The art of finding and employing talent has never been more awash with choice – of methods, technologies and media. The average business is now empowered like never before to speed up their hiring process, be more targeted in their search, and more accurate with attraction techniques. But what about the actual cost of hiring?
The cost of hiring via traditional recruitment
Hiring continues to be an expensive practice in Australia for most industries. Despite the growth of social recruitment and B2B engagement sites like Linkedin and Google+, there remains a heavy reliance on advertising to achieve results.
According to an IBIS World report, the Australian online recruitment market is expected to reach $300 million in 2015. This revenue will largely be eaten up by Seek, who reported revenue of $273 million for their Australian advertising business in the past financial year. With a growing suite of products continuing to drive the majority of job aspirants and employers to the site, it’s hard to see a short-term shift in the costs most businesses will need to pay in order to attract talent.
For most businesses, advertising costs are only the tip of the hiring iceberg. The bigger and more complex a company is, the higher the risk of cost spirals due to talent gaps, internal process delays, internal structuring, salary alignment and so on. And these are just the costs that appear in reports. The actual cost of hiring might look more like this…
Company X hires 100 staff per year. To do this they combine the skills of the HR Manager and an internal talent acquisition specialist. The HR Manager may earn $150K per year, the internal recruiter $90K. Let’s assume 50% of the HR Manager’s time is devoted to hiring and 100% for the internal talent acquisition specialist:
$75K + $90K = $165K/year
For two staff to fill 100 roles that have a reasonable diversity (sales, admin, customer support, IT, analysts etc), the company will need to use the latest technology tools such as Linkedin Recruiter or Seek Talent Search. Let’s say they go with Seek Talent Search at $500 per month:
$500 per month = $6K/year
For advertising, let’s conservatively say 60 unique Seek ads are posted during the year:
2x 30 Pack Seek Ads @ $5,469 = $10,938/year
Of these 100 hires, some 10% are deemed critical to the business, and coincidentally are proving the most difficult to source in the market despite the internal recruiter’s best efforts to source. So 10 hires then need to be filled by external agencies.
Let’s assume good agency rates were negotiated and the average fee is 13%. Of these 10 hires, the average salary package is $100K (factoring in a mix of senior and junior people in the market who are typically hard to source):
10x $13K= $130K/year
Then there is the loss of productivity costs due to internal interviews, job description approvals, processing and business case justification. But for this example let’s include only the hourly cost of attending interviews by the hiring managers involved and exclude time to review CVs or manage discussions post-interviews. Assuming a minimum three first round interviews per job, two second round interviews, with one hiring manager attending the first interview, and two attending the second, that’s seven hours of interview time per job – or 700 hours annually. If the hiring manager is on $140K base, the added cost to the business is:
So adding up, a traditional lean recruitment operation costs $360,938 to hire 100 employees in a year, or$3,694 per hire.
This is a typical hiring story, with most businesses paying substantially more, and the minority that pay less usually have either a dominant position in the market or a very narrow hiring need.
An alternative lower cost recruitment model?
So where is the evolution in bringing hiring costs down? The future might be in more flexible outsourced models that take hidden costs out of the hiring process, reduce agency spend, and reduce internal recruitment overheads.
As technology continues to provide more tools to find talent, the requirements of businesses move more towards service-based models. By working with flexible outsourcing models, businesses can pre-cost the hiring process, advertising, and early stage interviewing, leaving only final interview decisions with the HR and hiring managers. This can reap long term benefits not only on the talent acquisition bottom line, but also in the productivity of all staff involved.
Let’s look at the equivalent hiring costs for 100 people with a lightweight outsourced recruitment model. Firstly there are the costs of an outsourced recruitment-as-a-service provider (who manages advertising, shortlisting, phone screening, interviewing) = $40K. The costs beyond this are:
- HR Manager involvement reduced to 25% -=$37,500
- Internal Recruiter =$90K (more sourcing, candidate management, B2B site branding and final stage steering)
- Seek Talent Search =$6K
- Seek Ads (60) =$10,938
- Agency spend reduced to 4 placements (more time for internal recruitment to conduct deep sourcing activities and promote on B2B sites like Linkedin) =$52K
- Hiring Manager interview participation reduced to final interviews only (a saving of 300 hours annually -$21,000) – total hours now 400 =$28K
Total spend: $264, 438, to hire 100 employees in a year, or $2,644 per hire.
That is a savings of almost $100,000, or $1,000 per hire, by outsourcing recruitment-as-a-service versus a traditional recruitment model.
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