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Don’t shrink your recruitment budget


In 2012, the Society for Human Resource Management (SHRM) published the American National Cost-per-Hire Standard, which provided a detailed formula for calculating the cost of hiring an employee. Since then, the managers of many companies have used this metric to assess HR performance in terms of hiring staff. Now, if the recruiting team fails to meet its targets, top managers are looking for ways to reduce recruiting budgets. This applies even to such difficult-to-close vacancies as technical IT-specialists.

You can always find a couple of ways to trim the budget of the recruiting team. But is that the right approach? If the recruitment budget increase becomes the only way to fill technical vacancies, it’s time to worry about the performance of your recruiting team. However, a radical reduction in the recruitment budget could turn your company into a serious problem. Below is a couple of arguments in favor of why reducing the budget is still not worth it.


Unfilled vacancies are costs for your company

How do you think the managers, who are not directly involved in the hiring of employees, will respond if you inform them that the average cost of hiring a technical specialist is approximately $10 thousand? It’s no surprise that many of them will want to reduce the cost of recruiting. While hiring IT professionals may seem unreasonably expensive, the company’s costs associated with unfilled position may well be even higher.

It is commonly believed that the vacant position of a technical specialist costs $ 500 a day to a company. Among other things, this value takes into account the lost potential profit and the failure to meet the project schedule. Suppose that the vacancy in your company closed on average for 40 days. Then over these 40 days losses of your company are over $20,000.


If the candidates are passive applicants

Recruiters can only dream about vacancies, where it is enough to post a description on several job-boards to close it. However, statistics show that among IT professionals just 15% are actively looking for a new job. In such a situation, the team of recruiters has to conduct an active search for candidates.

How does this affect your recruiting strategy? Perhaps your recruiters should think about increasing on “live” activities? For example, visit specialized hackathons/conferences more often. Such activities implies travel expenses, which increase the cost of hire.

It would be a good idea to calculate the “cost of hiring an IT specialist” as a separate metric. This will make it possible to compare your expenses to close different vacancies and will serve as an argument in favor of increasing the recruitment budget.


Do not forget to include onboarding costs and equipment costs

The costing formula, published by the SHRM, takes into account the costs associated with recruiting activities when closing the vacancy. However, for a manager, it is important to distinguish between hiring costs and costs for getting a candidate. The SHRM formula provides an effective way to calculate the cost-per-applicant. In practice, the cost of closing a technical vacancy is significantly higher.

You probably know that technical specialists are attracted by well equipped companies providing an opportunity to develop their skills: access to training materials, trainings, etc. Now, when calculating the cost of hire, consider the costs of new equipment and trainings. This will give you a more accurate value of the costs, but also emphasize the importance of retaining the most valuable professionals, since hiring and further development of IT-techie will cost the company a lot.

Cloud recruitment automation system Clobbi.Recruitment will help you optimize the recruitment process and monitor the key performance indicators of your recruiting team. With Clobbi.Recruitment all aspects of the hiring process will be under your control.

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