
To avoid unnecessary spending because of fast turnover and a “bad apple,” entrepreneurs need to focus on their recruitment process. It should provide enough budget to attract the right people. But then, how much should recruitment cost?
The Cost of Recruitment
The Society of Human Resource Management (SHRM) revealed that the average cost per hire is around $4,000. But in reality, it could vary widely. Some might spend less or more, depending on many factors:
The cost of hiring a worker differs among industries. According to the 2011 Talent Acquisition Factbook, it’s more affordable to look for healthcare staff than fill a manufacturing or business service position.
At less than $4,500, technology recruitment could be more expensive than that of banking and insurance.
2. Volume of Applicants
One of the primary reasons for the varied recruitment cost per industry is the business’s ability to attract applicants. Take, for example, the spending gap between healthcare and manufacturing.
Although the demand for healthcare is high, the supply is also increasing over the years. In the trend graph by the Kaiser Family Foundation (KFF), the total number of medical graduates in 2018 reached nearly 26,000 compared to around 19,000 in 2016.
Meanwhile, fewer applications in the manufacturing industry might be driving the hiring costs up. For one, they need to extend their recruitment period beyond the average number of days, which is 42.
3. Methods of Hiring and Marketing
Recruiters can pursue various marketing strategies to attract talent. These can range from engaging candidates in social media or publishing positions on job boards. Regardless of the route they choose, however, each comes with a cost.
Posting in job sites like Glassdoor or Indeed.com could cost over $250 a month for a single post. Sometimes companies have to pay for a subscription plan or pay per click of the ad. Meanwhile, working with a recruitment agency could mean spending at least $20,000.
4. Candidate Assessment
It usually takes between one and two months for an HR department to go through applicant resumes, narrow down the candidates, and conduct several rounds of interviews. Each day costs the business in labor, equipment and supply, and productivity.
How to Lower Recruitment Costs
Businesses cannot avoid spending on recruitment, but they can explore a lot of ways to reduce costs:
1. Take Advantage of Technology
Many online tools or applications make HR life easier, faster, and cheaper by automating processes with high accuracy and reliability levels.
For instance, ATS tracking solutions help cut down costs associated with no-show of applicants or redundant review and interviews with a candidate. The data these systems can collect can also help the company in formulating a more realistic hiring budget.
Another tech they can harness is social media. Websites such as LinkedIn permit companies to reach out to highly skilled and diverse professionals at almost no extra cost. Facebook has groups and pages that HR can maximize to network with associations or organizations.
2. Consider Hiring Internally
Perhaps one of the underrated methods of lowering recruitment costs is internal hiring. According to Fit Small Business, almost 30% of the positions were filled internally. New graduates accounted for only 9.9%, while 28.3% were hired from employee referrals.
On the other hand, the cost of recruiting existing employees for other positions in the organization could be 50% less than that of external hiring. These workers are already familiar with the company culture and might be even more aware and knowledgeable about the job’s needs.
However, businesses need to be more transparent with internal hiring. Fit Small Business revealed that, in a survey, about 25% of firms prevent HR from recruiting internal talent other than to post jobs online.
3. Widen Network
Networking helps tremendously in the recruitment process. For instance, industry associations often maintain an extensive database of other groups or individuals in the field.
Most of them are already vetted before they can even be part of the group. Thus, in a way, organizations can provide a reliable list of potential applicants.
From schools to unions, many networking groups also offer low- to no-cost fees for a job post. Usually, these advertisements serve as help for their members.
Recruitment demands a lot of legwork and accuracy. One mistake could mean significant losses for the business. But it doesn’t have to break the bank either. These tips can help companies find the right people while keeping their hiring budget manageable.