7 Steps To Effectively Manage Recruitment Budget for this year
Recruiting new hires is one of the most important investments any company can make. But hiring new people also costs money. The Society of Human Resource Management estimates that the average cost of hiring a new employee is $4,425! That’s why, it is essential to plan the recruiting budget correctly to effectively drive recruitment activities, capture crucial metrics, and find areas of improvement. Read this blog to find out how to create a recruitment budget this year.
Without a well-planned recruitment budget, you always run the risk of overspending and ruining your entire hiring plan for the year. Also, it can be difficult to track all the expenses that were incurred in hiring a candidate, right from advertising the job to arranging lunch for candidates if required.
What’s a recruitment budget?
A recruitment budget is an annual estimate of the total cost of hiring in the organization consisting of internal (e.g. recruiters’ salaries) and external (e.g. recruitment tech stack, advertising expenses) costs. This also includes unplanned expenses as a result of staff leaving. The recruitment budget has to align with the company’s annual and longer-term business strategies, including any ongoing plans set by the CEO and Board of Directors.
How to Build a Recruiting Budget
Here are six simple steps that will help you to create a recruitment budget this year as Recruiter:
1. Determine The Budget
This is entirely up to each company’s discretion, but it can significantly impact cost-per-hire calculations. Whether or not you factor this into your cost-per-hire ratio, you must list out each job title needed on the various teams, including hiring dates and track salary per headcount to determine an appropriate personnel budget.
To accurately forecast total cost, be sure to add approx 30% to total to fully account for benefits, taxes, T&E, etc. Also, include any contractor or part-time employees that the company plans to bring on during the year. This will help when unforeseen expenses come across.
2. Determine your annual recruitment plan for new hires
Recruiters need to spend lots of time on this step.
• How many new hires your company plans on recruiting
• Establishing whether some roles are harder to fill than others. If so, will they cost more?
• Are there any seasonal hires?
• What about high-volume hires, such as college placement drives?
• What’s your staff turnover?
Knowing the answers to the above questions allows you to build your recruitment plan at least a quarter ahead. Plus, you’ll know how many yearly hires you need to prepare for each department.
3. Break down your expenditure
Calculate how much you regularly spend on recruitment by category and o a month-on-month basis. You may find the following headings a useful guide as you go about these calculations:
• Cost per hire
• Job advertisement costs (e.g., Indeed, Career Builder, industry-specific boards), while most of them are free, some can cost you for upgraded functions.
• Recruitment software costs like an ATS
• Branding (such as company videos, social media, banners, print materials and so on)
• Background checks on potential hires
• Interview expenses
• Salaries including as separate cost if you’re hiring temporary agency staff
• Training costs (during onboarding and annual development training)
4. Include an Employee Referral Bonus Program
Be sure you consider your spending on employee referral bonus programs. In some companies, 50% or more of hires can come through employee referrals. Having a strong program in place ensures success and rewards your employees for introducing you to new candidates.
Be sure to factor in fees that you will pay for hard-to-fill positions then multiply that by half the openings that you will have throughout the year, depending on the ratio of employees that you receive through word of mouth.
5. Assess your hiring plans for the whole year
After looking at the plan in general, you need to identify how many hires you estimate to retain in a year and accordingly set the hiring plan for the whole year. To get to the number easily, it is advisable to break this number down as per different departments or areas of your business.
You may have to do some brainstorming and meetings with departmental managers for getting a closer look at this number.
For instance, a workforce that is mainly composed of millennials will have a high turnover rate, since millennials have the willingness to take risks, try out new things while the older generation loves the comfort of staying in a secure position. While getting an exact number is much preferred, even if you get to an average number it’s more than satisfactory.
6. Determine all Discretionary and Unforeseen Expenses
The harsh reality of any recruitment budget plan is that you will always miss out on one or two points of the costs associated with candidate screening tests or incentives and bonuses associated with employee referral programs, etc.
Other unexpected expenses that can crop up;
- Urgent software updates
- Temporary staffing to cover unplanned leaves
- A careers page redesign to attract more candidates
- Relocation expenses for new hires
- Airfare for flying candidates for interviews, etc
There are plenty of times when recruiters tend to underestimate the money needed for executing certain recruitment strategies. So, it’s always recommended to leave some buffer to brace the impact of last-minute expenses.
7. Get the budget approved by the leadership
Be prepared to present the budget, argue your case, and show the leadership team how invested you are in attracting the best talent there is. Have the facts at the fingertips. You may need to clarify the mission, so have the details of your projected spending and ROI at the forefront of your mind. That way, you’ll be better prepared for any tricky questions that come your way.
You’ll have to show the value of high-quality hiring to your senior management team. Being able to show your leadership management the potential return on investment (ROI) will help you gain the ultimate budget approval.
It is common sense that having a sufficient recruitment budget is vital to any successful hiring strategy. Most importantly, you need to have a thorough overview of what your expenses are and how you’re going to grow your company. You can always use these 7 strategies to create a recruitment budget this year and manage it effectively. After all, having a realistic recruitment budget will help you get the right talent for your company.
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