There is no doubt that the cost of making a new hire - and retaining them has skyrocketed, so what’s the solution to keeping costs down at a time when everyone is looking to cut back on expenses!
Recruiting top talent is a critical function for any organisation, as the right employees can make a significant difference to the success of a company. The process of recruiting can however be complex, time consuming, and costly – particularly if an organisation chooses to handle it in-house.
The most obvious cost when thinking about filling a job vacancy is the cost to advertise – most organisations will need to advertise job openings to attract the right candidates. This cost can vary depending on the advertising medium used, but it can quickly add up – particularly if advertising across multiple channels. For example, placing just one job ad up on a job board, social media platform or local newspaper can cost hundreds of dollars! Also, this is often the only means of sourcing candidates for many organisations.
Then there is the cost associated with time, and the sheer number of hours that internal HR teams need to invest to find quality talent. Before the role can even be advertised, a job description needs to be written. This is a very important step in the process, as a well written job ad will help you attract (the right) great talent - and there is definitely a knack to getting this part right…! You need to ensure that your ad is targeting the right audience and includes all necessary information to avoid getting bogged down with unsuitable applications.
Once applications are received, additional time is spent screening candidates. This involves reviewing resumes, conducting phone interviews and possibly administering pre-employment assessments. Screening candidates requires significant time and resources, particularly if an organisation is receiving a high volume of applications. Applicant tracking systems (often used by recruitment agencies) can definitely streamline this process however, this also comes at additional cost.
The cost of interviewing candidates includes time spent by hiring managers and other employees to conduct interviews as well as any expenses related to travel or hosting candidates. According to a report published by the Australian Human Resources Institute, the average cost per hire for companies in Australia is $26,000, with a significant portion of this cost being attributed to interviewing candidates. A recruiter can present a list of shortlisted, pre interviewed candidates ensuring time is not spent interviewing unsuitable candidates, and act as a go between to significantly reduce the amount of time used up arranging and setting up interviews - especially when multiple rounds of interviews are required.
When you finally reach the decision to hire someone, the negotiation stage can draw out the process longer. If the hiring process takes longer than usual, this extends the lost productivity time and output for your company. According to a survey by SEEK, the average time-to-hire in Australia is 28.1 days, but this can vary depending on the industry and the complexity of the role.
Once the role has been filled, you could be forgiven for thinking the onboarding costs stop there, but onboarding and training is a cost that many companies fail to factor in when considering the cost of hiring an employee. These costs include: cost of IT equipment, formal training (such as courses), cost of employee support and loss of productivity as the new start gets up to speed.
This process is more important than you think, as the onboarding period will make all the difference to a new hire’s level of retention, engagement, satisfaction and, most importantly, productivity.
Finally, there is the cost of turnover. If an organisation’s recruitment process is not effective, it can lead to high turnover rates, which can be very costly. According to a study by Deloitte, the cost of replacing an employee can range from 75% to 150% of their annual salary, depending on the level of the role and the industry. Thankfully, most recruitment agencies will offer some sort of guarantee with candidates they place within an organisation. This offers a level of comfort knowing that if a candidate doesn’t work out within the guarantee period, the candidate will be replaced at no additional cost to the organisation.
So, while handling recruitment in-house may seem like the most cost-effective option to grow your team, it can actually be quite costly when all factors are considered. Advertising, screening, interviewing, onboarding, and turnover can all add up to a significant expense for a business. For this reason, it may be more cost effective to consider outsourcing recruitment to a specialised agency and in doing so, save time and resources, while also increasing your chances of finding and retaining top talent.