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Techniques to Measure the True Costs of Recruitment and Important Metrics

Tags: Analytics and Reporting

From advertising to finding a perfect candidates for vacancies, the costs of recruitment are variable. According to the cost per hire standards provided by the Society of Human Resource Management and American National Standards Institute, the recruitment cost can be evaluated simply by adding external costs and internal costs and dividing the sum by total number of new hires.


External Costs:

It refers to expenses including traveling costs, job fair fee, online posting fees, advertising fee and other related fees.

Internal Costs:

It refers to expenses like salaries, equipment cost, cost of the bills, medical, insurance, old age benefit cost, and other related costs.

5 Steps to Calculate the True Cost of Recruitment

The cost of recruitment can be calculated with this 5 step process.

  • The Basic Cost of Recruiting

Finding out the right type of people for vacancies is hectic. You need to make the selection process fool-proof. Advertising vacancies on all forums to attract nationwide talent is a great way to choose the perfect employee from thousands of applicants. The basic cost of recruitment includes advertising cost and the cost of entertaining the candidates (including snacks etc.).

  • The Cost of Training

Probation, training and many other terms are used by different organisations to evaluate the cost of recruitment after selection. You may need to search for candidates just after one month of recruiting a not-so-efficient employee.

  • The Cost of Salaries and Benefits

Free coffee, membership, benefits for minors, dental plans, disability or death coverage and many other such benefits may be more expensive than the basic cost of the salary. Joe Hadzima, the lecturer in Sloan School of Management in MIT believes that the average total of benefits is 1.25 to 1.4 times of the basic salaries.

  • The Cost of Integrating at Workplace

The cost of integrating at workplace refers to the cost of physical space required for new hires, the cost of travelling (including visa expenses if you are recruiting from abroad), the cost of technology including software and mobile phone credit, and the cost of other resources.

  • The Cost of Break-Even Point

In the scenario of recruitment, break-even point is the point when the employees start giving their maximum. New hires take time to become accustomed to new environment and understand the technicalities of your organisation. The employers need to wait and keep investing til the new hires reach their break-even point.

Recruiting Efficiency Ratio

RCR or Recruiting Efficiency Ratio is used to determine the worth of the new hires or to determine the efficiency of your investment on a new hire. It’s determined by dividing recruiting costs with total compensation recruited and multiplying the result with 100.


6 Metrics to Care About

The following are the 6 metrics to take care of during recruitment process.

  • Time to Hire (including the operations loss you may suffer)
  • Sourcing Channel (Multiple costs for multiple sources)
  • Retention Cost (The loss of resignations, rehiring and retraining)
  • Ratio of open vacancies with new hires
  • The Ratio of Offer and Final Resolution (The difference between what you offer and what candidates demand
  • Gender Mix

Careful assessment of recruitment process in the light of these tips and techniques can help you save a lot and choose the most efficient employee for your organisation.

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