The hidden costs of recruitment amount to far more than most companies could imagine. The biggest expense in recruitment isn’t actually the cost of an outsourced agency commission, but all the smaller things that are not tracked that add up and hit the bottom line.
Without having the full picture, companies often make terrible decisions that not only fail to reduce recruitment costs but can even drive them up.
What recruitment is really costing you
In South Africa, companies currently monitor their cost per hire at a very high level. For example, given a 10% placement fee to an agency to hire a new SQL developer at an annual salary of R300 000 means a placement cost of R30 000.
But this is only the tip of the iceberg. To understand what the SQL developer costs, the company needs to add up all direct and indirect costs.
Direct costs to advertise on job boards and social media, attend job fairs, and run background checks are fairly easy to determine. It’s the indirect costs that are the problem. Measuring admin time spent to run a recruitment campaign (especially that of senior managers), the salaries and development of members of the recruitment team, the hardware and software for the talent acquisition system, the cost of employee referrals, and compliance costs isn’t always that simple.
What’s even harder to quantify is the opportunity cost of having a job vacant for a while where there’s nobody in place to create value. Or the cost to the company of a bad hire which can be challenging to rectify, and could damage morale long-term.
Why in-sourcing alone isn’t a silver bullet
A big push for companies taking recruitment in-house is the goal of saving money by having their own recruiters do more than an external agency. An in-house team is also thought to be better placed to sell the company to prospects than an outside agency. But unless you also improve the team’s efficiency, saying goodbye to an agency won’t save you much – on the contrary, it could cost you even more.
How to stop the financial leak
Companies can cut their recruitment costs in five key areas:
1. Reduce the time to hire to maximise efficiency
The time to hire is critical in on-boarding a new hire as soon as possible, and the reason why companies often go to specialist agencies to find talent in one month instead of three.
Speeding up your time to hire requires a proactive recruitment strategy instead of post-and-pray. By realising the need before it is there, building strategic pipelines, and engaging promising candidates, interested talent will already be on tap when the right job comes along.
- 2. Automate manual processes to lower costs
Modern applicant tracking systems (ATSs) make it much easier to collect, filter and shortlist CVs than using your email inbox or fax machine. When candidates apply for a job, they’re guided through a specific workflow that enable you to easily filter good from bad applications, and move people through the process to get to a hire in the quickest time possible.
It’s also much easier to collate and communicate with promising candidates. When people apply for special jobs on the corporate career site, the ATS will drop their CVs into a specially marked folder on the system. Once notified of the CV the recruiter can then go to the folder which is always populated with great talent and email them directly from there.
- 3. Spend on high-return candidate sourcing channels
Some advertising channels will be better suited to certain candidates than others so look at the return on investment of each. For example, you’d have much more success recruiting an SQL developer through a forum like StackOverflow than a job board. Google has even done a billboard with a math equation to pull specific skills.
Many companies swear by referrals as the best way to hire. Getting your employees actively involved in recruitment will give you good skills that will last because people won’t refer others who aren’t any good, since their own reputations are at stake.
- 4. Strengthen the employer brand to avoid costs
Companies with strong brands like Discovery or Investec have a big pull for candidates who approach them directly for work.
Just like your consumer brand, your employer brand is also a sourcing channel, so invest in your reputation as a great place to work. Letting a candidate down will impact your brand equity because the brand has real value. According to Harvard Business Review, a bad reputation can cost a company at least 10% more per hire.
- 5. Strategic talent forecasting to avoid opportunity costs
A move from post-and-pray to a talent pipelining and pooling strategy will help you forecast what you’ll need in the year ahead. Know what you’re going to be recruiting for as your company grows, and plan for the critical roles so that when someone leaves, you have a backup plan.
As competition for scarce skills grows, companies are increasing their spending on talent acquisition. But before spending big on agencies and expensive job boards, streamline your recruitment process to avoid throwing more good money after bad. Look for recruitment software that supports the way you want to recruit, so you don’t get stuck with a two-year licence for the wrong software.
Graylink will work with you to identify your requirements, schedule a software demo if the fit is right, and ensure our system can really deliver what it is you’re looking for before you buy. Give us a call if you’d like to find out more.
The true cost of your recruitment
- Third party fees like agencies/ head-hunters
- Advertising including job boards and social media
- Job fair and campus recruiting costs
- External assessments, background checks and drug tests
- Salaries of in-house recruiters (x months per hire)
- Cost of management time (x days per hire)
- Skills development for in-house recruiters
- Talent acquisition system – hardware & software
- Employee referrals
- Costs for government compliance
- Productivity loss/ contractors hired
- Opportunity costs for unfilled positions
- Brand costs if the recruitment experience is poor
- Costs associated with wrong fit / bad hires