Strategizing Your Recruitment Budget for 2024: A Guide
The financial plan that an organization prepares before conducting a hiring process is called the hiring budget. The organization does this in collaboration with its HR team so that all expenses associated with executing the recruitment campaign are handled seamlessly and with minimal or no complications. Some of the basic recruiting budget considerations may include: Examples include a candidate tracking system, purchasing services, job postings, job advertisements, video interviews, and more.
In most companies, the responsibility for creating a recruiting budget lies with the human resources department. The company allocates a certain amount of money to the HR manager, whose job it is to carry out the process and, in the meantime, inform about every penny used in the recruitment campaign. So, the HR team plays a crucial role in the hiring process.
Breakdown of the spending category of the hiring budget
Typically, the budget includes expenses for overall hiring activities and the resources used in between. So, the hiring budget is divided into two types: fixed costs and variable costs. Let's understand exactly which hiring phases and activities are associated with which category.
1.Fixed costs
Fixed costs are the expenses related to the hiring process that are incurred annually and are usually handled properly, e.g. Full-time employee salaries, partnerships, hiring technology, and staffing or staffing company costs. Now let's look at the components of recruiting that require fixed expenses.
Subscription fees for job boards (e.g. LinkedIn Premium)
Companies use job boards to carry out effective personnel marketing, e.g. to post open positions, find potential candidates to expand their talent pool, and post content of a positive work environment to attract candidates.
So, hiring managers need to go back to last year's hiring data and narrow down the best channel that provides top-notch talent for different positions. Spend the subscription fees only on these channels and budget accordingly. For example, Indeed may have effectively recruited candidates for sales, while Stack Overflow was suitable for technical roles.
Recruitment team salaries
Hiring managers also need to calculate the hiring team's internal salaries when planning a hiring budget. If you include the HR team, the rule is that to manage 50 employees, you should hire 1 HR person. Also consider the costs if the company wants to add new team members to the hiring team and plan internal salaries accordingly.
Partnership fees or commissions with career centers
Partnering with a university or institution is a good way to find suitable applicants. Hiring managers need to budget for all the annual partnerships they want to enter into. This includes partnerships with event agencies, all types of paid memberships, promoters, external recruitment agencies and university career centers.
Recruitment technology spending
When it comes to recruiting, technology can help hiring managers quickly hire suitable candidates. With the right recruiting software, the recruiting team can collaborate and save valuable time and effort.
Online recruiting tools like Applicant Tracking Systems, Candidate Relationship Management Software, and Talent Acquisition Software are lifesavers for recruiters. This software automates the entire hiring process. When planning your budget, you need to consider the subscription fees for these online tools.
If you think about other tools for different hiring stages, such as: For some tools, such as interview management tools, resume management software, coding assessment tools, and background check software, you will need to factor in the subscription fees for these tools.
External Recruiter Fees
External recruiters bill the company for identifying applicants, screening them and placing the most suitable talent based on the requirements of the company's open positions. Typically, fees for external recruiters range from 15 to 20% of an employee's first-year salary, while the cost of a permanent position is up to 40% of an employee's base salary.
Suppose a candidate is placed with a company and earns $50,000, and the recruiting agency charges 18% at the time of placement; then the company would pay $9,000 to the agency for the placement.
This team collaboration could involve contracted recruiters on an annual basis. Therefore, it is necessary to take into account the expenses in the budget plan for recruiting.
2.Variable costs
Variable hiring costs are related to hiring a specific employee for a specific position, such as: job advertisements, employee referral rewards, participation in networking events, background checks, etc.
Vacancy
Companies pay to advertise their open positions on various online platforms and publications to attract a wide range of potential applicants. In order to market open positions on job boards, the Company must pay annual subscription fees to use the Service.
This is an additional cost, but it can be beneficial as these services allow you to reach the maximum number of applicants. When calculating the costs, you multiply the number of job postings per job board by the price for each individual posting.
Background check
Background checking is an important service that companies use to check the credibility of applicants. Many companies operate in this area and charge a higher amount for verifying all relevant details.
However, with the increasing use of social media platforms and networking websites, hiring by referral is an effective way to save on background check expenses. Calculate the effort accordingly.
Applicant assessment activities (skills tests, resume review, interview)
Applicant assessment activities include conducting various pre-selection tests such as: psychometric tests, situational behavior tests and technical skills tests. The company can use the ATS or online assessment tools available in the market to screen the applicants faster.
A solid investment in assessment tools allows HR managers to evaluate applicants effectively and in a timely manner. Companies can also purchase tests from consulting firms or other firms to use during the hiring process.
Employer branding campaigns
Everything from employer branding and video campaigns to career page optimization needs to be considered to get a better understanding of hiring costs. This includes the resources a company needs to establish a positive employer brand by creating compelling content posted on social media platforms and attending events, as well as the branding materials you provide to applicants at these Provide recruitment events.
Recruitment events
Plan the budget in advance by making a list of all upcoming recruiting events, job fairs, and career conferences that the company plans to attend in the near future and include them in the recruiting budget sheet. Calculate the fees, tickets and accommodation costs for these events.
Be guided by the expenses for events from the past year.
Track the number of qualified applicants you meet at each recruiting event so you can plan to attend the most efficient events in the future.
Bonuses for employee referrals
The main purpose of the employee referral program is to incentivize current employees who recruit new talent. This includes trips, vouchers, gifts, time off and other rewards. It's a cost-effective way to reach potential applicants. Typically, the average employee referral bonus is between $1,000 and $5,000. However, other bonuses that the company offers are different, so the HR manager can use the previous year's data as a guide and budget accordingly.
Induction and training
When allocating the budget, HR managers must also consider the costs of onboarding and training. In practice, it is not possible to accurately estimate the average cost of onboarding and training a new employee. They include paperwork and administrative costs, workplace setup, travel and relocation costs, employee training and support.
With rigorous and available training programs, the company is able to refresh the skills of the candidates. Therefore, a zealous effort on training programs needs to be considered. Some of the training tools the company should invest in are seminars, reading materials, workshops, online courses, etc.
Costs of training and development programs
With rigorous and available training programs, the company can refresh the skills of its candidates. Therefore, spending on training programs needs to be considered. Some of the training tools the company should invest in are seminars, reading materials, workshops, online courses, etc.
How do you plan a hiring budget?
Hiring new employees can be time-consuming and costly. However, with a well-planned budget, you can streamline your hiring efforts and achieve better results. Learn the following steps you need to take to plan a successful hiring budget.
1.Determine the company's hiring needs
The first step in planning a hiring budget is determining your hiring goals. Determine the number of positions to be filled, their size and salary, and the skills and experience required for each role. Determine the number of positions and how they will be hired (high volume, seasonal, headhunting, campus recruiting).
Hiring managers can ask the following questions to define hiring goals. For example: What positions do you need to fill? How many employees do you want to hire? What qualifications and skills are required for each position? Answering these questions will help you determine the resources you need to find the right candidates.
2.Analyze last year's costs
Analyze last year's highest and lowest costs and create your cost projections for the current year. Break down costs to get a clear picture of quarterly and monthly recurring expenses, inefficient benchmark tactics, and unexpected costs.
3.Determine the cost of recruiting
Recruitment costs can vary significantly depending on the type of position you are filling and the methods you use to find candidates. For example, a job ad on a job board can cost between $50 and $500, depending on the platform and length of the ad.
Hiring a recruiter or search firm, on the other hand, can cost thousands of dollars. To accurately determine hiring costs, it is important to consider all expenses associated with the hiring process, including advertising, recruiting agencies, employee referral bonuses, and applicant travel expenses.
4.Estimate the number of new hires annually
Start with the basics by estimating the number of hires regardless of the organization. One of the most important considerations before calculating the hiring number is to get all managers on board so that their understanding and requirements can be adequately taken into account.
When recruiting, the company needs to be clear about whether it wants to hire interns, senior executives or managers for a particular position. The reason for this estimate is to estimate costs in both annual and quarterly terms. On the other hand, if the question arises about working with external agencies, a rough outline of the skills required for the position in question can be very helpful.
5.Budget extra money for unplanned expenses
Human resources managers can actually base their plans on the previous year's budgets. However, you need to allow for additional margin for unplanned expenses in the hiring process. This amount can be used to address problems such as technical failures or staff departures.
The additional resources give you the freedom to make decisions to improve the hiring process and take advantage of spontaneous opportunities.
6.Consider recruiting KPIs
Once you have determined all the parameters above, the last thing you need to do is create a recruiting budget template that shows costs relative to recruiting KPIs. So the budget needs to include planned price versus actual price, planned KPIs versus actual KPIs, and efficiency metrics like cost per hire. This way you can make progress throughout the year.
7.Use a recruiting budget template
You can use a budget template for multiple consecutive periods. This allows you to keep track and compare hiring metrics from one time period to another in one place. This allows them to draw a data-driven and more precise conclusion.
Additionally, making your budget more manageable makes it easier to present your results to HR managers or financial advisors.
How to manage and save on hiring costs?
Planning and managing the hiring budget is indeed time-consuming. You shouldn't take it lightly and plan your budget carefully. Below are tips for managing your hiring budget.
- Use cost-effective recruiting methods: Use employee referrals, online job boards and social media to reach a larger audience at minimal cost.
- Simplify the hiring process: To streamline the process, consider automating recruiting as much as possible to reduce manual work and make the process more efficient.
- Plan ahead: Long-term planning and budgeting for recruiting will help you use resources efficiently and avoid unexpected costs.
- Negotiate with Recruiters: If you hire a recruitment agency, negotiate fees and be transparent about your budget to get the best deal possible.
- Offer Competitive Compensation Packages: Attract the right talent by offering competitive salaries and benefits that are in line with industry standards. This way you can reduce the time and money spent searching for the right applicant.
- Hire from within: Encourage internal mobility and promote employees from within the ranks to reduce hiring costs and improve morale.
- Regularly evaluate the hiring process: Periodically review and evaluate the hiring process to identify areas for improvement and cost savings.
Efficiently managing your recruitment budget is essential for successful hiring. With tools like IceHrm, streamline your process and save costs.