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The recruitment process consumes a significant portion of your overall operational costs. If you're running out of money recruiting new employees, it's high time to take action and improve results. You can drastically reduce your recruiting costs with innovative approaches and tools. Let’s dive in!

What Is Recruitment Cost?

Recruitment cost refers to the expenses incurred by an organization during the process of hiring new employees. It includes various direct and indirect costs associated with attracting, evaluating, and selecting candidates for job positions. Recruitment costs can vary depending on the size of the organization, the industry, the level of the position being filled, and the specific recruitment strategies employed. There are many common components that contribute to recruitment costs:

  • Advertising: Expenses related to advertising job openings through various channels such as online job boards, print media, social media platforms, and recruitment agencies.
  • Applicant tracking systems: Costs associated with using software or systems to manage and track job applications, including applicant screening, interview scheduling, and candidate communication.
  • Recruitment agencies or headhunters: Fees paid to external agencies or recruiters who assist in sourcing and screening candidates.
  • Background checks and pre-employment testing: Costs incurred for conducting background checks, drug tests, skill assessments, and other pre-employment screening measures.
  • Travel and relocation: Expenses related to travel arrangements, accommodation, and relocation assistance for candidates who need to relocate for the job.
  • Internal HR resources: The time and effort invested by the organization's HR team in sourcing, screening, and interviewing candidates, as well as coordinating the overall recruitment process.
  • Employee referrals: Referral bonuses or incentives provided to existing employees who refer successful candidates for open positions.
  • Onboarding and training: Costs associated with orienting and training new hires, including employee orientation programs, training materials, and the time spent by trainers and mentors.

Calculating the exact recruitment cost can be complex, as it involves both direct monetary expenses and indirect costs like the time and effort of internal staff. However, tracking and analyzing recruitment costs is crucial for organizations to evaluate the effectiveness of their recruitment strategies and optimize their hiring processes.

Why Are the Recruitment Costs So High?

Recruitment costs can be high due to various factors. These include advertising and marketing expenses to attract candidates, a competitive job market requiring higher compensation, lengthy hiring processes, inefficient candidate sourcing and screening, expenses related to relocation and onboarding, fees for external recruitment agencies, employee turnover leading to additional hiring and training costs, and investments in recruitment technology and software. How to reduce recruitment cost? Organizations can mitigate these costs by optimizing their recruitment strategies and processes.


Importance of Tracking Recruitment Costs

By tracking recruitment costs, organizations can accurately allocate budgets for hiring activities. It helps in forecasting and planning for future recruitment needs and ensuring that sufficient funds are available to support the hiring process.

Also, monitoring recruitment costs allows organizations to identify areas of excessive spending or inefficiencies in the hiring process. It helps in identifying cost-saving opportunities, streamlining processes, and implementing more effective recruitment strategies.

Tracking recruitment costs enables organizations to assess the return on investment (ROI) of their recruitment efforts. By comparing the costs incurred with the quality of hires and their impact on the organization's performance, businesses can evaluate the effectiveness of different recruitment channels, sources, or strategies. Organizations can also benchmark their recruitment costs against industry standards or competitors to gain insights into their cost competitiveness. It helps in understanding whether the organization is overspending or underperforming in terms of recruitment costs.

Moreover, accurate tracking of recruitment costs provides data-driven insights for decision-making. It helps organizations make informed choices regarding recruitment strategies, budget allocation, and the utilization of internal and external resources. By analyzing recruitment costs over time, organizations can identify trends, patterns, and areas for improvement. They can make data-backed adjustments to their recruitment processes, invest in more cost-effective channels or technologies, and implement best practices to enhance efficiency and reduce costs. When you can track costs correctly, you’ll also be able to find out how to reduce hiring cost.

How To Calculate Your Cost per Hire?

Cost per hire is a metric that shows a company's costs to hire one employee. Tracking this KPI helps HR managers create budgets and stick to them. Considering the average cost of hiring, you can allocate the budget efficiently.

To track the cost of hiring, you need to assess the internal and external costs of hiring staff and the total number of employees hired over a certain period.

  • Internal recruiting costs are the internal costs of filling a specific position: in-house talent acquisition staff salaries, recruiter salaries, talent acquisition program costs (such as an employee referral program), etc.
  • External recruiting costs are any costs to external vendors during the recruitment process: external recruiting agency fees, job postings on job boards, candidate background checks, employer branding events (such as job fairs), employee relocation costs, etc.

To calculate the rate, take the sum of the internal and external recruiting costs and divide it by the total number of employees hired within a specified period (f.e. a month).

For example, if the total recruitment expenses were $50,000 and you made 10 hires, the cost per hire would be $5,000.

Find more formulas of key HR metrics in our recent blog post!

Best Ways To Reduce Recruitment Costs Today - Expert Tips

You have doubts on how to reduce cost per hire? We have gathered cool tips from industry leaders in this field.

Develop In-House Talent Pipeline

As the founder of an SEO marketing agency and, I'd like to share a cost-efficient and practical strategy we've implemented to improve our hiring process: we've developed an in-house "Talent Pipeline" program.

The aim of this program is to identify potential talents early in their career and establish relationships with them. We regularly engage with local universities and colleges, offering internships and even organizing mini project-based competitions related to our field of work. This allows us to observe these talents in action, evaluating their skills, cultural fit, and passion.

As these young talents graduate and start looking for full-time opportunities, we already have a pool of candidates that we know and understand well. This reduces the time and money spent on sourcing, screening, and interviewing candidates from scratch.

Bowen Khong, CEO, GameDayr

Limit Interviews for Better Outcomes

As a recruiter and founder of Vetted, a boutique recruiting firm serving growth-stage tech companies, one of the most common complaints I hear from candidates is the length of the interview process.

As work-from-home policies expand the hiring reach for many roles, companies become prone to decision fatigue, sometimes extending the process for months, hoping to find a perfect applicant. This kind of over-analysis feels like good decision-making but is actually detrimental. Any perceived benefit quickly disappears as timelines bloat and cost-to-hire increases.

Further, studies have shown that taking more time to decide can actually impede results, as burnt-out hiring managers lose sight of the goal. Limiting the hiring process to two or three interviews saves budgets and produces better outcomes overall.

Tim Walsh, Founder, Vetted

Implement Automated Applicant Screening

One effective strategy for improving cost-efficiency in the hiring process is implementing automated applicant screening. By leveraging technology, such as applicant tracking systems and AI-powered algorithms, companies can streamline the initial screening phase, saving time and resources.

These automated systems can efficiently sift through large volumes of applications, identifying qualified candidates based on predefined criteria. This approach reduces manual effort, minimizes the chances of overlooking suitable candidates, and ultimately optimizes the hiring process, leading to cost savings and improved efficiency in finding the right talent for the job.

Viraj Lele, Industrial Engineer, DHL Supply Chain


Overall, tracking recruitment costs provides organizations with transparency, control, and valuable insights to optimize their hiring processes, improve cost-effectiveness, and make informed decisions regarding their talent acquisition strategies.

Reducing recruitment costs is a strategic approach that organizations can adopt to achieve greater efficiency and cost-effectiveness in their hiring processes. By implementing the best tips outlined before, businesses can minimize expenses while still attracting top talent.

To reduce recruitment costs and reach cost efficiency, we offer you to use Axterior - an online recruitment system. This software manages all the recruitment processes and assists in finding the most qualified candidates in a few clicks. Moreover, Axterior online recruitment platform can improve the accuracy of your data by identifying inaccurate or incomplete records and the cleanup process.

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