Employees are the heart of any organization’s continued growth and progress, but the challenge of high recruitment costs looms large.
Like technology and machinery, your human resources are crucial investments and should be perceived as such. If your hiring costs are too expensive, it will increase your overhead. However, failure to invest in top talents can lead to lackluster hires.
This expense is often tracked as a key performance indicator (KPI) for HR managers, adding pressure to find talent without breaking the bank. This article showcases effective strategies for how to reduce recruitment costs without compromising quality.
Recruitment Cost Factors
It takes a comprehensive understanding of your recruitment costs to determine how to reduce cost-per-hire. According to The Society for Human Resources Management (SHRM), several potential sources for recruitment overspending exist, as shown in this formula for cost-per-hire:
CPH=Internal factors+External factorsTotal number of hires in a time period
Let’s break down each element in the numerator, which indicates the costs and investments associated with the company’s operations, processes, and resources utilized during the hiring process.
The internal factors encompass expenses incurred within the organization’s control.
1. Staff and sourcing costs
Under staff and sourcing are recruitment staff expenses, such as salaries, benefits, and bonuses.
2. Compliance costs
Expenses linked to ensuring adherence to legal and regulatory requirements in recruitment processes, including background checks and registration for government-mandated benefits, are under this.
3. Administrative costs
These costs refer to the overhead expenses incurred in the hiring process, covering office supplies, communication tool charges, and other administrative necessities.
4. Onboarding, learning, and development costs
These costs include your investments in orientation programs, upskilling strategies, and mentorship initiatives for new hires.
The external factors encapsulate the expenses an organization pays out to outside parties.
1. Advertising and marketing expenses
These expenses involve posting and promoting job openings through various mediums, such as online job boards, social media campaigns, and traditional advertisements.
2. Technology and recruitment channel costs
These costs encompass expenditures related to utilizing recruitment software such as applicant tracking systems, hiring platforms, and agencies.
3. Economic and labor market conditions
These conditions signify the prevailing economic climate and labor market trends influencing recruitment, including unemployment rates, job market competitiveness, and inflation.
4. Industry-specific factors
These factors include the influences tied to a specific sector or field, such as unique skill requirements, niche job boards, or certifications relevant to that industry’s hiring processes. For example, IT roles are hard to fill because of a lopsided supply and demand curve for tech workers.
8 Approaches to Reduce Recruitment Costs
The best way to reduce your recruitment costs is by decreasing the impact of the factors that you can control. The following strategic approaches can help you meet your KPI.
1. Leverage technology and automation
Adopting technology-driven solutions and automation tools expedites the hiring process significantly, reducing manual efforts and costs associated with administrative tasks. Applicant tracking systems, AI-powered screening tools, and automated interview scheduling curb expenses and streamline operations.
2. Develop an employee referral program
Cultivate an effective referral program to tap into existing employee networks. This method significantly reduces sourcing and advertising expenses while often yielding higher-quality candidates who already know what to expect from the company and what the company expects from them.
3. Streamline your hiring processes
Identify and eliminate bottlenecks and redundancies in your hiring pipeline. Examine your workflows and standardize procedures to optimize resource allocation and save time. You can also track how well your job posting channels work and cut out those that underperform or overprice their services.
4. Strengthen your internal hiring and promotion processes
Building robust internal talent pipelines reduces reliance on external hires. Moreover, promoting junior talents to senior positions can be more affordable than sourcing candidates outside the company. Once a veteran employee has filled a senior role, you can fill the junior position by hiring externally.
5. Emphasize the quality of hire
Quality hires fit well culturally in your company and possess the skills you need. Prioritizing them as a hiring strategy over getting more people mitigates turnover rates and the subsequent recruitment costs incurred for filling the position once again.
6. Outsource non-core positions
If possible, outsource non-essential or repetitive tasks to specialized agencies or contractors. This strategy allows internal resources to concentrate on core business functions while lowering recruitment and training expenses.
7. Consider offshoring to a more affordable country
One of the best ways to reduce recruitment costs is by outsourcing or offshoring your business functions to countries with lower labor costs.
But it’s not all about costs, either—for example, the Philippines is a popular offshoring country due to its cultural compatibility with many countries and a population with above-average English-speaking skills. Offshoring can significantly decrease expenses without compromising talent quality, offering a strategic advantage in cost management.
8. Work with a recruiter
Collaborate with recruitment agencies or headhunters, especially for specialized roles or high-volume hiring. Their expertise, networks, and streamlined processes can expedite hiring, potentially reducing time-to-fill and associated costs.
A Cost-Conscious Approach to Hiring
The path to cost-efficient recruitment hinges on your strategy. A cost-conscious approach will help you slash expenses without compromising caliber. Embracing the methods listed above can reduce your recruitment costs and cultivate a more agile and competitive workforce.
For further assistance in optimizing recruitment processes and exploring outsourcing solutions, consider partnering with Manila Recruitment. We are a premier recruitment agency in the Philippines. Our expertise and tailored services can amplify your cost-saving efforts.
Contact us today to learn more!