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July 23, 2022

The Real Costs of Recruitment

Recruiting new employees is not cheap. According to new benchmarking data from the Society for Human Resource Management (SHRM), the average cost per hire was nearly $4,700. But many employers estimate the total cost to hire a new employee can be three to four times the position's salary, according to Edie Goldberg, founder of the Menlo Park, Calif.-based talent management and […]

Recruiting new employees is not cheap. According to new benchmarking data from the Society for Human Resource Management (SHRM), the average cost per hire was nearly $4,700. But many employers estimate the total cost to hire a new employee can be three to four times the position's salary, according to Edie Goldberg, founder of the Menlo Park, Calif.-based talent management and development company E.L. Goldberg & Associates.

That means if you're hiring for a job that pays $60,000, you may spend $180,000 or more to fill that role.

"Of those costs, I would say 30 percent to 40 percent are hard costs, and the other 60 percent are soft costs," said Goldberg, who is also the SHRM Foundation chair-elect and co-author of the book The Inside Gig (LifeTree, 2020).

Soft costs include the time departmental leaders and managers invest in supporting the HR-specific roles of the hiring process. When these are added to the hard costs, the price of recruiting skyrockets.

"When all of these professionals are meeting with potential candidates, screening applications, scheduling a few rounds of interviews and making final decisions, it takes away time from accomplishing organizational goals/outcomes, which then certainly ties to ROI [return on investment]," said Ankit Shah, supervisor of talent development at Columbus State Community College in Ohio.

Here's a look at other indirect costs to consider.

The Impact on Productivity

Goldberg said most people don't consider the expense of losing somebody on a team. "It disrupts the flow of how things get done. Teams can become unmoored," she said.

Organization network analysis looks at ties between different employees. Some staff members are "brokers" of information across different teams or subfunctions in organizations. Losing one of those individuals can interrupt information flows crucial to getting the work done.

Goldberg suggests implementing stay interviews. Retaining employees is directly tied to reducing recruitment costs. In addition, these types of conversations can shed light on an individual's concerns that factor in deciding to stay or leave.

For example, many parents and caregivers are concerned about going back to the office because they are afraid of bringing the COVID-19 virus home. Other workers may see positions similar to theirs at other companies that pay higher salaries or offer better benefits. Scheduling time to talk with employees about their most pressing concerns can reveal solutions to help them stay rather than leave. 

The Emotional Toll

More demands for higher compensation, time off, flexible work schedules and perks are taking a financial toll on organizations, according to Sharon DeLay, SHRM-SCP, founder of GO-HR, a full-service consulting firm in Columbus, Ohio. All of this creates mental exhaustion and fatigue for hiring teams.

"The mental and emotional toll of all the ghosting, demands, etc., aren't sustainable and likely causes them to lose focus on other duties," she said.

The Cost of Competition

There's also a price for what DeLay calls lost candidates. Most smaller businesses are not prepared to move quickly. So they must fight harder to recruit candidates, and then if they don't offer the job fast enough, the candidates are snapped up by another employer.

Losing a great candidate for the role midway through the interview process due to external competition also has financial ramifications. 

"Recruiters and HR people, especially in smaller companies, need to be empowered so they can be quick," she said.

Goldberg predicts that 2022 is going to be the year of the employee experience. A lack of opportunities for professional development and career growth is motivating employees to quit.

That jibes with a recent study of Generation Z workers that reveals feeling unable to contribute their strongest skills ranks among their top professional concerns. Finding ways to allow them to use or develop those skills can support retention.

"Knowing where their talents are and creating project opportunities for them to get new experiences helps a company stay on top of things and deliver the employee experience they are seeking," she said.

Article written by:  Orville Lynch, Jr.
Mr. Lynch, a member of the legendary two-time Ohio Civil Rights Hall of Fame Award winning Lynch Family. Mr. Lynch is a nationally recognized urban media executive with over 20+ years of diversity recruitment and serial entrepreneur with numerous multi-million dollar exits.

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