How to Start a Recruitment Business with No Prior Experience
Promising ways to reduce recruitment costs in 2022
A typical talent acquisition process can cost a considerable sum of money for any business. With evolving trends in the talent and recruitment market coupled with events such as ‘the Great Resignation’, the race to hire the best talent has become costlier than ever.
Recruitment costs have become difficult to calculate, especially during the post-pandemic era, as the recruiting strategies and mediums have tremendously evolved. Further, there’s been more pressure on companies to keep their recruitment budget dynamic to support a talent- centric hiring process.
You have landed at the right place if you are looking for brilliant ideas and effective ways to handle the money your company spends on hiring new talent.
This guide will cover everything about recruitment cost calculation and the promising solutions that can cut down on your organization’s overall hiring cost.
Recruitment cost refers to the detailing of the total hiring expenditure of an organization. There are two fundamental and defined types of recruitment costs: Internal and External costs.
Net hiring cost
The net hiring cost refers to the total cost of a company's hiring process. This includes multiple factors such as one-time hiring investments, periodical expenses, and need-based investments made for recruiters to improve their hiring process and strategy.
How to calculate recruitment costs?
Recruitment cost can be calculated using a standard formula:
Recruitment cost = Internal recruitment cost + External recruitment cost
Here the internal recruitment cost mainly consists of recruiter salaries and incentives, employee referral fees, and miscellaneous costs. The external recruitment cost consists of advertising fees, tech investments such as software licenses, candidate expenses, job referral payouts, cost of events and programs conducted for talent attraction, candidate engagement cost, recruitment outsourcing cost, recruiter training, and skill development cost, and one-time investments such as purchasing storage space and automation cost.
Recruitment costs are calculated periodically, usually on an annual basis where one-time investments and other seasonal investments are included in the annual budget proportionately.
Top strategies to cut down talent acquisition costs
1. Planning in Advance
The first step towards cutting down the hiring cost will be estimating the recruitment cost well in advance. By this, recruiters get to evolve better hiring strategies and accurately predict the cost and the return of interest, thereby reducing unnecessary hiring steps. Here you can also measure and set a benchmark for the hiring success rate and can afford to plan for a need-based dynamic hiring budget. All of which effectively helps cut down your hiring costs.
Here is a list of important factors to consider before calculating recruitment costs.
- Role-related hiring requirements.
- The number of people to be hired.
- Whether outsourcing the hiring process is required.
- Cost of outsourcing recruitment steps.
- The tech investment to be made and the budget for the same.
- Salary of the recruiter or the HR team.
- Cost of improving the hiring process such as skill upgradation of recruiters, job referral campaigns, employer branding, good CPH benchmark, etc.
- Amount spent due to candidate attrition.
2. Recruitment automation
Automation of the hiring processes is predominantly a one-time investment with few upgrades and integrations to be made in the future. It primarily helps by taking care of redundant and manual steps, thereby freeing up recruiters’ time. This allows recruiters to concentrate on more crucial aspects of hiring that require their skill, expertise, and experience, such as candidate engagement, interviews, background verification, and so on. With automation, the human resource requirement for data entry, redundant and several manual processing steps can be minimized thereby bringing down the overall recruitment cost.
3. Utilizing the right tools and hiring strategy
The right set of required hiring tools and the winning hiring strategy depends on the job nature, role, company needs, and the industry. Even for a specific job role, no single tool or a one-size-fits-all hiring strategy will rule forever, knowing that the hiring ecosystem is ever evolving.
Addressing this, recruitment teams should relook at the hiring requirements periodically, and it is recommended to stay informed and updated on the current hiring market, trends, and technology. This includes training, webinars, joining recruiter communities, and job fairs. Here the money invested by an organization for the skill upgradation of its hiring team is also a recruitment-related expenditure, yet acquiring the required expertise and interacting with experts in hiring has immense potential to cut down unnecessary spending.
4. Internal hiring
Internal hiring is one of the evolving trends in talent acquisition. Every organization encounters surplus staff who are prone to be laid off. Layoffs are expensive and complex for the management and the employees as both have invested time, trust, effort, and resources in each other. Especially for an organization, the average money spent on hiring a candidate is Rs. ~25,500. On top of that, considering the resource spent on training and other benefits even sums up to more. Therefore, retaining employees is cost-effective by offering them different roles within the same organization. By this, enterprises can minimize candidate sourcing, screening, and background verification expenses.
5. Job referrals
Acquiring a relevant talent pool to choose from within a short time is challenging. This depends on the success of your job posting, and a way too lavish job advertisement budget will hit hard on the overall hiring budget. Here recruiters' resort to an efficient and cost-effective job advertising strategy: a job referral program. A job referral program is similar to a known person from your circle referring you for a job post. Here, the person who gave the candidate reference gets rewarded for their referral.
Running a job referral campaign is simple and can be done using your company website or social media. Here you need to pay only for those candidates hired there by effectively reducing candidate sourcing effort and cost.
6. Optimizing the candidate screening step
Candidate screening is the challenging step that every recruitment team is going to complain about. This is because the time to screen for a job vacancy depends on the requirements for the job role, number of applicants, the time taken to receive enough applicants to screen. All such uncertainties incur both tech and human resources for which the cost remains hidden, which hamper predicting the hiring budget well in advance.
As a solution, it is recommended to streamline the candidate screening process with AI & ML enabled CV screening tools that swiftly filter and rank CVs with respect to the skill requirements. Tests that can quickly assess the basic qualifications and the willingness of the candidates can be of great help in filtering the less suitable ones quickly, thereby reducing the volume of candidates to be screened.
7. Outsourcing the recruitment process
Recruitment process outsourcing simplifies the complicated task of calculating the hiring cost. Whenever you outsource parts or the entire hiring process, the recruitment service provider will readily provide you with an estimated cost. Moreover, RPOs are supposed to be professional recruitment industry experts who will ensure quality hiring service within a time-limited period. They also provide hiring metrics, ensuring a definable return on interest for your outsourcing endeavor and making your hiring process cost-effective. Outsourcing is well-known for minimizing the hiring cost and maximizing efficiency when there are bulk-hiring needs.
Calculating your recruitment costs accurately can often be a challenging task. In the run for competitive hiring and talent retention, one cannot discount the cost and the budget factor, aiming to remain at the top of the recruitment market. You must deploy the best strategies and tools to optimize your results while balancing your financial budget to achieve the desired recruitment outcomes in a cost-effective manner.
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