Reducing Recruitment Costs

The number one topic on most HR executives’ agendas is how to attract quality talent whilst reducing recruitment costs. But what is the cost associated with recruiting? How can an organization reduce its recruiting costs?

Reducing Recruitment Costs Reducing recruiting costs is not easy. Typically most companies will negotiate with an agency to get their fees down, reducing the recruiting cost. Some companies will negotiate hard on fee percentages to try and reduce their recruiting expenses. However, this approach may work in theory, but certainly not in reality – the lower the agency fee does not equal the lower the overall recruiting costs. Most agencies will quite simply place their best candidates where they get the highest fee, so that at a reduced fee level you will be provided with the ‘best of the rest’ from their database. It is also worth remembering that you are giving an agency the role and your ‘employer brand’ to sell to and position to candidates on your behalf. Whether you like it or not, they will own the sales process for hiring your candidates. Agencies can strongly influence which company they choose to position most positively to candidates.

Reduce Recruitment Costs By negotiating agency fees down and encouraging lower calibre candidates to be submitted to you, the result will be higher first year employee attrition – adding to rather than reducing your recruitment costs. If a candidate leaves your company within the first six months of his/her employment the likelihood is that you will not be entitled to a rebate from the agency, but will have to re-engage the same or a different agency resulting in another fee – so potentially two fees in one year on one head.

Reducing your employment expenses can be achieved by streamlining your recruitment process, ensuring that there is a defined and structured interview process for each role/business area. Making sure that all your hiring managers have interview training and follow the process, so improving the ‘candidate experience’ and enhancing your chances of attracting better quality hires. Remember that your recruiting process should be designed to ensure that you hire the best candidates - the better the experience the better the chances of the chosen candidate accepting an offer and thus reducing recruitment costs.

Other factors to be taken into account and implemented to limit recruiting costs include the continued promotion of an employee referral programme with the appropriate internal referral fee. The value of the referral fee is a key consideration - too high and you will be inundated with high volumes of inappropriate CV’s from employees hoping that one of their referrals will get an offer. Too low and you will not get any CV’s and no contribution to lowering the cost of recruiting.

The strength of a company’s employer brand should always be considered in respect of its ability to attract direct applicants through the corporate website –and it is a great way of reducing recruitment costs. Having a Facebook, LinkedIn and Twitter careers page can help to further develop and promote the employer brand, as can company-branded advertising on the job boards. Increasing direct applicants is a valuable way of lowering expenses but will very rarely contribute more than 10% of any new hires and needs to be considered in conjunction with other initiatives.

The most effective way to minimize recruitment rates quickly and significantly is to adopt a direct recruiting model, or direct candidate sourcing model, reducing and removing the reliance on agencies to source candidates, and the associated high costs. Quite simply put a direct candidate sourcing model, or direct recruitment model, is the most cost-effective way to recruit. Not just reducing recruitment costs per hire but also ensuring ongoing recruitment cost savings through the associated reduction in first year attrition and the need to repeat hire.

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