Step 1: Budget for Your Roles + Basic Recruitment Costs
Now that you’ve taken the time to meet with your hiring managers, you know what they need and the budget you’ll need to pay their new hires (as well as some information to help you with budgeting for hires to replace turnover). While this budget doesn’t come out of your recruitment budget, it is useful in determining how much you should spend on tools, branding and salaries to FILL these positions.
Much in the same way a CMO needs to know sales projections to build his or her budget, a talent acquisition professional needs to understand what’s been allocated to each role or department to decide what they’ll spend on getting people in the door for those positions!
Calculate basic recruitment costs. These may include:
- Job boards or aggregators. Which job boards do you use? Gather results from niche, regional, industry-specific job boards and try to determine which boards worked well for which locations and positions. Based on the hires from the boards and aggregators you’ve used in the past, you can project what your expenses will be in the coming year.
- Staff and Resources. Internal recruiters’ salaries are a cost, as are dedicated sourcing or research teams and any recruitment agencies or RPOs you might use. You’ll need to account for 2 internal recruiters per 100 hires and if you use agencies for any higher-level positions, the standard fee is around 20% of first year pay, expect to double that percentage for an executive hire. (Note: We’re currently experiencing record low unemployment, which means that you may well have to look at agencies even if you’ve never used one in the past.)
- Recruitment advertising. Everything from events to career sites and social media ads falls into this category, whether specific, like employer branding initiatives or more general employer branding. As with job boards, take note of which tactics worked well in years past. For example, a costly employee review campaign may have netted a higher flow of applicants, while a cheaper jobs RSS feed got little to no results. If you use a branding agency to create swag, videos, microsites or printed materials, factor in these costs as well.
- Recruiting Tools (e.g. sourcing, screening, ATS, CRM). Chances are the technology or services your organization relies on to find, connect with and manage candidates come with associated costs. Typically technology has a yearly or monthly baseline charge that will be unchanged. However, additional costs can accrue from increased usage or services. Be sure to understand the terms and conditions of your tools and set aside a portion of your funds should overage fees be incurred. And take time to audit and evaluate your changing needs in regards to how tools are or aren’t fitting your needs.
- Employee referral program. Many organizations offer their employees rewards for referring qualified candidates to their team. Even if the reward isn’t monetary, there are probably a few costs associated. Try to calculate those costs based on the number of referrals that were hired in previous years.
Step 2: Do the Math
Next, it’s time to do some math to create a more clear estimate and hypothesis about what these new positions and departments will consist of. This is where you dive deep into the full burden of acquiring a new employee. Here’s a quick run down:
- Multiply the number of days the employee could potentially be absent by eight hours per day. Then subtract this result from the number of hours she is available for work per year to calculate the number of actual hours she works per year.
- Determine from your records the amount of annual costs you pay in addition to your employee’s hourly wage that are directly related to his job. Include any payroll taxes, insurance, benefits, meals, supplies and training costs. Add each cost to determine the labor burden cost of the employee.
- Multiply the employee’s hourly wage by the number of hours she is available for work per year to determine her annual payroll labor cost. Add the annual payroll labor cost to the labor burden cost.
- Divide your result by the number of actual hours of work per year to calculate the fully-burdened labor cost for the employee.
- This number will then need to be multiplied by the number of employees you are estimating to hire, whether that means 100 or 1,000.
Lastly, make sure to keep all this information together. Although this formula should give you an hourly average of the total burden, keep all these numbers because they will be essential when looking toward any cost needed from your company - expected or unexpected.
About Jeanette Maister:
Global talent acquisition technology leader with extensive experience in global talent acquisition, applicant tracking systems & recruiting technology, recruiting metrics and process. Deep insight into all aspects of campus recruiting strategy. Recognized for driving growth and helping clients transform their recruiting efforts.
