What is the true cost of recruitment?

Whether it’s an annual graduate intake or a one-off drive to fill a single vacancy, every business will need to recruit at some stage.

The costs associated with this can vary widely. Influencing factors like job location and level of seniority will impact the cost of recruitment, as will the methods you use to attract, screen and onboard candidates.

This makes it impossible to put an exact, or even estimated figure on how much your next hire will set you back.

We can however help you better plan your budget by looking at typical recruitment activities and their average cost, as well as highlighting some of the often overlooked expenses you may face.

What is the average cost of recruitment?

There are a wide range of opinions on how much the average cost of recruitment actually is. The Chartered Institute of Personnel Development (CIPD) puts forward an average of £1,500 for a non-senior level role.

This figure includes direct costs like advertising and in-house resources but does not go as far as to consider additional expenses like employee onboarding and training.

Glassdoor claims the average cost per hire to be £3,000, with the process taking around 27.5 days. Again though, this only considered the direct costs involved in recruitment.

It also doesn’t account for the fact that every employer will implement a unique hiring strategy. With that in mind here’s a look at some typical activities likely to be included in your own strategy - with average costs given where possible.

Job board recruitment costs

The first step in sourcing top talent is to get your job out there and for most employers, this means posting the vacancy on one or more online job boards.

There are many of these available and whilst some offer free postings it’s unlikely you’ll generate much interest through them. Sites like Indeed, Reed and Monster are far more popular thanks to their high-volume traffic and extensive candidate databases.

Depending on which sites you choose, you can expect to pay anything from £70 to £239 for a single job post lasting 30 days. If you predict your hiring needs will extend beyond a single vacancy, you’ll also find more cost-effective packages on offer.

Job advertising recruitment costs

Job seekers today have no shortage of sites to search through, and it can be a challenge to get your job ad in front of the right eyes. That’s why many businesses now choose to invest in targeted advertising.

A lot of the big job boards offer this as a service, matching user profiles from their databases with your specified criteria to target suitable candidates. Don't forget the role of social media in recruitment too! Running paid job ads on sites like Facebook and LinkedIn can help you engage with a new generation of talent.

Paid and sponsored ads are charged on a pay-per-click (PPC) basis, with multiple factors affecting their cost. As a very rough ballpark, expect to pay anything from 10p to £2.00 per click.

Job Screening recruitment costs

Having sourced a pool of applicants, the next stage in the process is shortlisting. Perhaps the most cost-effective way to do this at scale is to use pre-employment testing, like aptitude tests, personality questionnaires, and skills assessments.

These help you quickly identify the best candidates and give you comparable data on their suitability. Again, what you pay here will depend entirely on your needs - i.e. how many jobs you’re recruiting for, how many applicants you need to assess, and how many tests you want to run.

You can typically access pre-employment testing through subscription packages that range from as little as £41 per month for basic needs to £2,500 per month for a comprehensive service.

In-house recruitment costs

If you’re running your recruitment strategy in-house you’ll need to factor in the time of your HR department.

HR employees are likely to be responsible for or at least involved in tasks like writing job descriptions and person specifications, posting job ads, CV screening, test administering, phone calls, and interviews, as well as completing associated paperwork.

These tasks all mount up, and some estimates suggest that for an in-house recruiter on a £35,000 salary, the time spent on a single hire would equate to around £2,153.

You’ll also need to account for any additional in-house resources, like an applicant tracking system (ATS) should you choose to invest in one. The starting price for this technology is around £5,000 annually. Calculating its cost-per-hire is as simple as dividing your annual fee by the number of new hires in the same period.

Recruitment agency costs

As an alternative or complement to in-house recruitment, you may choose to outsource some or all of the process.

The cost of working with a recruitment agency will depend on the fee structure you agree to. For example, the agency may take a percentage fee per hire, or it may work on a retainer or contract basis. The percentage fee structure is a popular model. This means you can pay anything between 15% to 25% of the first year's salary agreed upon for any successfully appointed employee.

This means costs can vary significantly based on the chosen agency and the salary associated with the role. Do your research and make your choices carefully.

Interviewing costs

We’ve already accounted for part of this by looking at the cost of in-house recruitment. Covered in this is HR’s time commitment to scheduling and taking part in candidate interviews, and completing the necessary paperwork.

It’s unlikely however that HR will be solely responsible for the interview stage. Depending on how you prefer to structure your interview, there may be one or two other members of staff involved, or an entire panel present.

To get an accurate picture of cost-per-hire you’ll need to estimate the time required from each interviewer and what that equates to as a proportion of their salary. This will become more costly the more senior the interviewer.

Onboarding costs

The cost of recruitment doesn’t end when a job has been offered and accepted. The new employee then has to go through an introductory period known as onboarding. There are several costs that may be involved here, some applicable in all cases and some role dependent.

Onboarding paperwork for example will always need to be completed - contracts created and signed, employee handbooks administered, personal details uploaded - all these things are additional tasks on the desks of HR.

Then there’s the cost of any equipment the new employee will need, like laptops, screens and mobile phones. Finally, the time of anyone involved in the onboarding process must also be included in the final tally - like staff giving guided tours of the workplace for example.

Training costs

The last activity that’s likely to directly affect the cost of a new hire is their training. Just as with onboarding, there are various costs that may or may not be applicable here.

You may need to invest in specific courses or materials, but the most common cost is again associated with the time given by other employees involved in that training.

Additional recruitment costs

On top of the direct costs, there are a number of additional expenses that come as a by-product of the recruitment process, or as a result of a poor hiring decision. These include:

Lost productivity

The longer a job role remains vacant, the more a business suffers in terms of output, which in turn will impact profitability. Even when a new employee is found, research suggests it can take up to five months for them to reach the same level of productivity as their predecessors.

Hiring the wrong person

When you total up the cost of all the activities involved in recruitment the final figure can be an eye-watering surprise. But if you make the wrong decision and have to start again, you can pretty much double it. That’s why the cost of tools like screening tests is value for money - they help you make the right decision the first time around.

Employee turnover

Whilst not something associated with cost-per-hire, employee turnover will certainly impact your recruitment budget. The higher your turnover rate the more you’ll need to spend on replacing those you lose. To avoid this, consider how to hire to decrease turnover intent.

The average cost for each new employee

Whilst organizations like the CIPD give a very basic average cost-per-hire of £1,500, recruitment is a complex process that is unique to every employer.

To predict the cost of your next hire you’ll need to plan out your strategy and consider all the resources involved from start to finish.

Whatever the final figure though, a successful hire can bring considerable value to your business and its cost should be seen as a sound investment.