Here are frequently asked questions and answers about recruiting costs to help you plan your budget, monitor your cost per hire and optimize your spending:
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What is cost per hire?
Cost per hire is the average amount of money you spent on making a hire. This metric is useful when you are creating or tracking your recruiting budget. For example, if you plan to hire 100 people in a year, and your cost per hire is $4,000, you can estimate a total spend of $400,000 for recruiting. You can compare annual cost per hire over several years to spot any significant changes.
How do you calculate cost per hire?
The Society of Human Resource Management (SHRM) collaborated with the American National Standards Institute (ANSI) to create a standard formula for calculating cost per hire (CPH):
(Note: all of these variables should refer to the same time period.)
What should be included in recruiting costs?
Internal recruiting costs are organizational costs and internal expenses, like recruiters’ salaries and money you spend on your referral program.
External recruiting costs refer to every expense you pay outside of your company, like job board fees, agency fees and costs associated with a background check service.
What’s a good benchmark for cost per hire?
A recent survey by the Society of Human Resource Management (SHRM) found that the average cost per hire is just over $4,000. This number is the average across all the companies SHRM surveyed.
However, several factors may affect each company’s individual average. For example, cost per hire depends on hiring volume. The more people you hire, the lower your cost per hire will be. This is because some fixed costs can be spread out over a larger number of hires. Also, some roles and industries (e.g. engineering) have longer time to fill and the accumulated costs of a longer hiring process result in higher costs per hire.
Depending on the size of company and industry, a good benchmark is a value between $3,000 and $5,000.
What’s a good benchmark for recruiting costs?
Recruiting costs depend on each company’s needs. A good way to approach recruiting costs is to begin by creating a detailed budget while keeping your average cost per hire in mind. Afterwards, measure recruiting costs using a spreadsheet or an Enterprise Resource Planning (ERP) system that tracks expenses and ensures they don’t exceed budgeted amounts.
It’s best not to obsess over recruiting costs. If higher costs translate into better people for your team, your investment is worthwhile.
Find your average cost-per-hire with our simple calculator.
What should be included in a recruiting budget?
Think about what you usually spend on recruiting. Creating a detailed list of possible recruiting costs will help you create an accurate spending plan. Here’s a list with common elements to include in a recruiting budget:
- Job boards fees. What you pay job boards to display your job openings.
- Candidate assessment costs. Fees for companies that offer pre-employment tests or coding challenges.
- External recruiter expenses. Money spent to pay individual recruiters, recruiting agencies or staffing firms.
- Employer branding efforts. Funds spent on events related to recruiting, like campus recruiting days and careers fairs.
- Careers page costs. Expenses that include the setup, maintenance and redesigning of your careers page.
- Internal recruiters’ costs. Often the highest recruiting line item, this includes recruiters’ salaries, benefits and travel expenses.
Also add any other expenses related to recruiting, like referral program bonuses, travel reimbursements for candidates and Applicant Tracking System (ATS) costs.
How do I calculate my recruiting budget?
You can calculate your recruiting budget in two ways:
- Use your average cost per hire. Calculate it by adding the actual recruiting expenses from last year and divide by the number of hires you made. Then, multiply your average cost per hire by the number of hires you plan to make this year.
- Add all projected internal and external costs. For example, imagine you plan to hire 50 people next year. If you decide that you need 50 job listings on three different job boards, you can multiply each job board’s fee by 50 and then add all three numbers to get the total projected cost of job boards.
What’s a good benchmark for a recruiting budget?
Use your cost per hire as a benchmark for your recruiting budget. If your industry’s average cost per hire is $3,000, try to keep your own around this value. Don’t let a higher cost per hire scare you though. It might mean you’re investing more in effective recruiting techniques. If your quality of hire and other metrics are consistently strong, your investment is worth it.
More Recruiting Metrics FAQs:
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Get a free trialThe hiring process is rarely simple, whether you’re scouring the job market for your next employer or your next employee. Seventy-six percent of hiring managers admit attracting top talent is their greatest challenge, one that costs organizations an average 23.8 days and $4,129 per hire. Enlisting the services of a recruiting firm can streamline the search, but how are companies to know which agencies are best equipped to help them win the talent war?
Forbes has teamed up with market research company Statista to answer that very question by producing, for the second year, our annual ranking of America’s best recruiting firms. The list is divided into two categories: one for the top 250 executive search firms specialized in filling positions with salaries of at least $100,000 and another for the top 250 professional search firms focused on placing positions with salaries of less than $100,000.
To determine the best recruiting firms, Statista surveyed 30,000 recruiters and 4,500 job candidates and human resources managers who had worked with recruitment agencies over the last three years. Respondents were asked to nominate up to 10 recruiting firms in the executive and professional search categories. Firms could not nominate themselves; last year’s findings were considered. More than 14,500 nominations were collected, and firms with the most recommendations ranked highest.
Gallery: America’s Best Recruiting Firms 2018
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Dominating this year’s ranking is Los Angeles-based Korn Ferry. A partner to 93% of Fortune 100 companies, the firm’s executive and professional search divisions secured the No. 1 spots on both lists. At a time when online job listings allow candidates to flood the applicant pool, making it more challenging than ever before for hiring managers to identify the right talent, Korn Ferry CEO Gary Burnison attributes his company’s success to its effective use of intellectual property. “We’ve anchored the firm in research and IT,” he says. “We can go into a function and say, ‘This is what a great CEO looks like’ or ‘This is what a great marketing professional looks like’ based on our insights.”
Data-driven recruiting seems to be the driving force behind many of this year’s top-ranked firms, including the Atlanta-based Lucas Group. Ranked sixth for executive search and third for professional search, the recruiting agency pairs nearly 50 years of job-market experience with a proprietary candidate-tracking system so that it can serve small businesses and Fortune 100 companies alike. The technology, says senior managing partner David Armendariz, allows the company to maintain relationships with every professional it’s ever worked with. That way, whenever a candidate is ready to make a career change, Lucas Group is the first to know. And yet, he believes the technology isn’t actually what gives the firm its true edge. “The database is great,” he says, but it’s the firm’s people who are “the only reason we’ve been as successful as we have . . . We nurture relationships and help clients in ways other firms can’t.”
Relationships are also key to the strategy at MRINetwork, says general manager Nancy Halverson. Recruiters at the Philadelphia-based firm—ranked 10th for executive search and seventh for professional search—learn both the career and personal aspirations of their candidates to best match them with clients, most commonly small and midsize businesses. “The best recruiters have life-long relationships with candidates and customers. It’s not uncommon for a superstar recruiter to follow a candidate through their entire career,” says Halverson. “It’s not a transactional business.”
No matter the strategy, the goal for America’s best recruiting firms is always the same: to find a fit. “A company, like a candidate, is very much concerned about a culture fit,” says Burnison. “We’ve moved our business from finding candidates to finding out who candidates are.”
For the full list of America’s Best Executive Recruiting Firms, click here.
For the full list of America’s Best Professional Recruiting Firms, click here.
'>The hiring process is rarely simple, whether you’re scouring the job market for your next employer or your next employee. Seventy-six percent of hiring managers admit attracting top talent is their greatest challenge, one that costs organizations an average 23.8 days and $4,129 per hire. Enlisting the services of a recruiting firm can streamline the search, but how are companies to know which agencies are best equipped to help them win the talent war?
Forbes has teamed up with market research company Statista to answer that very question by producing, for the second year, our annual ranking of America’s best recruiting firms. The list is divided into two categories: one for the top 250 executive search firms specialized in filling positions with salaries of at least $100,000 and another for the top 250 professional search firms focused on placing positions with salaries of less than $100,000.
To determine the best recruiting firms, Statista surveyed 30,000 recruiters and 4,500 job candidates and human resources managers who had worked with recruitment agencies over the last three years. Respondents were asked to nominate up to 10 recruiting firms in the executive and professional search categories. Firms could not nominate themselves; last year’s findings were considered. More than 14,500 nominations were collected, and firms with the most recommendations ranked highest.
Dominating this year’s ranking is Los Angeles-based Korn Ferry. A partner to 93% of Fortune 100 companies, the firm’s executive and professional search divisions secured the No. 1 spots on both lists. At a time when online job listings allow candidates to flood the applicant pool, making it more challenging than ever before for hiring managers to identify the right talent, Korn Ferry CEO Gary Burnison attributes his company’s success to its effective use of intellectual property. “We’ve anchored the firm in research and IT,” he says. “We can go into a function and say, ‘This is what a great CEO looks like’ or ‘This is what a great marketing professional looks like’ based on our insights.”
Data-driven recruiting seems to be the driving force behind many of this year’s top-ranked firms, including the Atlanta-based Lucas Group. Ranked sixth for executive search and third for professional search, the recruiting agency pairs nearly 50 years of job-market experience with a proprietary candidate-tracking system so that it can serve small businesses and Fortune 100 companies alike. The technology, says senior managing partner David Armendariz, allows the company to maintain relationships with every professional it’s ever worked with. That way, whenever a candidate is ready to make a career change, Lucas Group is the first to know. And yet, he believes the technology isn’t actually what gives the firm its true edge. “The database is great,” he says, but it’s the firm’s people who are “the only reason we’ve been as successful as we have . . . We nurture relationships and help clients in ways other firms can’t.”
Relationships are also key to the strategy at MRINetwork, says general manager Nancy Halverson. Recruiters at the Philadelphia-based firm—ranked 10th for executive search and seventh for professional search—learn both the career and personal aspirations of their candidates to best match them with clients, most commonly small and midsize businesses. “The best recruiters have life-long relationships with candidates and customers. It’s not uncommon for a superstar recruiter to follow a candidate through their entire career,” says Halverson. “It’s not a transactional business.”
No matter the strategy, the goal for America’s best recruiting firms is always the same: to find a fit. “A company, like a candidate, is very much concerned about a culture fit,” says Burnison. “We’ve moved our business from finding candidates to finding out who candidates are.”
For the full list of America’s Best Executive Recruiting Firms, click here.
For the full list of America’s Best Professional Recruiting Firms, click here.