The True Cost of Recruitment

Written by J. Crawley on Tuesday, 24 April 2018

Ask someone how much it costs to recruit an employee, and they would probably say that ‘It cost us x £s for the advertisement’, or ‘We had to pay an agency 23%’. The actual answer is slightly more complex because people generally forget about their and their own staff time involved in the process.

A more accurate cost, therefore, is as follows:

(a)  The cost of the recruitment medium + (b) The cost of the employers own staff time

Now how many of you actually know what you cost? I am not talking about the cost of employing you, your wages, insurance but the cost of you doing a task for a business. For a salesperson, this is relatively easy to work out. There are approximately 260 working days in a calendar year, take out 10% for holidays, sickness, training, among others, and you are left with approximately 234 working days. If a salesman’s target is £1m a year, then their daily cost is as follows:

£1,000,000 / 234 = £4,473

Therefore. The hourly cost of this individual conducting interviews rather than selling your product is £534

For individuals who don’t hold such a target, it should still be possible to work out what their value is to the business is each year (if you can’t, then you probably don’t need them) and subsequently, a daily and hourly rate.

This exercise is very valuable, and I would encourage companies to do it for all their employees. It’s one of the most powerful metrics available to you in business, as you can instantly understand the cost of an away day, holding a weekly meeting, running a special internal project, but we are digressing.

Now having established the base cost, we need to count in additional factors such as the following:

-          The cost of having an interim whilst the role is vacant;

-          The cost on the productivity of having the role vacant; and

-          The additional load that affects the other employees of having the role vacant.

All the above need to be multiplied by the number of days until the new employee joins.

I would hazard an educated guess that on an average the true cost of recruiting someone, especially a replacement of someone, is at least 150% of their first year’s actual cost.if not more.

That's why retention is so important, and why you must always keep an eye on your #employerbrand

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Does this resonate? If so more thoughts are available in my book Fuel Your Employer Brand, Click to go to Amazon or you can just get in touch and we can have a coffee.