How to calculate your recruitment budget in 5 steps.
Recruitment cost refers to the total expenses associated with the process of attracting, sourcing, selecting, hiring, and onboarding new employees.
Knowing the recruitment cost is crucial for planning the finances effectively and allocate resources accordingly, identify areas where the process can be optimized and make it more cost-effective and measure the effectiveness of hiring strategies and make data-driven decisions for continuous improvement.
Here are five steps to set up your recruitment budget.
Gain insights into your hiring requirements
by engaging with hiring managers. Schedule meetings to discuss their experiences with past hiring budgets, anticipated staffing needs, upcoming organizational objectives, and identified skill gaps across teams.
Factor in provisions for unforeseen vacancies in your budgeting.
Analyze the turnover rate from the prior year, whether at the departmental or company-wide level, to gauge potential contingencies for expected turnover. If historical data is limited, consider utilizing industry-average turnover rates as a benchmark for your budget estimation.
Assume you currently employ 60 people and aim to hire an additional 16. If there is no turnover, you will have a workforce of 76 by the year’s end. However, projecting a 10% turnover rate suggests that 8 employees might leave. To maintain a total of 76 employees, you’d need to fill 24 positions throughout the year.
Estimate your essential costs
Joab boards: Evaluate past expenditures on job boards for insights and check current prices on job bardz of your interest.
Subscriptions: Break down the costs associated with subscribed platforms like Indeed, LinkedIn or Xing..
Salaries: Account for expenses related to in-house recruiters by incorporating their total salaries into your budget. As a general guideline, consider allocating one in-house recruiter for every 20- 50 hires anticipated in a year – depending on the seniority. For more challenging or executive positions, external recruiters might be a preferable option as their remuneration often is success fee-based.
Important: every person involved in the recruitment process like team members or Hiring managers, should also be counted in the recruitment cost. Their time is a cost.
Estimate your recruitment tools’ costs
ATS: Check the cost of your ATS and what the price is based on:
The number of active users. The number of available job slots. Company size Specific requirements and functionalities available on different subscription plans
Sourcing tools: applications, software, and extensions have also their prices. If you use paid versions, don’t forget to calculate them into your budget.
Onboarding costs
The cost for onboarding can vary based on several factors, including the size of the organization, the complexity of the onboarding process, and the resources involved. Here are some common elements that contribute to the cost of onboarding:
Training and materials, technology and software, mentorship or Buddy Programs, paperwork and documentation, equipment.
The average ramp-up time for a new employee is 3 months. All before that is a cost.
Estimate additional costs
like background checks, skills, and personality tests, and video interviewing tools.
In summary, planning a recruitment budget for the next year is a strategic and proactive approach that contributes to financial stability, effective talent acquisition.
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