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How Much Does it Cost to Recruit an Employee?

Posted by Edna Nakamoto on Jan 21, 2019 12:03:00 PM

Recruiter using a laptop and calculator to determine the cost of hiring a candidate.Have you ever taken time to quantify the costs involved with recruiting a new employee? If you’ve never actually tracked the time, dollars, and resources required for finding a single, new employee, you likely only have a very vague, incomplete idea of the actual costs.

Ignorance is bliss, right? Maybe. However, knowledge is power. Instead of continuing to cruise along looking at your recruitment process through rose-colored glasses, let’s dig into the direct and indirect costs of this vital function.

Direct Costs of Recruiting an Employee

Some costs are easy to identify. Start a spreadsheet and record your direct costs per year when it comes to recruiting. Divide the total spent by your total employees recruited, and you’ll have an idea of your direct costs to hire an employee.

Here are just a few areas to monitor.

Recruiter salaries or agency fees. How much do you pay your internal recruiting staff? If you’re working with a recruiting agency, how much does that cost per year? Jot that information down first.

Steps to Build an Effective Recruitment Process

Digital recruitment marketing costs. According to WebFX, costs for digital recruitment marketing can cost organizations between $1,000 - $20,000 per month depending on the size of the business, total job openings,  and the level of commitment to online recruiting. Think about all of the costs related to finding and attracting applicants online to understand your total spend. Your fees may include:

  • Digital advertising spend on social media.
  • Online job board fees.
  • Specialty services on social media platforms, such as LinkedIn Talent Solutions.
  • Related costs for maintaining a branded careers page (design, SEO, maintenance, etc.).

What are your online employee branding and marketing costs? Add that information to your spreadsheet.

Career events. If you attend local job fairs or campus recruiting initiatives, calculate your costs to participate. Include booth fees, printed materials, signage, swag, and other collateral you use for the event.

Evaluations, checks, and screenings. Don’t forget about the various screenings and background checks involved with the recruitment and hiring process. Are you paying for skills assessment tests? Do you hire a clinic to perform drug screenings? Are you performing credit or background checks through third parties? Tally up these costs, too. Don’t forget to allocate a portion of someone’s internal salary as part of the costs of managing these checks, tests, and screenings.

Employee referral bonuses and incentives. Do you offer perks to employees who refer qualified candidates? What’s the typical yearly cost and cost per new employee gained?

Indirect Costs of Recruiting an Employee

Indirect recruiting costs are where things get a bit murkier. However, you still need to track them. Otherwise, you’ll never know your actual costs related to talent acquisition.

Here are a few items to consider. 

Time costs of internal staff. There are a variety of scenarios to think through when it comes to the internal team and their time costs in supporting talent acquisition.

  • A dedicated, in-house recruiter: apply 100% of salary to talent acquisition costs.
  • Admins and assistants: allocate cost based on their salaries and the percentage of time they support recruiting efforts.
  • HR staffer who manages a recruiting agency: if you outsource recruitment, how much time do you or others spend managing the agency relationship?
  • Other managers or executives: in a small business, an owner or other leaders may take part in recruiting. How much does their time cost when it comes to hiring?
  • Marketing and communication staff: do you rely on someone in marketing or communications to help you post jobs to the company website, create advertisements, develop signage for events, and more? What amount of time do these resources spend?
  • Hiring managers: how much time do hiring managers spend in reviewing resumes and participating in interviews?

Productivity and opportunity costs. This figure will probably be a little harder to quantify. If you can’t assign an actual number for this area, at least think about what productivity and opportunity costs may occur when other team members help with recruiting. 

  • What is a marketing resource not doing when he or she helps you with talent acquisition projects? 
  • What strategic initiatives is a business owner ignoring when he or she is responsible for recruiting?
  • How much productivity does the company lose when a manager takes time away from day-to-day responsibilities to participate in the hiring process?
  • What opportunities does the company lose the longer the job opening stays vacant? If it’s a sales role, you may be missing out on new customers. If it’s a customer service job, you may be losing loyal customers. A developer role? You may be losing a competitive gain that would win more clients in the long run.
  • How much do you potentially lose when you miss out on a great applicant due to mismanaged processes or slow response time from your company?

How Can Applicant Tracking Software Technology Help?

Not all technology products are created equal, so you need to carefully scrutinize your needs before adding to your Human Resources tech stack. If you want to streamline the hiring process, spend more wisely and save time, you need to look into an applicant tracking system (ATS). 

An ATS like The Applicant Manager can help you reduce spend and reallocate resources. The right ATS can streamline the recruitment process to help you eliminate certain administrative roles and reallocate headcount to more mission-critical jobs. Look for options like:

  • Job board integration for automatic posting to your favorite boards and social media sites.
  • A branded careers page that you can manage without having to beg for any marketing or IT resources.
  • Automated prescreening tools that weed out under-qualified applicants for you.
  • Applicant verification features and passive applicant database searches to save you time and effort.
  • Communication tools to streamline and automate aspects of the interview scheduling process.

Limit your opportunity costs with an ATS. The best ones will help you reach the right applicants quickly so that you don’t risk losing them to another business. However, these platforms also limit some of those other indirect costs we covered above. 

Ready to Decrease Your Recruiting Costs?

While an applicant tracking system can’t do everything for you, it can have an enormous impact on how well you will be able to manage everything in the recruiting process. TAM can take manual and tedious tasks and make them quick, easy and efficient. Why not book a demonstration of TAM today?

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Edna Nakamoto

Written by Edna Nakamoto