It is becoming increasingly difficult and expensive to hire the right people. According to the Society for Human Resource Management, as of 2022, the average cost per hire for a non-executive post is $4,683 per year. This number is higher for higher-ups and leaders. Recruitment departments are always trying to find ways how to reduce recruiting costs per hire while assuring quality.
We have shared the meaning of cost per hire, how to reduce recruitment costs and the benefits, and calculation formulas. So, let’s start!
What is cost-per-hire?
Cost per hire is the total financial cost an organization incurs to recruit for a single open position. It includes all the financial costs the business incurred during the recruitment process. These are some of the hiring costs:
- Job board postings
- Advertising fees
- Recruitment agency fees
- Interviewer time
- Pre-employment assessments
- Background checks
- New hire onboarding, etc.
How do you calculate the cost per hire?
As a company, it is important to calculate the cost per hire to understand your recruitment process. Calculating cost per hire can answer questions like whether we are recruiting the right way or spending too much to recruit an executive, etc.
The formula to calculate the cost per hire is as follows:
Cost Per Hire = Total Cost of Recruitment / Number of Successful Hires
Companies can make their hiring process highly efficient by understanding and optimizing this metric.
How do you reduce the cost per hire?
Many companies face challenges in reducing their cost per hire. For some companies, hiring for one role costs up to 40% of the employee’s base salary. That’s why it is extremely important to reduce the cost per hire.
Here are some ways in which companies can reduce their cost per hire.
Build an employer brand
Building an employer brand has become important for businesses in this age. It can help them attract talented individuals organically. Businesses can attract genuinely interested people by showcasing their culture, values, practices, work environment, opportunity for growth, job benefits, etc.
The brand will reduce the need for expensive, broad recruitment outreach. Moreover, it will increase the likelihood of attracting the right fit, thus minimizing the recruitment cost ratio.
Leverage the technology
Businesses should use technology to save both time and resources. For example, they can use applicant tracking systems to help simplify the whole screening process. ATS automatically filters the resumes based on the criteria that are pre-defined by the businesses. This saves time and resources for recruiters and allows them to focus on interviewing only the most promising candidates.
Also, automated video interviews are another way to leverage the technology. They can be used for initial screening and free up time for in-person interactions with the most qualified applicants.
Retain and promote the current employees
Businesses need to focus on internal promotions whenever possible. Current employees can be proven as the best hires. It demonstrates a commitment to employee development and career progression. They are already aware of and accustomed to the company culture and work environment.
That means they already work with their highest productivity, as new hires may require 5 to 8 months to become fully productive at work. This also fosters a loyal and engaged workforce, reducing the cost and time associated with external recruitment.
Employee referral programs
Current employees are also a valuable resource for talent acquisition. Businesses should make the most of employee referral programs that offer a win-win situation for the company and the employees. Employees who refer successful candidates can be rewarded, while the company benefits from the quality of potential hires.
Existing employees likely have a good understanding of the company culture and the skills needed. This leads to a higher chance of successful placements through them.
What are the benefits of reducing the cost per hire?
Businesses can have multiple benefits of reducing the cost per hire. Some of them are as follows:
- Financial saving: If recruitment costs are reduced, it will result in direct financial gains, hence a positive return on investment (ROI).
- Time & resource saving: If businesses automate the whole recruitment process, it will free up both time and resources for the team.
- Stronger candidate quality: For reducing the cost per hire, a greater focus should be on attracting the right fit. This lowers the risk of bad hires and improves overall team performance.
- Increased employee engagement: A positive employer brand and focus on internal promotion boost employee morale and loyalty.
- Increase productivity: A higher CPH delays new hires, affecting the team’s productivity and growth. Reducing it can eliminate this problem.
Wrapping Up
A well-designed recruitment strategy reduces the average cost per hire by industry and proves an investment. Filling open positions should not become a recruiter’s nightmare or burn a hole in the business’s pocket.
For the most efficient way to reduce the cost per hire, use Jobsoid. This recruitment software makes the business’s hiring process simple and effective.
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