Understand and reduce the cost of recruitment, to increase your company's value

When it comes to achieving profitability, everything has to be measured: salaries and social security contributions, overheads, supplies, production, marketing budget... But there's one item of expenditure that some organizations sometimes underestimate: the cost of recruitment.

And yet it can easily amount to several thousand euros. And this figure rises when you make a casting error, and the new employee leaves prematurely.

So there are real stakes in recruiting well, i.e. hiring a candidate who's aligned with the position, with the company... who wants to stay with you, in short!

How much does hiring cost? What direct and indirect costs need to be taken into account? And above all, how can you reduce these expenses?

See all software Recruiting

Recruitment costs: definition

The cost of recruiting refers to the budget devoted to hiring a new employee, which includes all the expenses required to complete the entire process:

• defining needs ;
• drawing up and distributing the job offer ;
• sourcing candidates ;
• CV sorting ;
• cost of interviews and skills tests;
• onboarding the new employee.

The main value of calculating the cost of recruitment lies in the fact that it helps you optimize your expenditure, and thereby refine your HR strategy. If you don't take the measure of your actual situation, how can you improve it?

💡 Just to give you an idea: according to Le Figaro, the average cost of recruitment in France varies between 3,000 and 10,000 euros. A tidy sum, I'm sure you'll agree!

How do you calculate the cost of recruitment?

To find out how much a recruitment costs, take into account all the direct and indirect costs involved. In fact, all you have to do is add them up.

And if you want to calculate the average cost of all your hires over a given period, apply the following formula:

Calculate direct costs

Direct recruitment costs represent the expenses immediately associated with the candidate search process.

👉 They are easily identifiable and cover several essential aspects:

• posting job ads on specialized sites or professional social networks ;
• recruitment sourcing costs.💡 The cost of actively searching for profiles on platforms such as LinkedIn, or prospecting in databases, represents a significant item, with a budget that can vary between 500 and 2,000 euros depending on the duration and complexity of the work;
• technical or psychometric assessment tests, which are often not free of charge;
• participation in job fairs (site rental, logistical costs, etc.);
• software subscriptions or licenses, such as ATS;
• logistics for physical interviews, etc.

Calculate indirect costs

Indirect recruitment costs are less visible than direct costs, but just as important.

They concern the financial impact on time, internal organization and productivity. These include the salaries of employees involved in the recruitment process.

👉 Here are the main indirect costs:

• the time invested by HR teams and managers (analyzing CVs, organizing interviews, debriefings, etc.) ;
• the cost of vacancy, as a prolonged absence often results in an extra workload for the team, or even a drop in sales;
• the temporary drop in productivity, while the new employee reaches his or her full potential, etc.

These costs are sometimes underestimated, but their real impact on the budget can be considerable. If you don't anticipate them, you risk ending up with unforeseen expenses.

💡 Please note: don't overlook an important component here, i.e. the loss of earnings resulting from the mobilization of an employee (a manager, for example) on recruitment. In fact, during this period, he or she will devote less time to his or her main, value-generating missions.

Take into account the costs of external recruitment

In some cases, companies use the services of an external recruitment agency:

• to hire rare or highly specialized profiles;
• for large-scale recruitment;
• when there are no internal resources to do the job, etc.

☝️ These expenses are booked as direct costs.

But how much does a recruitment agency cost?

On average, it represents 15 to 25% of the new recruit's gross annual salary, if the position is in the middle range. This amount rises to a higher level when the task becomes more complicated, as in the case of hiring penurious profiles, for example, or for management positions.

Add onboarding expenses

The cost of recruitment also includes the cost of onboarding, a key stage in the hiring process.

Onboarding goes far beyond simply handing over the keys to the office. It aims to help the employee adapt quickly to his or her position and understand the company culture... to avoid getting off on the wrong foot either way.

Best of all, it's a process that needs to be repeated every time, so it's worth taking into account if you're planning to do a lot of hiring in the coming months.

👉 Onboarding a new employee includes the following costs:

• training (introductory sessions, e-learning, personalized coaching, etc.) ;
• HR time needed to manage the administrative side, and managers' time to support the new recruit;
• the cost of the tools and equipment the employee needs to be productive, etc.

Anticipate the costs of a recruitment failure

Finally, to better anticipate your future expenses, it's important to take into account the costs associated with the potential failure of a recruitment (even if you're going to do everything you can to make sure it doesn't happen, of course 😉 ).

So, what's the cost of poor recruitment?

Depending on the position, it can sometimes be as much as 2-3 times the initial cost.

And there's a good reason for this: in addition to the unavoidable costs that are essential to restarting the hiring process, there are other costs to consider:

• administrative management of the employee's departure;
• legal costs and potential compensation payments;
• potential loss of productivity if the new employee lacks the necessary skills and motivation;
• lower morale in the team concerned (turnover has a major impact on group dynamics!).

Recruitment costs: an example

💡 To see a little more concretely what a recruitment can cost, here's a concrete example, concerning a mid-level position with a gross annual salary of 50,000 euros.

In this example, the cost of recruitment is €8,300.

In the event of failure, the cost rises to €18,300.

How can you reduce the cost of recruitment?

Keep a close eye on your expenses

The task of calculating the cost of recruitment that you may have just carried out thanks to our article... doesn't have to be done just once!

It's important to do it over time, with a view to continuous improvement. In fact, various expense items are likely to evolve according to situations, market conditions, etc.

🔎 By keeping a close eye on these expenses, you can constantly adjust your HR department's profitability.

Think internal recruitment

According to Factorial, the cost of internal recruitment is on average 25% to 50% lower than the cost of external recruitment.

Certain costs are simply eliminated, such as those associated with multi-posting advertisements or using a sourcing agency.

Another advantage is the reduction in onboarding costs, since the employee is already familiar with the company's culture. What's more, they already have their own equipment.

Opt for co-optation

Cooptation is another solution commonly considered by organizations to reduce the cost of recruitment.

Here too, you can say goodbye to the cost of advertising. What's more, the hiring process is accelerated (and that saves on overheads).

☝️ On the other hand, this system traditionally goes hand in hand with a financial reward for the employee who finds the rare pearl. Factor this into your calculations!

Use recruitment software

This article proves that time is money. So what better way to save time than with recruitment software that automates tasks?

Of course, the price of the tool also enters into the equation, and more specifically into your direct costs. But used properly, it promises an excellent return on investment.

💡 Softy, for example, is a software solution that takes care of recruitment processes from A to Z, thanks to its extensive functional coverage: multicasting of advertisements, application management, testing, co-optation and internal mobility management, onboarding, etc. All these operations are centralized, and the platform features an intuitive interface, to streamline and therefore accelerate operations. What's more, thanks to the latest intelligent technologies, you can avoid costly recruitment errors as far as possible.

Developing your employer brand

Finally, there's the question of your employer brand.

When your employer brand shines, applications pour in, especially from quality candidates who are sometimes hard to spot.

This inexorably reduces :

• certain costs, in particular sourcing and recruitment agency fees;
• turnover, which is costly in the long term.

See all software Recruiting

What to remember about the cost of recruitment?

Don't take the cost of recruitment lightly: it can run into thousands of euros!

To get the full picture, you need to take into account a whole range of expenses: direct and indirect costs, onboarding costs, etc. Not to mention the fact that in the event of a casting error, the "bill" climbs even higher!

With this in mind, calculating the cost of hiring is all well and good, but trying to reduce it is even better. The good news is that the levers you can activate in this direction (use of dedicated software, internal mobility, cooptation, etc.) not only enable you to recruit more cheaply, but also more efficiently !

Because when you find that rare gem, you generate long-term value for your company's growth.