Recruitment is the gateway to getting great talent into the organization. Despite how challenging this process may be, recruiters are always bound by the constraints of time and budgets. If you are in a fix with managing your recruitment costs, you can read further to learn:
Recruitment Costs include internal as well external costs
Strategies that can reduce recruitment costs can include the use of social media to find talent, the use of employee referrals, etc.
Strategies need to be implemented at each stage to bring down the overall expense
It is believed that money can get you almost everything you desire. For a recruiter, it is the best candidate for the job. However, companies do not always have a full coffer of funds to allocate to talent acquisition teams.
Hiring a good candidate on a budget is tough. After all, recruitment costs add to the bottom line of the company and are under constant scrutiny.
The objective of every recruiter is to hire the best or the most compatible talent for the organization while working within the scope of the allotted recruitment budget.
What are recruitment costs?
Recruitment costs vary depending on various aspects and contexts.
One of them is the cost per hire, which is the average cost incurred per new hire for a given period. This cost per hire is calculated by adding up the external and internal costs of hiring new employees in a given time frame. The sum is divided by the total number of hires in that same time period.
External costs include expenses incurred for advertising or marketing, recruiting event costs, relocation expenses, etc.
Internal costs include administrative costs, equipment, recruitment software costs, travel costs, employee referral incentives, and benefits.
These costs are just some of the tangible ones; several others are incurred in the process of recruitment, like the opportunity cost of time for recruiters and productivity costs for business operations.
Costs that can be managed
Some of the incurred recruitment costs are common and unavoidable, like infrastructure costs and recruiters’ salaries. However, some costs that can be managed or reduced are:
Marketing or advertising costs
Sourcing and screening methods
Interview modes
Let us look at some easy and effective strategies to reduce hiring costs.
10 Strategies to Reduce Recruitment Costs
In marketing and employer branding
#1 Use social media to attract candidates
Social media is one of the most efficient and simple ways of reaching out to candidates, especially the younger generations like millennials and Gen Z.
Statistics show that 86% of job seekers use social media to look for jobs. Job sites like LinkedIn allow easy access to opportunities at a lesser expense. Other social media sites such as Facebook, Twitter, Instagram, and even YouTube are used by employers to reach out to candidates that suit the job profiles.
Social media is not only used for posting jobs but also to build a strong employer brand. When candidates and existing employees advocate for your brand, costs can be considerably reduced.
#2 Encourage employee referrals
When satisfied employees advocate for the organization and refer others to job opportunities, it reduces sourcing costs, effort, and time considerably.
Employee referrals are known to be the most important source of hire. Employee referrals are likely to increase the probability of a job match by 2.6–6.6%. Organizations that source candidates through referrals have noted that about 45% of employees stay with the company for more than four years.
Interview process
#3 Adopt automation
Although the adoption of automated software like an Applicant Tracking System (ATS) or a Customer Relationship Management (CRM) tool incurs a cost. However, it saves a lot of direct costs in the long run and indirect costs incurred due to manual errors. It also saves time and effort for recruiters, especially for volume hiring.
78% of companies using an ATS say recruitment tech makes hiring easier than ever.
According to SHRM, 88% of companies globally already use AI in some way for HR.
#4 Schedule online interviews
Global changes in the recent past have increased the use of technology for recruitment. The use of technology to screen candidates, conduct interviews, and communicate with candidates to share updates and feedback helps to reduce productivity costs for recruiters.
Bulk screening via one-way video or conducting group interviews can also save costs and time. Using an ATS helps recruiters send automated texts and emails to keep in touch with their candidates.
Online interviews have also saved travel costs and time for candidates.
#5 Streamline the assessment process
Knowing what kind of candidates you are looking for makes it easier for you as well as save time and money.
The lesser the interview stages, the lesser the effort and costs. Structuring, customizing and optimizing your hiring process based on your hiring needs and strategy helps reduce the number of hiring stages.
This streamlining of the hiring process will reduce the time to hire, which in turn, will reduce the cost of hiring.
#6 Be selective about candidates
You will reduce a lot of cost, time, and effort if you focus on quality instead of quantity of candidates. This is possible only if you set clear criteria for the job role as well as the organizational culture.
Beyond the first step of creating clear Job Descriptions, you can have interview rounds that have specific evaluation criteria and benchmarks.
Cultural fit can be evaluated through psychometric assessments. This will help you use tools like predictive analytics to make informed and data-driven recruitment decisions. It is easier for you to screen and hire candidates, thereby helping reduce costs.
Manage talent
#7 Build alumni network, talent pools, and communities
Many employers focus on engaging with a potential talent pool by building talent pools and communities.
Talent pools or pipelines are a database of skilled potential candidates who expressed interest in a specific job role and/or have applied previously.
Often a profile may not be suitable for an advertised role at the moment but could be considered for other opportunities in the company. These candidates would already know about the organization, culture, and Employee Value Proposition (EVP).
If your organization allows rehiring, you could consider building an alumni network. This talent pool could be ‘plug and play’ by meeting the candidate’s expectations.
Many organizations also build social media communities, sharing company updates, technical information, and domain knowledge that may help in candidate engagement.
All these also help in connecting with passive candidates, who will then have access to the opportunities in the company.
#8 Internal talent mobility
This is possibly the least expensive method of recruiting. You not only save costs on sourcing and screening but also that of inducting a candidate into the organization. Internal hiring can also be a great motivation for existing employees to work with the organization for a longer time.
Internal hiring can be done for a new position within the organization. Job rotations, lateral movements, and project placements can be beneficial to the organization.
According to a LinkedIn report, internal recruiting improves retention by 81%, accelerates new hire productivity by 69%, and the hiring process by 63%.
#9 Employee retention
Keep existing employees within the organization, and you don’t need to hire many from outside. This may sound like the most obvious way to reduce recruitment costs, but it is a good idea.
Many studies have indicated that the cost of losing an employee can range between 1.5-2 times an employee’s annual salary. The costs incurred in losing an employee include:
Lost productivity
Lost skill, knowledge, or expertise
Hiring their replacement
Onboarding and training the new employee
Employee retention can also be accomplished through the following:
consistent employee engagement,
creating career development plans,
training and coaching,
motivating and meeting employee expectations,
creating a safe and cordial work culture
#10 Hire consultants or outsource for smaller projects
Although this is not a common practice for many organizations, this practice can help you reduce costs. You could outsource a part of the project to third parties, which can prove to be cheaper in some cases.
Routine, repetitive tasks in high frequency and volume can also be outsourced to freelancers as well, which can prove to be much cheaper.
Some organizations smartly hire consultants and assign existing team members to shadow the consultants to pick up skills, knowledge, and methods. Team members can learn how to do the tasks to replicate them the next time.
Wrap up
It is prudent for recruiters to manage costs involved in activities with relatively low Return on Investment (RoI). They can instead use the saved costs in activities that are more effective and beneficial.
You can identify which of your recruitment processes are effective through data mining at regular intervals.
You can then opt for more efficient methods to achieve the same outcome using any of the abovementioned strategies.
After all, how you use the money to your benefit determines its actual value!
FAQs on Reducing Recruitment Costs
Which are the least and most expensive methods of recruitment?
Internal hiring can be considered the least expensive hiring method for a role.
Employee referrals follow this, although referrals may incur costs when the organization offers referral bonuses.
External recruitment may be expensive due to advertising costs and outsourcing to third parties.
What is the role of automation in reducing recruitment costs?
Implementation of automation software involves time, effort, and money. However, automation can help save recruiters’ time and avoid manual errors.
Automation can make your processes efficient in the long run, also helping recruiters make data-driven decisions.
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