Every company, even the smallest ones, needs to recruit staff. An unavoidable part of any business, hiring the right people for each role is crucial to the success of your brand and the smooth running of the day-to-day proceedings.
It’s one thing to hire suitable people for positions, but carrying out lengthy, extensive processes to find the right talent also comes at a cost.
Depending on your recruitment budget, it is easy to overspend in areas that don’t need the extra expenditure. This article will demonstrate how you can create a recruitment budget that works and stick to it as a guide for your future hiring processes.
Let’s get started.
1. Estimate the salary budget for new recruits
To lay the groundwork for your recruitment budget strategy, you firstly need to identify your business’s salary budget for taking on new staff. This budget will be the basis of every decision you make after that. Managing your finances as a business isn’t easy, so putting the proper steps in place early on will help in the long term.
After all, employees are the main expense of any organization. Labor costs can account for as high as 70% of total business costs, so it makes sense to get things right. For example, if your business plans to hire around 100 people a year, Workable estimates that each employee costs around $4,000 to hire – that’s $400,000 of recruiting in a year!
Take some time to identify the answers to several key questions, namely;
- How many recruits do you plan to hire this year?
- What roles need filling, and will some require a more detailed and expensive hiring process than others?
- Are you planning any seasonal hires?
- What is your general staff turnover rate?
Once you can answer these questions, you can plan your year ahead of recruitment effectively.
Calculating personnel costs is not recommended for every business, as it can impact your cost-per-hire calculations. Nevertheless, to do so, you need to itemize each job role and fill it with essential details such as hiring dates and salary impact per headcount by quarter.
This calculation will help determine your rough personnel budget. However, to track forecast cost effectively, you also need to add 30% to take into account the weighting that other factors provide, including taxes and benefits, as well as any other part-time staff you might need to employ later in the year.
2. Determine the expected number of new hires
You won’t be able to make any meaningful or accurate recruitment budget calculations if you don’t know the expected number of staff you will hire this year.
The best way to begin this process is by getting together all the managers of the various departments your business operates, for example, your engineering manager, sales manager, marketing manager, and IT manager.
Then, create an Excel or Numbers table labeling each department, give each department boxes to fill for each quarter of the year, and then a total box at the end of each row. After consulting with each manager, you should estimate how many staff each department needs to hire for each quarter. The final total will give you a ballpark estimate as to how many staff in total you expect to hire that year.
You should also consider the skills required for each role within each department and determine whether each role is a senior, entry or temporary level.
This process is also something you should consider regarding the costs of non-employees, such as if you decide to hire freelance writers. Along with these factors, you should also be aware of your business’s turnover rate, as people leaving each year impacts your recurrent budget plan.
3. Consider the system and program fees involved.
Beyond the initial, apparent costs attached to any recruitment process, a sensible recruitment budget should always consider other less obvious factors, such as program and systems fees.
For example, consider that your company needs to manage its social media accounts and update the careers section of your website (or create a separate careers website entirely).
It would help if you considered adding multimedia to your website to reflect your culture and make you an appealing prospect to jobseekers, invest in your employer brand and even think about installing recruiter analytical tools (to sift and screen potential applicants).
Check out Squarespace’s careers section on their website below as an example. See how the imagery and webpage design make working for Squarespace attractive to jobseekers—achieving this level of attractiveness as a company costs money.
If you want to attract the cream of the crop in talent, you need to invest in sophisticated infrastructure that will help you achieve just that. Cutting corners on the systems and programs needed to find the right people for your vacancies will not pay off, so give it your full attention and financial backing.
4. Include the costs of recruitment events
Advertising your careers and job openings to potential candidates via your website and social media pages isn’t the only way of attracting top talent. You also need to consider face-to-face networking events, such as careers fairs and conferences.
Hosting events like this can be expensive, so make sure to factor the cost of this into your recruitment budget.
On average, in-person careers fairs can cost as much as $40,000 for a large business, taking into account factors such as parking, catering, marketing, and personnel. Of course, you could opt to arrange a virtual career fair as a cheaper alternative, but this will still require specialist IT infrastructure to ensure a smoothly-run event, free of any technical glitches.
Take into account all possible events that your business will be hosting throughout the year, and factor the estimated cost of each one into your recruitment budget.
5. Implement an employee referral bonus plan
Finally, be sure not to forget to implement an employee referral bonus plan. According to LinkedIn, the average company saves around $7,500 per hired employee through employee referral compared to traditional hiring methods (due to fewer production costs and less productivity required).
For example, if you hire 100 recruits via an employee referral bonus plan, you’ll save on average around $750,000.
Given that employee referrals are the top source for hires (they delivered more than 30% of all hires in 2016), this is a saving your business cannot ignore and must be factored into your recruitment budget.
Don’t forget to factor in costs that you need to pay for those harder-to-fill positions (such as those based on a rotating shift), then multiply that by half the openings you’ll have over the year depending on the rate of employees received via word of mouth.
It may be time-consuming, but working out an adequate recruitment budget is the best way for you to plan effectively for the rising costs of recruitment.
Having a solid knowledge of your expenditure, projected areas where you will need to spend for each quarter, and an appreciation for the general costs involved will prepare you much better for this inevitable side of any business.
Take these tips on board when drawing up your realistic recruitment budget, and you won’t have to endure any nasty surprises along the way.
Good luck with the future of your business recruitment strategy.