Quick look: Hiring an employee is a significant investment, and there’s a lot to know about finding the right candidate—including understanding the costs associated with recruiting. As the labor market grows tighter, these costs are only expected to increase. From the soft cost of productivity loss to the hard cost of an applicant tracking system, here’s a look at what really goes into recruiting for an open position.
Recruiting is a vital process for any organization looking to grow and succeed. However, recruiting costs can quickly add up, making it a significant expense for many companies. In fact, SHRM’s new benchmark research reveals the average cost of recruitment is nearly $4,700 per hire. Other costs can include hard expenses such as sponsored job postings and background checks, as well as indirect like the time and effort spent by HR professionals and hiring managers.
Understanding the costs of recruiting can help you make informed decisions about your hiring strategy and maximize the value of your recruitment budget. So, whether you’re a small- or medium-sized business (SMB) or a large corporation, here’s what to know about the costs associated with recruiting and how partnering with a professional employer organization (PEO) can help alleviate them.
Behind the scenes of recruiting
Recruiting is a complex and time-consuming process with many steps that require careful planning, execution, and evaluation, including:
Advertising the open role: is more than just posting to the careers page on your company website. It involves creating an effective job description with insight from managers and teams, as well as posting on multiple job boards, social media channels, socializing with your internal network, and more.
Sourcing candidates: a proactive process where recruiters network with top talent on industry platforms or social media even before a position is open.
Screening candidates: evaluates an applicant’s resume and cover letter to determine whether they meet the basic requirements for the job and possess the necessary skills and experience.
Interviewing candidates: assesses qualifications, skills, and experience to determine whether they are a fit for a job position and organization as a whole.
Background and reference checking: involves verifying the accuracy of a candidate’s job history, education, and other relevant details, as well as contacting previous employers or other references to gain additional insight into the candidate’s character and abilities.
Onboarding: refers to the process of integrating new hires into an organization, providing them with the necessary tools, training, and support to be successful, and familiarizing them with the organization’s culture, policies, and procedures.
Training: provides employees with the necessary knowledge, skills, and abilities to perform their job effectively, increase their job satisfaction and engagement, and contribute to the overall success of the organization.
The hard costs of recruitment
Hard recruiting costs refer to the expenses incurred by companies during the recruitment process, such as advertising job listings, conducting skills assessments, or paying for a recruiting agency. These costs can vary depending on the complexity of the role and the level of competition, but generally will include:
Job boards: are valuable platforms to spread the word about job openings, but each one comes with its own fee.
Applicant tracking systems: useful technology designed to help organizations manage and streamline their recruitment process.
Candidate assessments: evaluates a candidate’s skillset or personality to determine if they are a good fit for the role and may require the use of third-party providers that result in additional costs.
Dedicated career pages: can relay your company culture and allow for easy application for job openings, but they must first be built and maintained to stay relevant.
Employer branding efforts: involve posting on social media to highlight company news and events, but some advertising and sponsored posts includes fees.
Salary and benefits: are perhaps the most significant costs associated with hiring new employees, and can vary greatly depending on the role and level of experience. SMBs must consider not only the direct costs of salaries and benefits, but also the indirect costs like payroll taxes, insurance premiums, retirement contributions, and other benefits like paid time-off and flexible work arrangements.
The hidden costs of recruitment
Soft costs refer to the intangible expenses incurred during the recruitment process, which are often difficult to quantify and don’t always appear as line items on your budget. These costs can include time to onboard new employees, potential loss of productivity, and decreased morale resulting from staff vacancies. Other soft costs may include:
Time it takes to hire: The time it takes to hire a candidate can vary widely depending on a variety of factors, including the complexity of the role, the level of competition for the position, and the efficiency of the recruitment process. In some cases, a position may be filled quickly within a matter of days, while other roles may take months to fill.
Cost of a mis-hire: Mis-hires refer to the situation where a company hires the wrong candidate for a position. Mis-hires can be costly to an organization, as they can result in decreased productivity, low morale among team members, and ultimately a loss of revenue. Mis-hires occur for a variety of reasons, such as inadequate job screening or interview processes, misalignment between the candidate’s skills and the job requirements, or a poor culture fit.
Competitive job market: The competition for skilled workers can be intense and result in challenges for leaders seeking to fill positions, such as a limited pool of qualified candidates, increasing salaries and benefits demands, and high turnover rates. Many SMBs are also finding they need to sweeten the pot. They are offering referral programs for current employees to assist with the recruitment process, sign-on bonuses to entice candidates, or hiring remotely to expand their available talent pool.
Streamlining the hiring process with a PEO
Recruiting top talent is a goal for every business, but it’s also a challenge that keeps hiring managers up at night. Many SMBs don’t have the budget to misspend on hiring people and they need relief from the mounting price tag that a professional employer organization (PEO) can offer.
A PEO like ExtensisHR saves businesses time and money that would normally come with the cost of recruiting.
By working with ExtensisHR, SMBs receive:
- Unlimited 30-minute phone consultations with a recruiting specialist
- Sourcing for most staff-level positions
- Job advertisement creation
- Salary surveys
- Skills assessments
- Offer letter consultations
- Access to Recruiting Cloud – a free resource with guides, checklists, and forms to help SMBs prepare for every stage of the interview and hiring process
An added bonus, these recruiting solutions are offered at no additional cost when paired with our PEO solution, inclusive of payroll, benefits, risk and compliance, HR management, and more.
Looking to cut the high cost of recruitment? Contact one of our recruiting specialists at ExtensisHR today.