Calculating the hidden costs of recruiting internally.
Updated: Nov 29, 2021
There are a number of expense items that need to be considered when hiring someone. There are the direct costs but also costs for planning onboarding and keeping staff engaged.
If you are a hiring manager, your company or department may require you to identify and break down these costs.
#1 The direct cost
The direct cost of recruitment includes;
Salary of your recruitment team
Fees for contractors involved in the hiring process
Advertising and online job board costs (these can quickly escalate into the tens of thousands!)
Investment of an applicant tracking system
These are some of the biggest recruitment expenses and arguably are the easiest ones to identify and price up. When you add everything up, the average cost of a new hire can be anywhere between $4,000 and $10,000.
#2 Labour costs
Ever heard the saying, time is money. Or is money is time? Anyway, while your staff are busy undertaking the various stages of recruiting, this is time that is not spent on other projects.
During the time you are hiring, there’s either no productivity in the role you’re hiring for or limited productivity. If the hiring process takes longer than usual, this extends the lost productivity time and output for your company.
Time taken out for filtering through applicants may take a considerable amount of time.
When you finally reach the decision to hire someone, the negotiation stage can draw out the process longer.
#3 The cost of getting it wrong
A new member of the team who doesn’t quite “fit” has the potential to be costly to your business. An employee with a bad attitude can be detrimental to the culture of your team and also to customers!
#4 Recruitment outsourcing costs
This one won’t apply to everyone, but many companies are looking to outsource the hiring process to recruitment agencies to avoid all of the above costs associated with hiring the wrong person.
Recruitment agencies have an advantage over in-house recruitment as they tend to have bigger and better industry networks, contacts, databases, and manpower invested in recruitment.
Whether or not you choose to recruit in-house or through an agency, be sure to factor in the extra time, energy and effort outside of the financial recruitment cost.