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A closer look at employee recruitment costs: A case for retention

Michael Bertrand
by Michael Bertrand on August 5, 2014

recruitment costsNo matter how fluid and effective your recruitment strategy, hiring new employees can be an incredibly costly venture. Companies have openings for various reasons, from growth in their operations to retiring workers. However, enterprises with high levels of employee turnover also need to engage in recruitment and hiring exercises - an endeavor that usually carries heavy costs that could be avoided.

How much does it cost to recruit an employee?

Recruitment expenses are determined by a number of factors, including the company's industry, size and renown as well as the approach and resources it uses. The position being filled also makes a significant difference, particularly if specific skill sets are required or if it's an upper-level role necessitating experience or an especially well-suited candidate. 

"Recruiting isn't just a function of recruiters, it also includes hiring managers and often times, their teams," Jeff Freeland, CEO of Santa Clara, California-based recruiting start-up Jobularity, told "This cost is often hard to measure or is missed. How much does it cost for, say, a network security manager to set aside a four-hour window for him and three members of his team in order to conduct interviews?"

According to the source, Freeland also mentioned that tools for recruitment are increasingly expensive, with LinkedIn Recruiter costing as much as $10,000.

Adding up hiring costs 

Estimates vary for just how much it usually costs to hire employees, but this roundup of figures demonstrates that the reality might come as a surprise:

  • Recruiting, hiring and training a new employee adds up to about $4,000, according to some estimates, Entrepreneur reported.
  • The National Association of Colleges and Employers found in its 2012 Recruiting Benchmarks Survey that the average cost per hire in 2011-2012 was $5,100, with expenses peaking for businesses with 2,501 to 5,000 employees. These entities spent an average of $11,365.35 per hire.
  • put hiring expenses at as much as $18,795.24, an infographic published by the Huffington Post explained. This includes $37.50-$456.50 for posting each opening, more than $587.50 to review applicants, over $100 to pre-screen candidates, about $31.25 to prepare for interviews, $75 to develop an interview method and $187.50 to wrap up the process.
  • Recruiting expert Jorgen Sundberg estimated that new employees cost an average of $57,968, not including training expenses.

In addition to the direct costs associated with advertising a role, selecting candidates, holding interviews and so on, lengthy recruitment processes can burden organizations with indirect consequences, such as lower employee morale and overtime expenditures as remaining team members have to shoulder the extra workload. Furthermore, making a hasty or erroneous decision causes more expenses down the line: As Entrepreneur noted, these include higher absenteeism, employee turnover, healthcare costs, workplace theft and possible violence - all of which can impact both the company's bottom line and its reputation.

The expenses don't end with the hire, either. Onboarding and training costs add up, especially when organizations must devote other workers' time to helping the new hire learn the ropes. Mistakes and missed opportunities in the transition period could impact the company's business results and reputation in the industry.

How do you improve your retention rate? 

To boost company loyalty and keep your top talent from walking out the door, you need to have a retention strategy. Hiring the right people will only get you so far - you also need to ensure that the corporate culture and enterprise processes inspire team members to be invested in their jobs, their co-worker communities and their organization. In short, there's a lot you can do to prevent employee turnover from turning into high recruitment expenses.

For starters, getting a sense of what your workers think and how their experiences impact their perception of the company gives you the foundation you need to start building an effective retention strategy. For instance, do you know what's really important to them? Many managers think that offering workers perks like free coffee and similar incentives will motivate them to perform well and be happy on the job. However, research has shown that more intrinsic motivators - such as recognition and positive working relationships - are far more significant.

Engaged employees have greater job retention 

With reducing employee turnover a smart business decision, it's critical for organizations to take a look at how they can make the workplace a more engaging, attractive place for professionals. It's not about catering to their whims, filling their days with fun and games or providing superficial perks. To truly have an impact on retention, these strategies must get to the heart of what makes employees tick.

This begins with giving team members a voice - and being prepared to act on the results. Do you know if your employees feel overworked? Would they say that they have positive relationship with their co-workers and respect their bosses? These are the types of factors that tend to have a bigger influence on turnover rates, ultimately determining whether enterprises are going to face the heavy costs of replacing valuable workers.

employee engagement roadmap

Michael Bertrand
Written by Michael Bertrand

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