Breaking down the expense categories in Recruitment

Breaking down the expense categories 

 

There are seven main expense categories in our spreadsheet. Each is explained below:

 

 

1. Job boards & advertising: This category includes any expense associated with posting your open position as you source candidates. Every job board should be included as well as any of your company's paid recruiting accounts (e.g. LinkedIn premium). Add the number of postings per job board and the cost of each posting. Cost per posting may be fixed or variable, depending on whether you use a pay-per-click model.

 

2. Assessment: This category includes any kind of candidate assessments your company pays for (tests, competitions etc.). Companies can buy tests from consultancies or other firms to use during the hiring process. The cost of these kinds of assessments are usually calculated per candidate. Below you can see an example of how much a GAT test would cost along with the annual total and monthly average in the last columns:

 

3. External recruiting: This category of your budget template reflects any external recruiting costs. It'll usually include recruitment agencies and headhunters. Sourcing software may also fall under this expense category.

 

4. Employer branding events" Employer branding costs should be separate from marketing efforts. Only include costs directly associated with recruiting. Career fairs, recruitment events and conferences are the most common examples. An important addition is "branding materials," which include any the costs of items you hand out or use during recruiting events.

 

5. Careers page: An attractive and easy-to-use career page is important. Associated costs include development, maintenance or redesign expenses. These recruiting costs can be allocated to an external service or the salary of an in-house employee.

 

6. Partnerships: Partnering with universities or other institutions is a good way to source qualified candidates but it isn't cheap. Include all kinds of paid affiliations and partnerships directly linked to your recruitment efforts.

 

1.   Salary costs of your hiring team: This is often a high cost and it's challenging to calculate. In this context, your hiring team is in-house; external recruiters are included in category 3 (see above). You can calculate salary costs by multiplying the hours spent on recruiting (for one position or multiple positions) by the hourly salary of employees. Imagine how high these costs can get when a VP or manager has to consistently dedicate time to hiring. The example below shows the costs of a recruiter and a VP spending time hiring for one position during a month:

 

It's very important to keep track of this expense and take steps to minimize it. Since high level employees are most commonly involved in interviewing, make sure it's worth their time.

 

What are other expenses associated with recruiting?

Other recruiting expense categories can add up. If companies use referral programs, they may have to consider incentive costs like bonuses. Companies may also choose to bring in candidates from different areas, paying for their travel and accommodation expenses. Background check services usually charge an amount per candidate. Applicant Tracking Systems are a monthly or annual cost, though they can help reduce overall costs by saving hiring managers' time and making the hiring process faster.

 

How do I make sense of the numbers?

There's value in knowing that, for example, your company spent $3,000 on external recruiters in January. But what this expense means and how it impacts your company and recruiting pipeline isn't always immediately obvious.

 

First, consider that recruiting is often a "bumpy cost", one that doesn't remain stable throughout the year. One month, your hiring team may be stressed out, trying to fill multiple open positions and going to lots of career fairs. Another month, recruiting may slow down. Calculate your average monthly expenses by adding the costs of all months and dividing by 12. (You can also calculate quarterly costs by dividing by 4). In the example below, you can see how the number of Indeed postings went up during the third month and how this increase affected total and average spend:

 

Second, it's very important to compare your actual recruiting expenses with budgeted amounts. Did external recruiter expenses fall short of, meet or exceed your allocated budget? Maybe the budget wasn't realistic. Or maybe it'd be worth spending extra money on your hiring efforts.

 

Lastly, consider recruiting metrics and data in your analysis. For example, you may have spent 40% of your budget on certain job boards but only got about 15% of your qualified candidates from them. Figure out what this yield means for your company. Maybe an external recruiting budget cut had a negative impact on your time-to-fill or time-to-hire metrics. Valuable knowledge can be drawn from the right metrics, so try to make your analysis as thorough as possible.

 

Use our free tool to calculate your current cost per hire and plan your future recruiting spend.

 

What other types of plans should I use?

Many useful recruiting budget plans can support a more complete outlook of the hiring process. For example, a spreadsheet listing number of hires or money spent per department can help you determine whether you achieved your goals. It'd also be useful to create a spreadsheet with salaries of future hires, including the start date of each position and the budget allocated for their salary from that date on. It's helpful to compare budgeted salaries with actual salaries (resulting from negotiation).