The True & Honest Cost of Recruitment in 2023

A?recent survey?of over 1,200 HR leaders and talent professionals found that 33% expect recruitment spending to stay the same in 2023, while 54% expect an increase in their recruitment-related spend this year.

How can HR and TA teams measure the typical costs within their business and, more importantly, how can they make the most of their budgets while still attracting the best talent for the company?

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The true cost of recruitment

When we talk about the cost of recruitment, the cost per hire is one obvious element. But the cost to the business is much wider than this, with many different factors making up the whole cost of recruitment. These include:

Cost of hiring

This comprises the actual spend for job adverts, psychometric tests,?recruitment agency fees?and other expenses, but also includes staff time (both for HR/TA teams and recruiting managers), as well as the cost of any temporary staff to cover the vacancy.

Estimates for this cost can vary widely.?CIPD?estimates the average cost of filling a vacancy, including labour costs, is ￡6,125. For a manager role, these figures rise to ￡19,000.

However, that figure can be significantly higher for more senior roles, especially if recruitment is outsourced. Recruitment agencies can charge 20-30% of the salary, which for a role commanding a salary of ￡120,000 would equate to ￡24,000 to ￡36,000 simply on agency fees.

Cost of an empty chair

Data?suggests that the typical time to fill a role in the UK is 48 days in the UK and Ireland and 43 days in the US. This can vary widely though, depending on the seniority of the role, the skills required, local competition and the job market overall. Some roles can prove very?hard to fill.

However, the time to hire can be much shorter than the time to fill. Recruiting managers may not immediately notify HR about vacancies.?

And at the other end of the hiring process, companies often need to wait for candidates to work out notice at their current employer.?All of this can add a significant amount of time.

Throughout this time, the business will be losing revenue, either directly for an employee who is income-generating, or indirectly for roles in a support function, where other employees may need to step up and cover, which can impact everything from sick leave to employer brand perceptions.

This is an area that HR and management teams recognise. A?recent survey?showed that 14% of businesses have increased their focus on retaining talent. However, a certain level of turnover is inevitable and often healthy, so these costs cannot be minimised completely.

Cost of productivity for a new starter

While a new employee gets up to speed, there will be a loss of productivity vs the previous post-holder who knew the job well. Time and costs are incurred throughout the onboarding process, as managers bring employees up to speed about the role. This can take 1-2 months, which equates to a direct drop in income and profits over this time.

The time investment in onboarding will be worthwhile though, as ensuring a good process can help with retention rates.?Research?shows that as many as 43% of new hires leave their role within 90 days. This obviously escalates the costs of recruitment significantly – with lost time and resourcing for onboarding, not to mention incurring recruitment costs for a second time. Even worse, the cost of an empty chair may be even higher, as new recruits may be on a shorter notice period during their probationary period.

And it’s not only on the employee side where there are issues.?New research?shows that 57% of hires made in the last 12 months weren’t working out in some capacity and 25% weren’t working out at all. The top reasons were poor fit for the role (46%) and poor fit for the culture (44%).

Data?shows that the cost of a poor hire at mid-manager level with a salary of ￡42,000 can cost a business more than ￡132,000 to resolve, so it’s essential to get the right person for the job.

Ways to lower the cost of recruitment

There are many ways that companies can make recruitment more cost effective.

Reduce the cost per hire

Data?shows that hiring costs can vary from 12% for an in-house team to 22% and up for an agency-led solution. As in-house teams become increasingly stretched, it is often necessary to outsource recruitment. However, there is an alternative to the traditional recruitment model and its associated percentage fees.

Talent mapping?and?talent search?can be much more cost-effective, allowing businesses to have full sight of the best talent in the market, regardless of whether they are actively seeking a new role. In addition, our costs can be significantly lower, as they are based on the work required rather than a percentage of the salary.?In addition, we don’t charge placement fees for our talent mapping or pipelining services, so companies can fill multiple roles without incurring any additional costs.

Increase staff retention and lower turnover

There are many ways to improve staff retention:

• Providing clear career progression
• Investing in training
• Offering the right benefits
• Supporting staff’s mental health
• Clearly communicating a vision for the future of the business

With the rise of the great resignation and quiet quitting, getting your salary and benefits package right is key. Salary benchmarking can help when it comes to this.

However, one of the key elements that impacts overall retention rates takes place right at the start of the talent lifecycle; finding the right candidates who are a good fit for your business needs. Honing in on your staffing gaps and finding candidates who are the right cultural fit is imperative in maintaining high retention levels, and in many cases, finding the right cultural fit can be more important than finding someone with the right skill set. By maintaining a broad talent pool and reaching out to?passive candidates, companies can increase the calibre and quality of their candidates and improve their odds of finding a high-performing and long-lasting employee.

By having a broad talent pool and reaching out to passive candidates, companies can increase the choice of quality candidates and improve the chances of finding someone who is a great fit for the business.

Look at a global talent pool

Finally, with a rise in remote working, opportunities are opening up to widen locations, which can help to reduce the time to hire for specialist roles where skills may be in short supply locally. If your business is located in a capital city, it may also be possible to reduce the cost of additional salary weighing by recruiting an employee to work remotely.?Data from Mercer?shows that 30% of businesses are considering location as a way of managing talent availability and cost.

How we can lower your cost of recruitment

We help clients with many aspects, including:

• getting the best talent with the right fit for your business
• helping companies recruit for hard-to-fill roles and reducing empty chair costs
• saving on recruitment costs overall vs traditional recruitment agencies

We’re always happy for a no-obligation conversation to see how we could help your business.