Set A Realistic Recruiting Budget
Published: August 24th, 2021
Set a Realistic Recruiting Budget
Attracting high quality candidates is important to the success of every business. Recruiting costs can make up over 25% of all HR spend so it is imperative for companies to operate efficiently when it comes to sourcing the most qualified candidates for a position. A recruiting budget helps in hiring efficiently as it provides an annual estimate of the total cost of hiring, including both internal and external expenses. The budget aligns with your organization’s short-term and long-term business strategies. Key performance indicators (KPI’s) such as cost-per-hire, time-to-hire, and offer acceptance rate will help track hiring costs.
Create an Annual Recruitment Plan
Determine how many new hires your company plans on hiring for the year, taking into consideration the staff turnover rate. How many people have been hired over the last year? Were they new hires due to growth or replacements for turnover? An accurate count will give you an idea on how you will perform this year.
The overall demographics of the company will help set hiring costs. The job type and location will affect the budget as some roles and locations are harder to fill because of unique skill sets or competitive markets. Knowing how many yearly hires you need per department will help set the budget for the year.
Key performance indicators are metrics that measure the effectiveness of your hiring process. KPI’s will not only help to create an accurate budget but provide insight on how close you are to reaching your recruiting goals to make better decisions about where investment should be allocated.
Cost-per-hire: Cost-per-hire is one of the most important metrics for recruiting analytics. According to a study conducted by the Society for Human Resource Management (SHRM), the average time it takes to fill a position is 42 days, with an average cost of $4,129 per hire. It is important to figure out exactly how much each hire is costing you. The cost-per-hire will indicate where to invest recruiting dollars to attract the best candidates.
To track cost-per-hire, each job title by department and salary must be listed to determine a correct budget. The cost-per-hire formula equals internal costs plus external costs divided by the total number of hires.
Time-to-hire: The time the recruiting department spends on hiring costs money, so you need to know how long it takes for your company to hire a new employee. If your company is small, it might take more time to hire. Time-to-hire can be figured out by figuring out when the candidate entered the pipeline and subtracting it from the day they accepted the offer.
Offer Acceptance Rate: Although you would like qualified candidates to accept an offer, that does not always happen. If most offers are not being accepted, it could be a sign that something is wrong in the recruitment process that could be costly. It can easily be calculated by dividing the number of offers accepted by the total number extended.
These measures will indicate whether recruiting programs are working. Having performance data on a job board is helpful in determining whether you will get the volume of applications you need and what the actual cost of that hire will be based on the job boards’ fees.
Consider Other Expenditures
The fixed costs of the hiring process are included in the total expenditure. These include any fees related to hiring for that position such as:
- Posting Jobs Online
- Background Checks
- Managing Social Media Accounts
- Recruiting Analytics Tools
- Recruiting Software
- Networking Events
- Employee Referral Bonus Program
- Training Costs
An adequate budget will ensure that you are able to hire the best talent for the job.
The Recruiting Budget
A budget takes the general plan into consideration with specific budgets for each line item. Every larger recruitment activity, such as sourcing, agency costs, travel costs, and advertising, should have its own line item on the budget. For smaller projects like a new recruitment video, group them under a ‘Recruitment Marketing” line item with deadlines and expected results. Don’t forget to include the cost of recruiting technology such as applicant tracking systems.
A sufficient recruitment budget is the key to successful hiring. The budget will give an overview of hiring expenses and indicate how the company will grow.
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