How to set a Recruitment budget

German payroll with euro banknotes

Having navigated several companies through today’s inescapable swings and roundabouts of global economies, I know all too well the challenges of creating and sticking to a Recruitment budget that generates the most qualified candidates at the lowest cost to the business. Developing a Recruitment Budget is largely determined by the following:

  • Overall hiring goals
  • How difficult a challenge meeting those goals is likely to be
  • How expensive each recruitment stream is

Below are my steps to executing a Recruitment budget for companies looking to grow quickly with reasonable spend expectations.

Step 1. Determine how many people the organisation will hire

To accurately determine how many people need to be hired, you must also estimate your attrition (leavers). For example, if your attrition rate is 15-20%, multiply that by the number of employees and include them in your hiring goals. This is the total number of employees needed just for backfills in order for the organisation to maintain its current size.

NB Foresight: Despite every caution, with high growth comes the possibility that some new-hires simply won’t cut it, forcing you to re-hire for their positions. Make an allowance for this possibility to incur additional costs in your hiring numbers.

Step 2. Estimate the commercial impact of incremental hiring

Here’s how to go about this:

  • Calculate last year’s total cost of recruiting (all people hired and the costs of the systems and programs used). Divide this number by the number of hires you determined in Step 1. This will provide a high-level cost-per-hire. It’s a good idea to also estimate unaccounted costs, such as what rogue Hiring Managers may have spent on their own, and cleverly parked under more discreet line items.
  • Diagnose how competitive and costly it will be to hire. To do this, categorise your hires into high, medium and easy-to-hire buckets to understand what percentage of hires are likely to fall into each bucket. For example, software engineers may be hard-to-hire, where interns are expected to to be easy-to-hire. After you categorise the anticipated hiring conditions at your corporate HQ and the various other hiring locations, identify whether you expect the respective location will impact the complexity of hiring, and if so by how much. Lastly, compare your hiring forecast to the hiring totals of last year. If you’re hiring twice as many positions this year, its reasonable to expect you’ll face additional challenges associated with the shift in volume.

Step 3. Work out your candidate sourcing strategy

Now that you have a view into the hiring numbers and goals, determine which sourcing strategies provide the best opportunity achieve your targets. First and foremost, it’s good practice to determine the percentage of hires you can make internally through your career site and employee referral program. Estimate the cost of these two sources, and then establish the gap and how you’ll fill it. Mapping out the sourcing strategy in this way will give you more accurate forecast figures. As a guide, follow the below reminders.

  • Identify the number of internal, full-time recruiters needed. A good rule of thumb is an internal recruiter can typically be expected to fill five to seven positions per month. Estimate the number of positions third party recruiters will need to fill, factoring in recruiting fees at 15-20% of the new-hire’s first-year salary. This is likely to be your most expensive sourcing stream on a cost-per-hire basis so you’ll want to budget appropriately to avoid being bushwhacked later.
  • Calculate job posting and advertising costs plus, time-to-fill metrics to approximate your sourcing budget. For example, if your organisation needs to hire 50 people and it typically takes three months per hire, you may want to have budget for 150 (50×3) job postings, assuming the 30-day-per-post standard on most job boards.
  • Don’t forget to include career fairs expenses. Not only registration and space hire fees, but also the travel for accommodation costs of your mobile Recruiters.

Step 4. Agree the level of service provided to Hiring Managers

From the outset, its prudent to maintaining good relationships to determine if you are providing full-service recruiting (job posting, candidate sourcing, applicant screening, interview scheduling, and contract negotiating) or opting for minimal service (posting, scheduling). Depending on the level of service offering, you may need to budget for Resourcers, Recruiting Coordinators/Schedulers and HRIS operations specialists. Including all of these costs and setting expectations early will help you refine an effective strategy and avoid any mid-play stakeholder anxiety-fuelled interruptions to your strategy execution.

Step 5. Know the “lights on” expenditures, systems, and tools your team needs to operate effectively

The cost to maintain your career site with systems tools and update it with compelling Employer Brand content (e.g. a ‘Why work for us’ video and explainer info-graphics) needs be factored into an overall recruitment budget and strategy. Associated expenditure may include costs for mobile optimisation, running or upgrading an Applicant Tracking System (ATS), and leveraging increasingly available passive recruiting tools.

Bringing on the right people to strengthen your organisational culture and set businesses up for success requires developing a Recruitment Budget that addresses not only the realities you face today, but also considers the high-growth talent management tools and systems you will need over the coming year to compete in fast-changing employment markets internationally, weathering any resource knocks and punches along the way.

If you think you would benefit from getting some support to really set your Talent Acquisition efforts up for resounding success, WNC consultants shine in employment arenas. We pride ourselves on being our clients’ most valuable partner in the attraction, retention and engagement of their current and future employees. We offer quality end-to-end strategies and solutions including creative, digital, research, planning and communications within the Talent Management space.

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