Today, the ever-soaring recruitment costs have become a matter of concern for HR leaders across the globe.
Rightly so, the average US employer spends about $4000 to hire a new worker.
What’s more? The average cost of a bad hire is estimated to be around 30% of the first-year salary.
Realizing how high the stakes are, it’s important for hiring managers — especially those that are associated with small businesses — to select the right candidate the very first time.
In this piece, we show you how to reduce recruitment costs without compromising the overall quality of your hiring process.
But before that, let us get to understand —
What are the Common Costs of Recruitment?
To understand what goes into mitigating your recruitment costs and which are the areas that you can cut down on, you first need to be fully aware of what goes into calculating the total expenses of your recruitment model. This also includes the hidden recruitment costs which aren’t always visible on the surface.
The components of each business’ recruitment strategy vary considerably depending on:
- the industry
- the level of the position that is to be filled
- where the business is located
- the total time taken to fill the position
However, there are a few fixed components (and the resultant expenses) that the majority of businesses will incur when hiring to fill a vacant position. These include:
1) Costs Associated with Various External Hiring Channels
The channels you use to attract top talent hold the potential to make or break your recruitment strategy, which is why identifying ones that meet your unique hiring needs is crucial when wanting to mitigate overhead costs from your hiring budget.
According to one recent article published on SHRM, some of the common costs related to external recruitment channels used by most HR leaders are:
- Advertising and marketing expenses
- Background checks and eligibility to work expenses
- Campus recruiting expenses
- Consulting services
- Contingency fees: contingent to regular
- Drug-testing expenses
- Immigration expenses
- Job fair/recruiting event expenses
- Pre-hire health screens
- Pre-screening fees
- Recruitment process outsourcing (RPO) fees
- Relocation fees
- Sign-on bonuses
- Sourcing costs
- Travel and expenses, candidate
- Travel and expenses, recruiter
- Technology costs
- Third-party agency fees
2) Internal Costs of Recruitment
Next up, we’ve got the internal costs that your recruitment strategy incurs on your organization. These include everything right from your hiring team’s salaries, to the perks you give your employees for referring good candidates and any additions you make to your compensation plans.
The same article published by SHRM (from the previous point) highlights a few common internal costs associated with recruitment:
- Expenses incurred while attracting employee referrals
- Cost of recruiting staff
- Cost of sourcing staff
- Internal overhead for government compliance
- Non-labor office costs
- Recruiting learning and development
- Secondary management cost of time for events
- Secondary management cost of time for recruiting
Depending upon the type of cost-per-hire (CPH) metric being calculated (either for an internal reflection of a single organization’s costs or to compare the CPH data across various organizations), employers may only use some of the above costs, or use other unique methods not listed above that are meaningful to the organization.
Now that you know the various components that play a vital role in deciding how much your company spends on optimizing it’s recruitment strategy, let us quickly get to understand how to solve the main issue —
How to Reduce Recruitment Costs for Your Company?
1) Streamline Your Hiring Process
The first and foremost step to cutting down additional overhead costs is — streamlining your hiring process.
You heard that right!
Simply because, that way you’ll gain more clarity about:
- Which processes are directly contributing toward increasing your hiring process’ efficiency,
- Where you’re spending more capital and effort than needed, and
- Which are the operations/tasks that, even if held back for a while, won’t impact your hiring process negatively.
An article published by Indeed last year goes on to explain why having an efficient hiring process in place is important if you want to cut down costs:
“It can help save your organization valuable time and money in the long run—streamlined hiring processes can create a direct pipeline for your organization to foster success, higher employee satisfaction levels and less employee turnover.”
So then, how exactly can HR leaders streamline the recruiting process at their company? Follow these simple steps:
- Templatize wherever possible. It automates as much as possible from the get-go. Instead of allocating staff hours to sending follow-up emails and finding interview slots, the template does that for you. You’re free to focus on finding the perfect candidate.
- Leverage state-of-the-art tech innovations such as predictive analytics (to predict behavioral patterns of a potential recruit), automation (to take care of repetitive tasks that otherwise demand a lot of your team’s time), integrated software solutions such as Applicant Tracking systems and web apps (to make all the discrete procedures work as one), etc.
- Keep previously qualified candidates engaged. You can easily do that by leveraging low-cost engagement techniques such as email campaigns, maintaining a blog section on your website where you publish content that sparks curiosity, and arranging webinars/workshops.
- Use pre-employment assessments. These help you gauge a candidate’s ability and helps shortlist only those candidates that fulfill your minimum hiring criteria, which in turn mitigates the time-to-hire as well as cost-per-hire at your company.
Apart from the ones mentioned above, there are ample other ways and systems available in the market today that can help in streamlining your recruitment process. You just need to be willing to experiment and figure out what works best for your hiring model.
2) Keep Your Talent Pipeline Current and Updated
Too many hiring managers tend to forget about the good candidates in their talent pipeline once they’ve filled an open position. This is one of the biggest mistakes you can make as some of those candidates might potentially make a great fit for the company in the future.
Thousands of dollars are spent and wasted qualifying top of funnel talent. As an HR leader, you only have so many hours in the day to allocate toward achieving your hiring goals. Why not maximize the ROI of those efforts?
If you’ve attracted strong candidates who’d exhibited immense interest in working for your company, one best practice would be to store their resumes in your database.
Let them know that you’ll contact them anytime a relevant position comes up at your company.
One concrete way of improving both is to follow up with every candidate regardless of process outcome, providing additional opportunities and nurturing the candidate relationship, even after they are no longer under active consideration.
Recent Talent Board research found just 28% of companies employed text-nurture campaigns in 2017 to engage top talent. Twelve months later, that figure climbed to 48% in 2018.
You can imagine just how popular the approach must’ve become today!
Some of the best practices you can follow to nurture past qualified candidates are:
- Don’t go more than a day without responding to a candidate’s most recent message or query
- Test the schedule and cadence of nurture campaigns to see what leads to the most responses
- Ensure your employer brand is factored into all nurture messaging and linked job descriptions
3) Place Consistent Effort toward Retaining Employees
Lastly, ’employee retention’ is the secret sauce to ensuring that you aren’t going all in on your recruitment budget.
This is true because it can cost a business up to 33% of an employee’s annual salary when an employee leaves. However, there are also other hidden costs like:
- Opportunity costs — How much could your business have grown if you kept your team together?
- Culture costs — How will the departure of good employees impact the rest of the team? When you lose employees who make positive contributions to your culture, what happens to your culture when they take those contributions elsewhere?
One low-cost technique to increase employee retention is to increase employee engagement — a measure of how invested your employees are in the organization and their work.
Show employees recognition and appreciation, provide opportunities for team building and virtual learning to expand their skill set, solicit feedback from everyone on your team, and make sure you’re communicating growth opportunities to your top performers.
But perhaps most importantly, give your employees a sense of purpose in their work.
A 2017 Gallup study found that when employees have a sense of purpose in their work, their engagement increases exponentially. Employees who said they can link their individual goals to the organization’s goals were 3.5 times more likely to be engaged in their performance.
The downside is that only 44% of those workers polled said that they can actually see these connections. You can put your business at a significant advantage in terms of retention if you can connect people’s work with a greater purpose.
With that, we’ve reached the end of this article.
To learn more about how to reduce recruitment costs and hire the best candidates in the process of doing so, get in touch with us at BenchPoint – a healthcare IT recruitment leader with proven expertise in the niche.
We will be happy to guide you in your search for top talent, and help you build a result-oriented workplace in a comparatively shorter span of time.