Have you really considered the cost of recruiting in-house?

Updated: Oct 16, 2021


As if hiring was not challenging enough, it has never been more important to carefully consider the actual cost of hiring. Up until fairly recently many businesses have been reluctant to use a recruitment service and fairly so.


Whether it be a new employee starting so that you can scale your efforts upwards, or whether you were looking to replace existing staff who are on their way out, you cannot afford to get hiring wrong.

Businesses are now beginning to understand how much this is really costing them and the benefits that a recruitment agency can bring to an organisation.


Consider these costs:


Replacing an outgoing employee

  • In many cases once an employee has decided to actively look for alternate employment they have already given up with the organisation that they are with at the moment. There will be a tendency to reduce their effort, provide less value and in some cases can negatively impact the culture and become toxic.

  • For many roles, it can take months to find a good alternative to replace them. In this case there is a cost of ensuring their position is staffed by temps, or by giving existing staff additional hours to compensate for the missing person.

  • The person in charge of hiring will need to devote their efforts to recruiting a new hire and consequently the opportunity cost of their time needs to be considered.

  • The non-monetary cost of someone leaving can be crippling. The tacit information an employee can take with them is sometimes incredibly valuable. There are many instances of where this information is then used to advantage their next workplace. The accumulation of years of work, effort, research and understanding that has cost the company considerable amounts in their investment in that person.

  • For some industries the potential to lose clients also needs to be considered.

Hiring Costs


Many organisations think that the easy answer is just to post on a free job board. Whilst this can be effective for some roles, for other roles luck will only get you so far. Especially if there are many requirements for the role.

  • Advertising costs can typically be anything from $300 though to $3000 for a single campaign. but you should not put all your eggs in one basket, so you may need to multiply this by 2 or 3 for the different job boards.

  • The starting cost of the new employee can often be higher then the person leaving and the ongoing ramifications as this flows through the company

  • The time spent to review the applications, shortlist, arrange interviews, report to authorities, do background checks, reference checks, so on. These costs can quickly add up.

  • The use of assessment testing, background checks, drug screening (usually done on more than one candidate), and time spent interpreting and discussing results, and;

  • Time spent assembling and processing all the new hire paperwork, explaining your employee benefit programs, and entering the necessary data to ensure the employee gets paid.

Onboarding


Many savvy businesses leaders know that in order to maintain the highest possible amount of engagement, the onboarding process really begins at the early stages of interviewing. When the employee has completed the paperwork and everything is been processed through HR, there is the cost of making sure that training is performed - especially for specific software or other company policies and procedures that may not be industry-standard.


The cost of familiarising the employee with the new environment and cost of familiarising other employees with the new employee. This is often performed by a manager or someone more senior and their time is also valuable. The cost of not performing proper onboarding procedures really does result in a higher turnover rate.


Training costs


Because new employees do not enter the organisation completely trained, it will take time before they are fully productive. Factor in the following productivity costs:

  • During this time, the person’s manager is also spending more time directing, reviewing work, and possibly fixing mistakes. (Errors will be made that are not caught right away and will cost money to correct down the line. A customer who receives an incorrect price or an incorrect shipment due to the new employee’s lack of experience, etc);

  • Employee morale plummeting as overworked employees assume responsibility while the new hire is being trained.


Now that you’ve closely examined the costs associated with each person leaving, you can then plug this information into a spreadsheet to determine the real cost of employee turnover in your organisation.


Now ask yourself again: do you want to use a recruitment service?