How do you reduce recruitment costs in the digital era, when recruitment marketing, job ads, and hiring efforts are so expensive? Our guide to cost-effective recruitment strategies gives you 16 tips and three ways to implement them.
During macroeconomic stress or volatile business situations, the first thing that gets the axe in companies is the hiring budget. Companies across sectors tend to start any cost-cutting initiative by either entirely freezing or reducing spending on talent acquisition. Given this reality, Human Resource leaders must find cost-effective recruitment strategies and focus on intelligent budgeting.
Before we get into this, it is essential to understand what recruitment costs include and how to calculate overall recruitment costs for your company.
Learn More: Top 10 Recruitment Strategies to Attract Talent in 2022
Calculating Recruitment Costs to Accurately Measure ROI
Recruitment cost is the sum of all expenses accrued throughout the recruitment phase and includes everything from job advertisements to recruiter salaries.
The total expense of recruitment is also known as the cost per hire. The cost per hire is the sum of recruitment expenses divided by the total number of employees. If you invest $5,000 in recruitment expenses, for instance, and take on ten employees, the cost per hire is $1,000.
A cost-effective recruitment strategy will factor in two recruitment expenses: direct expenses and indirect expenses or overheads.
Direct costs are expenses linked to the production or delivery of a service. This may include advertising, examinations for health, reimbursement for travel, and training expenses. Direct costs generally constitute most of the cost-per-hire rate for a business.
Overhead expenses consist of company-incurred costs that are unrelated to recruitment numbers yet are nonetheless incurred. This may include salaries for internal recruiters and salespeople, office expenses, and communication costs.
It is important to calculate the cost per hire for an organization so you can ensure that the hiring process stays efficient and cost-effective.
Learn More: The Evolving Role of the Recruiter: Looking ahead to 2025
Evaluating Your Expenses - Uncovering the Factors Behind High Recruitment Costs
When the recruiting manager is aware of how much they invest in recruitment, they can determine if what they’re following is a cost-effective recruitment strategy or if there’s a need to tweak the process. In this section, we will take a closer look at some of the most common factors that can significantly inflate your recruitment expenses:
- External agencies: Working with hiring agencies can be quite expensive. The average cost of recruitment agency services usually varies between 15% and 30% of an employee's base salary. Reevaluating the agency partnership can help you put together a cost-effective recruitment strategy for your company.
- Technology and digital devices: Video interviews, applicant monitoring systems, or candidate evaluations all contribute to recruitment costs and the prices for technology usage can be high. While you cannot do away with HR tools and recruitment software, be sure to choose the right software or tool, so you get the best return on your investment and can eventually decrease recruitment expenses.
- Subscription to job boards: Often, a lot of funds are squandered on job board advertisements that don’t always yield results. Determining which employment forums have proven most effective for your industry is essential – instead of advertising on every board available simply to increase visibility.
- Recruitment marketing: The breadth and scope of recruitment marketing extends far beyond job boards. Employer branding activities, display ads, recruiting events, pay-per-click (PPC) ads, and search engine optimization (SEO) activities all add to hiring costs and need to be monitored to ensure there’s no excessive spending.
Learn More: Recruitment Life Cycle: Importance and Stages
The Essential Guide to Crafting Cost-Effective Strategies: 10 Steps for Maximizing ROI on Recruitment
Now that you know how to measure recruitment costs and the most common causes of budget overruns, let us get down to the brass tacks: what does a cost-effective recruitment strategy look like? Here are the steps you should take:
1. Create your ideal candidate persona
Who would you want to hire? What kind of skills and personality attributes do they need to bring? Where would you find them? Find answers to questions such as these and create an ideal candidate profile. Think about the candidate's experience, background, and understanding of your company's culture. Developing a persona based on these characteristics helps you determine what you're really looking for in an employee while also acting as a safeguard for what you do not want.
An HCM solution with a dynamic AI-based skills ontology coupled with an exhaustive skills library can help your HR team take stock of the skills inventory across the organization. Meanwhile, AI-powered hiring and the ability to create an internal talent marketplace can help companies streamline recruitment while allowing them to rapidly deploy, motivate, develop, and retain their workforce. Efforts like these will help you target the talent pool better and be more efficient with your hiring efforts.
2. Streamline job ads
Advertising in the right place and the right channels is among the best methods to promote cost-effective hiring. You can achieve this by analyzing data and note the recruitment channels that have been beneficial for you, and which draw the most qualified candidates.
Once you have your ideal candidate persona set, and the most effective channels sorted, hiring and recruitment will be far more cost-effective and efficient.
3. Implement next-gen HR technology with robust recruitment functionalities
A robust recruitment tool and a unified HRMS will help a great deal in ensuring that recruitment is efficient and cost-effective.
For starters, a modern HRMS with a recruitment module can help with automating certain tasks. You can conserve time, money, and resources by streamlining and automating certain aspects of your recruitment process. It will also increase recruiting frequency, quality, and overall productivity. Identify which elements of the current recruitment process can be automated by conducting a thorough evaluation. This could involve using artificial intelligence (AI) for resume parsing, scheduling interviews and running background checks, among other tasks.
An ideal HRMS or recruitment tool is also one that supports multiple job board integrations. They not only allow you to manage all job postings from one central location but also cost less than subscribing to each job board individually. HR software also allows you to monitor and focus on the job boards that generate the best candidates, and let go of job sites that don't offer sufficient returns on investment.
4. Refine job descriptions and ensure clarity
When you understand your company’s requirements accurately, you are more likely to attract ideal candidates without spending excessively.
An ideal job description creates a favorable impression and attracts applicants who are genuinely qualified. Compose an unambiguous job title, offer details about the available position, and use straightforward language. Transparency is also critical, especially when you consider that 75% of candidates are more inclined to apply for a position if you state the salary range. You must offer this data to avoid losing out on top talent and facing a delay in the recruitment process, adding to the costs.
An ideal HRMS or recruitment tool is one that supports multiple job board integrations. They not only allow you to manage all job postings from one central location but also cost less than subscribing to each job board individually. HR software also allows you to monitor and focus on the job boards that generate the best candidates, and let go of job sites that don't offer sufficient returns on investment.
5. Invest in direct hiring
Direct hiring is when a candidate contacts the company directly instead of applying through an ad or a job board, and direct hiring is among the most cost-effective recruitment strategies.
One way to do this is by developing a careers section on your website that is always up-to-date and represents the company's values and establishes your employer value proposition. Create opportunities for future staff members to discover more about your company through the careers page.
Another way to improve direct hiring is by conducting events such as career fairs, seminars, competitions, and internship programs with universities and other institutes of higher learning.
Also, when your employees attend conferences or retreats, encourage and incentivize them to network with prospective employees and candidates ideal for your organization.
Former employees are another valuable resource. Ensure you maintain contact with them via an alumni email list so you can advertise and promote new positions and receive referrals from them.
6. Drive employee advocacy
Employee advocacy is a powerful tool that helps you attract genuinely enthusiastic candidates to work for your company. If you are confident that you are doing everything possible to provide your employees with exceptional employee experiences and have high employee engagement, encourage them to write reviews on websites such as LinkedIn or Glassdoor, so candidates know what employees feel about working at your company. Encourage and incentivize employees to share their work and workplace experiences on social media and support your employer branding initiatives.
Learn More: Transform Your Recruitment Operations With Technology
7. Launch a referral program
A referral program is one that essentially incentivizes employees to refer candidates for open roles in the company – and employees get a certain financial incentive if the candidate they refer joins the company and remains there for a certain period of time. Launching a referral program involves allocating budgets to give bonuses to current employees for successful recommendations. Yet, it is a cost-effective recruitment strategy in the long term. Staff members are going to only refer candidates who not only meet the position's requirements but also fit your organization's ethos. Therefore, these hires are likely to fit your requirements, join your organization, and remain with you for a longer time leading to cost savings.
8. Invest in IJPs and nurture your existing talent pool
Internal hiring is always a far simpler and smarter option, making an internal mobility program with internal job postings (IJPs) an excellent cost-effective recruitment strategy. Essentially, you’re filling vacant roles with talent from within the company while giving employees the opportunity to explore new roles and learn.
To be able to run a smooth and effective IJP program, you must foster a culture where switching from one position to another within the same organization is actively encouraged. First, conduct an internal audit and chart the skill sets of your employees. Encourage professional growth and mentorships within your company to create a well-planned internal recruitment strategy. Build and groom a qualified and diverse talent pool. This is a very cost-effective recruitment strategy when a role opens up that you have to fill at short notice.
9. Work on your employer brand
If your employer branding is robust and well-articulated, you will not need a complex recruitment strategy. The employer branding activities will do a large part of the job. The right applicants are going to find you since they value you as an employer. Furthermore, if your organization has an outstanding work culture, a diverse workforce, and an enjoyable working environment, existing employees are likely to act as brand ambassadors and share referrals.
Remember that it takes time to build a strong employer brand, and while this is a cost-effective recruitment strategy, it takes time to show results.
10. Draw insights from data analytics
HR analytics assists in minimizing recruitment costs by tracking areas that are known to be costly or ineffective. It will notify you of the optimal recruiting resource, the average time to engage, the offer rejection rate, etc. Using this information, you can adopt the most cost-effective recruitment strategy that delivers top-notch talent without any waste.
Learn More: Refine Your Recruitment Process to Attract the Best Talent
Smart Recruitment: How to Implement Cost-Effective Recruitment Strategies
Now that you know what a cost-effective recruitment strategy looks like, you’re ready to put these into practice. Here are some industry best practices to follow:
1. Classifying temporary vs. permanent hiring needs
Consider the immediate requirements of your business and the goals you have for the next six months. Known open positions: Will they stay relevant while being in line with the same parameters?
For example, during the holiday season, you may require some extra help to expedite an influx of orders. It may be easier to hire temporary workers to fill these vacancies. You might find a star employee who can be later added to the permanent payroll! For instance, companies that over-hired during the pandemic have recently seen massive layoffs, which indicates a large amount of waste and revenue loss.
2. Gauging the suitability of external staffing agencies
In small businesses and startups, the leadership team often spends a lot of its time on hiring. In contrast, the majority of external recruiters are contingent-based. This implies that they only receive a fee if an effective placement is made. Typically, placements include a guarantee period, which means that if the employee leaves during that time, they will be replaced at no cost. A third-party recruiter can be useful for discovering uncommon talent and experience and might be a cost-effective recruitment strategy to adopt rather than having an in-house recruitment team or having senior leaders invest a lot of time in recruitment.
3. Weighing the cost of training vs. productivity
As much as we would like to hire people who start making a difference almost immediately, this is not always possible. Even if they possess all of the necessary skills and work experience, an initial period of transition and acclimation is unavoidable. Also, hiring candidates who need zero training can be too expensive and outside your budget.
Therefore, training at the time of employee onboarding and ongoing training must be provided to every new hire. Whether training happens on the job or through an external entity, there's always a cost. Carefully assess your options in terms of cost and actual outcomes. What’s the more cost-effective recruitment strategy for you: hiring a relatively less qualified individual and training them, or acquiring talent that can reach full productivity ASAP?
Learn More: Hiring Strategies for Start-Ups: 23 Tips for 2023
Conclusion
A cost-effective recruitment strategy doesn't mean that you drastically cut down on your investment. Instead, it involves implementing measures to maximize the return on investment. Therefore, when optimizing your recruiting strategy, be thrifty and reasonable with your finances and search for ways to maximize asset allocation.
HR technology solutions like Darwinbox – with its built-in job board integrations, integrated assessments, candidate experience management, and detailed analytics – can help you achieve a more cost-effective recruitment strategy. Schedule a demo today!
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