If you have ever been responsible for growing a team or making a new hire, you'll be familiar with the fees and costs that can rack up.
Recruitment is certainly not cheap. There are mixed opinions about how much exactly recruitment costs, and there are a lot of different factors to consider that will have an effect. There are also certain expenses to take into account when putting together a recruitment budget and investing in your hiring process.
What Is The Recruitment Cost?
Recruitment cost is the total amount of money spent on hiring a candidate beginning from posting the position to joining the organisation. It may also be referred to as cost per recruitment. Cost of recruiting includes expenses like job board fees, candidate assessment tools, and internal recruitment fees.
What Is The Average Cost Of Recruitment?
The average cost of recruitment in 2022 /23:
| Recruitment Activity | Average Cost |
|---|---|
| Job Board Fees | £207 |
| Advertising costs | £200 |
| Recruitment Agency Fees | £6,000 |
| Internal Recruitment Expense | £3,000 |
| Invisible Business Costs | £10,000 |
| Hiring The Wrong Person | £18,500 |
| Average Cost Per Hire | £15,095 |
5 Examples Of Recruitment Costs
1. Job Board Fees
You might decide to advertise your vacancy on a dedicated job board. Posting a vacancy to boards such as Indeed, Reed or Total Jobs is a sure way of attracting applicants who browse these boards regularly. Given that it is a very saturated marketplace for both candidates and recruiters, job adverts must paint the best possible picture of the business and role.
Studies have shown that candidates who regularly apply to roles advertised on job boards represent around 20% of the qualified candidates in the marketplace. So, posting your role on job boards will get you some attention, but whether you'll attract the attention of the right person for your role is another story.
Estimated recruitment cost for job board fee expense: £150 to £265 (per individual posting)
2. Candidate Assessment Tools
Once you have your applications in and have totaled up your advertising costs, you then need to identify and shortlist the most appropriate candidates. One option is to use aptitude tests or psychometric testing before you start screening your candidates on the phone.
Again multiple sites offer online solutions for these tests, all offering varying pricing models. Let's assume you want to send 25 tests.
Estimated candidate assessment tool expense: £125 to £1,250
3. Recruitment Agency Fees
This is, usually, the biggest expense for all in-house or internal hiring teams. Recruitment agencies will advertise, collect and shortlist CVs for you to interview. A lot of work goes on behind the scenes – which is how agencies justify charging staggering percentages, sometimes as high as 25%, of a new hire's starting salary. The average salary for vacancies recruitment agencies are asked to assist with is £40,000 and the UK average recruitment fee is 15%.
Estimated recruitment agency expense: £6,000
4. Internal Recruitment Fees
Using internal sources is a vastly more frugal approach to hiring than outsourcing to agencies. However, with the lesser expense tends to come fewer resources. Agencies should have access to premium job boards including LinkedIn Recruiter packages in addition to their industry-specific networks. Good agency recruiters have far-reaching networks of good candidates and, in theory, save time when recruiting.
It's worth noting that over 70% of in-house solutions fail to source 90% of their vacancies themselves. Also take into account that if you're running the recruitment process internally, you need to consider the costs of marketing your brand, updating the careers page of your website and the time cost of making your own shortlists (on average agencies source successful candidates 2–4 weeks quicker than in-house recruitment teams).
Estimated internal recruitment expense: £2,000 to £4,000
5. Invisible Costs To Business
This includes managers taking time out of their schedule to interview, screen CVs and train new hires. There is also usually a considerable cost to the business just waiting for someone to be hired. Often employees will be doing the work of two people while waiting for the new addition to the team.
While these might not seem to directly impact a company's bank balance, the effect on the production level is almost always a costly one. This is truest when there is pressure to hire and the wrong person is offered the job.
Even after a new employee is welcomed to the team, they are typically functioning at only 25% after the first month. Harvard Business discovered that it takes 5 months to get to the point where a new employee can achieve full productivity - imagine having to go through this twice because you hired the wrong person.
Estimated invisible cost to business expense: £5,000 to £15,000
Other Recruitment Costs To Consider
Employee Turnover rates
The Employee Turnover rate is the percentage of employees who leave their job within a given period. It can be calculated by dividing the number of employee departures during that time frame, by the total number of employed people at that time. The calculation should include both voluntary and involuntary departures.
A high turnover rate will impact the cost of recruitment as you'll need to hire more frequently and incur costs.
Time to hire
One of the most important factors in recruiting is the amount of time taken to find and hire the right candidate. If your company is struggling to fill positions, it could contribute to more costs - both in terms of time and money.
On average it can take 12-16 weeks, to hire a candidate from start to finish.
Making The Wrong Hire
Recent studies have indicated that almost 50% of new hires in the UK leave within the first twelve months. In this instance, the hiring process must begin all over again.
The Recruitment and Employment Confederation has estimated that the costs of a bad hire can sometimes cost more than triple the cost of the initial position's salary. On average, the cost of making an ineffective hire is around the £30,000 mark.
This is taking everything into account, including time to hire, cost to business of training, double recruitment fees, temporary staff, etc. Some lucky (or not so lucky) employers have listed the costs of replacing a bad hire as low as £7,000, but this seems to be the best-case scenario.
Estimated expense: £7,000 to £30,000
Average Cost Per Hire
Based on our calculations, the overall estimated expense you can expect to spend per hire for each vacancy is between £7,275 to £22,515 (add £18,500 for a wrong hire).
This figure is an estimate and in no way definitive. Every company and every employer will have a different figure.
However, this serves to highlight how extortionate hiring can be; particularly when the wrong candidate is hired for the job.
