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The hidden cost of recruitment: What’s recruitment costing you?

Today, we want to look at the hidden recruitment costs you might not know about, and discuss the more cost-effective ways to hire new employees into your business. Let's dive in.
Published 21 Jun 2022
Updated 9 Nov 2022
7 min read

Every business needs to recruit employees. Employees are the ones that make a business thrive and determine how successful it will be in the future.

Our very own CEO Ben Thompson stated in a webinar we hosted on business compliance that, β€˜We always say that people are the foundation of businesses; if you can get your people to perform at the top of their game, the results are outstanding.’

But in order to bring in the best and the brightest talent to your business, it comes at a price.

Today, we want to look at the hidden recruitment costs you might not know about, and discuss the more cost-effective ways to hire new employees for your business. We’re here to make sure you do right by your business the next time you need to hire top talent.

To start off, let’s look at all the hidden recruitment fees you need to bring into the equation.

What do recruitment costs mean?

Recruitment costs are the fees associated with finding talents, hiring, and onboarding new employees. This includes the cost of:

Several factors go into the recruitment process, on top of planning and onboarding a new employee. As a hiring manager, your company or department may require you to outline various expenses associated with this task, so we’ll break them down for you.

Read more: How to improve candidate experience

The monetary cost of recruitment

The actual budget spends on the cost of recruitment comes first. This includes;

How much does it cost to recruit a new employee?

These are some of the biggest recruitment expenses and arguably are the easiest ones to identify and price up. When you add everything up, a new hire’s average cost can be between $3,500 to $5,000.

Here’s a breakdown of the cost of hiring an employee in New Zealand.

What are the hidden recruitment costs?

#1 Time invested by hiring managers during the hiring process

In business, time is valuable. While you may have already allocated a certain financial cost to recruitment, including the items we listed above, it’s easy to underestimate the time it takes to hire a new recruit.

  • Writing a job ad, posting to and promoting the job ad to networks will take a lot of time out of your hiring managers day-to-day tasks.
  • There’s either no productivity in the role you’re hiring for during the time you are hiring or limited productivity. If the hiring process takes longer than usual, this extends the lost productivity time and output for your company.
  • Time taken out for filtering through applicants may take considerable time.
  • When you finally reach the decision to hire someone, the negotiation stage can draw out the process longer. Leading to more HR wages allocated to the hire, and productivity and output lost in the role you are hiring for.

Although these elements of the recruitment stage don’t come with a physical price tag, they still add up to a high cost in time lost for current employees.

Download our interview checklist for hiring managers

#2 The recruitment cost of β€œbad” hires

A new hire who doesn’t quite β€œfit” can be costly to your business – this could be someone that just doesn’t work out in the role and either leaves the company on their own or is asked to leave by the business.

This will not only mean having to start the hiring process again, but it can also lead to less productivity among the remaining staff, lower employee morale, and put existing projects on hold. The recruitment associated with this can be profound for your business!

To make sure you don’t have to deal with this particular hidden cost of recruitment, here’s a handy guide on how to make sure you hire the right person for an upcoming role.

Read more: Bad hire interview red flags

#3 Recruitment process outsourcing costs

This one won’t apply to everyone, but many companies are looking to outsource the hiring process to recruitment agencies to avoid all of the above costs associated with hiring the wrong person.

Recruitment agencies have an advantage over in-house recruitment as they tend to have bigger and better industry networks, contacts, databases, and manpower invested in the recruitment process.

Whether or not you choose to recruit in-house or through an agency, be sure to factor in the extra time, energy and effort outside of the extra agency fees.

The most cost-effective recruitment strategies

Now, every business wants to save money. And as you can see, the mixture of monetary and timely recruitment expenses can add to a hefty bill. So we want to run you through some of the more low-cost recruitment strategies that can help reduce recruitment costs (and save time) when you next need to hire.

1. Recruitment Referrals

A cost-effective recruitment strategy is leveraging your current workforce to refer hot candidates. This can be through their friends, families, former colleagues, or growing networks.

The benefit of having an internal recruiter is that your employees would’ve already done half the sense checking for you! And it’ll cost much less than a recruitment agency or outsourced strategy.

In order to really engage your employees in the referral scheme, we suggest setting up some sort of incentive. That means they will receive a reward if their referral is successful. This can be monetary, time-dependent or whatever works for your business and your budget.

Pro tip: Send an email blast with an employee referral template

2. Brand Ambassadors

Another tip that goes hand in hand with recruitment referrals is turning your current employees into brand ambassadors. Jobseekers are no different from the average consumer of a product.

In the same way, as they would when buying a new pair of shoes, they will do their research on a business before applying for a job. They might ask colleagues, peers and friends for their impression of a business, consult their LinkedIn connections or read reviews on Glassdoor for insider knowledge.

Therefore, employee advocacy can be a very powerful yet inexpensive recruitment tool for your business.

3. Social Media

Social media is a cost-effective recruitment strategy for an obvious reason; it’s free to post. You can create a cool, attractive graphic that will get people to stop dead in their newsfeed and read all about your exciting new role.

You can again focus on the power of your existing workforce and get them to like, comment and share the post to their networks. This way, you’ll reach even more people (again for free!)

When it comes to social media posting, remember;

  • Video content is very important, they’re more effective in grabbing people’s attention in the newsfeed and favour the algorithms much more. Perhaps you could film the department head explaining the available roles within their team? Or get one of your current employees to shoot a fun testimonial video about why they love working for the business. The more creative the better.
  • Don’t be afraid to use images! Graphics are important for social media posts, so ensure images are incorporated into your social media recruiting strategy.
  • The power of hashtags is real!

Read more: Marketing strategies to recruit talent

4. Job Fairs and Industry Conferences

Job fairs are a low-cost way to find employees. Whether you decide to attend a live or virtual job fair, you don’t necessarily have to invest in a large, expensive stand. You could just attend and simply network with other visitors on the day. Bring some hot-off-the-press business cards and your networking expertise, and that’s all you’ll need.

Similarly, attending industry conferences and trade shows that aren’t centred around recruiting is a great low-cost recruitment strategy. You can talk to potential employees through networking at these events. As well as meet with others who work in a related industry that may allow you to tap into potential candidates.

Pro tip: Get fresh talents by creating a graduate program

5. Recruitment Tools

If you don’t have the right tools at your disposal for your recruitment needs, your ability to hire cost-effectively will be hampered from the start.

Although it might seem like a big up-front cost, if you invest in a robust applicant tracking system (ATS), you’ll be able to streamline your process, reduce duplication of work and data entry, protect candidate data and better comply with the requirements of the GDPR. It’s a win-win-win-win scenario!

Read more: What is an applicant tracking system?

6. Create job ads that speak for themselves

The job advert that potential candidates see, whether that’s on your website, job boards, or on social media, will be one of the first experiences they have of your business. So it’s vital that you create an on-brand, appealing and engaging job ad. One that stands out from the crowd.

Your job ad not only has to be well written, but it also needs to be compelling, optimised for search, and clearly outline the job’s key requirements and responsibilities. With the right job ad, you can invest minimal amounts of time and money into promotion.

Read more: How to write great job descriptions

7. Reduce the need to recruit

The final low-cost recruitment strategy we want to highlight might sound a little strange. But one way to cut recruitment fees is to simply reduce the need to recruit first!

This can be done by improving the way you support and engage your existing employees. Supporting them with internal training, upskilling opportunities, and incentives will improve your company culture and employee engagement. This, in turn, lowers your staff turnover and therefore reduces the need to recruit in the first place!

The wrap up

As you can see, there’s a lot more hidden recruitment costs than first meets the eye! But with a few cost-effective strategies in place, you can save your business time and money and still recruit the best candidates.

Download our 40-page comprehensive recruitment guide

If you want more information about recruitment and how you can use your awesome employer brand to attract top talent – take a look at our article here: Employer Branding Strategies To Attract Top Talent.

Download now

The ultimate recruitment and onboarding guide

The Team
Employment Hero -
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