A recruitment budget is essential to cover all the costs associated with creating a recruitment strategy, engaging and recruiting talent, and retaining them once they are hired. However, it is essential to plan the recruiting budget correctly to effectively drive recruitment activities, capture crucial metrics and find areas of improvement. Without a well-planned recruitment budget you always run 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 the advertising the job to arranging lunch for candidates if required.
- What is a recruitment budget?
- How to create a recruiting budget?
- The Important Components of a Recruitment Budget
What is a recruitment budget?
The recruitment budget is a comprehensive estimate of costs that will be incurred while driving hiring activities throughout the year. Whether it is direct expenditure on channels such as job boards and staffing agencies or other unplanned recruiting costs that pile up through the process, planning the recruitment budget requires a correct understanding of the hiring requirements and overall recruitment plan of the company. Also, if you want the recruiting budget to get approved quickly from the CFO, it has to be aligned to the businesses’ overarching goals. So now the question is
How to create a recruiting budget?
A survey conducted by Indeed in the beginning of 2018 predicted that 61% of recruiters were going to hire more than they did in 2017. Considering that the economic slowdown is now over and companies are looking to expand their businesses, this hiring trend is going to continue in the coming year 2019. Increase in hiring means recruiting teams will be busier and the recruitment budgets will increase. Therefore to succeed in the months ahead, it is essential to create and manage budget for recruitment and selection process. Here are the three major steps for the same:
Analyze your past cost of recruitment and selection
In order to come up with a budget plan for the future think about what measures does your department or organization takes for recruitment currently. What are the diverse array of processes and strategies followed to attract qualified candidates to the organization? Is there any tool or HR technology used and if yes, what are the associated costs? Does your organization conduct recruiting events such as walk-in interviews or job fair? Is your organization engaged with a third party background screening and assessment vendor that needs to be accounted for in the budget? It’s essential to analyze all of these points and their associated costs to include them in your recruitment budget.
Also, before making a final plan, also perform a data-backed comparison of these strategies with your recruitment goals to know the processes which have been most successful. You should be dedicating your financial resources only on the tactics that have shown results in the past. An audit of your past policies and budgeting decisions will provide you a bigger picture of what your organization’s needs are in the recruitment process and how best to reallocate the budget to fulfill those needs.
Assess your hiring plans for the year
Next, looking at the year in general, you need to identify how many hires you estimate to make. This will have the maximum impact on the recruitment budget. 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 hiring managers for getting a closer look at this number. Also an overview of your current company culture can give you some insight into the average number of hires you would want to make.
For instance, a workforce that is mainly composed of millennial will have a high turnover rate, since millennial have the willingness to take risk, try out new things while older generation loves the comfort of staying in a secure position. These patterns might change from department to department and may also be affected by the kind of role you are hiring for. Fresher candidates are more likely to leave the company within short time of being hired than someone who is senior management. While getting an exact number is much preferred, even if you get to an average number its more than satisfactory. It is better to calculate for a higher budget than run out of money midway through the year and then look for ways to hire the positions needed to be filled. Metrics like employee turnover rate will help you in getting close to the accurate number.
The Important Components of a Recruitment Budget
- Job Boards or Aggregators are important part of recruitment costs
- Staff and Resources are an important component of the recruitment budget
- Recruitment Advertising form a vital part of hiring costs
- Recruitment tools is an important part of recruitment budget
- Employee referral program is also one of the important components of recruitment budget
Now that you’ve an idea of the recruitment process, and the number of hires you need to make, it’s time to get friendly with numbers and dive into the different components of recruitments costs:
Job boards or aggregators are important part of recruitment costs: Which job boards will you use to publish your requirements? You can refer to your source conversion report to get an understanding of which CV sources provided the most number of job applications and the maximum conversion. Gather results from niche, regional, industry-specific job boards and try to determine which boards worked well for which locations and positions. Based on the hires from the boards and aggregators you’ve used in the past, you can project what your expenses will be in the coming year.
Staff and Resources are an important component of recruitment budget: Recruiters’ salary, any external vendors or consultants you may use for hiring or any agency that helps you in recruitment account for a separate cost which must be considered while designing the recruitment budget. This depends on the number of people you are planning to hire in the next year. For example, 2 internal recruiters per 100 hires might be a good ratio.
Recruitment Advertising forms vital part of hiring costs: Recruiting the best candidates requires a number of activities such as conducting events to developing career sites and advertising on social media. These employer branding initiatives or general employer branding also needs to be taken into account while creating the recruiting budget. As with job boards, you have to consider which advertising channels worked well in past.
Recruitment Tools is an important part of recruitment budget: Today, technology goes hand in hand with recruitment. Without the service of proper technology, it is not possible to get the best candidates to work for you in this highly competitive space. An ATS such as Naukri RMS will not only automate your hiring process but also impact other recruitment metrics such as quality of hire, speed of hire, and candidate engagement. However, all these goodies come at some additional costs which again should be a part of the recruitment budget estimates. The cost incurred while deploying an ATS is justified with the end results in form of saved productivity, time and other resources.
Employee Referral Program is also one of the important components of recruitment budget: Employee referral is considered one of the best sources of hire and therefore investing in an employee referral program to hire candidate makes sense. Many companies offer their employees monetary rewards for referring qualified candidates. There are some other costs also involved which can be calculated based on the number of referrals that were recruited in previous years.