How to Reduce Recruitment Cost

In this blog post, we will be looking at how to reduce recruitment costs for your organisation.

Coming up in this post on how to reduce recruitment cost:

  • Why are recruitment costs so high?
  • Recruitment Agencies
  • Recruitment technology
  • CRM systems
  • Job boards
  • Marketing for recruitment
  • In-house recruitment salaries
  • Importance of tracking recruitment costs
  • Calculate your cost per hire
  • How to reduce recruitment cost
  1. Understand your demand
  2. Employee Attrition
  3. Be current with advocating activity
  4. Use Social Media
  5. Introduce a referral scheme
  6. Be smarter with your advertising

According to many experts, the cost per head when recruiting new talent can range from a mere couple of hundred pounds to a staggering £170,000 for executive-level talent!

This is dependent on a wide range of factors that impact the business. Related costs such as the loss of productivity and the resource costs associated with searching for new talent greatly influence.

However, Undercover Recruiter modestly states that an average of £3000 is spent on recruitment costs per hire.

Large organisations with high turnover can quickly become a considerable sunk cost if not managed properly.

It’s a tricky situation for the HR department, as it’s not a revenue-generating part of the business. It can be hard to allocate appropriate budgets when the return on investment can be more easily seen in other revenue-generating departments.

But the harsh truth of the matter is, it costs to recruit the best talent for your organisation.

Why are the recruitment costs so high?

You may be wondering, why does recruitment cost so much?!

Several things can massively inflate recruitment costs.

Recruitment Agencies

On average, a recruitment agency service ranges between 15-30% of the employee base salary. This figure is much higher if specialised, or executive search companies are used. For startups and small businesses, this figure can be prohibitive, even when considering the access to networks and knowledge of the sector specialist recruiters.

Recruitment technology

Many recruitment processes are totally reliant on technology built specifically to enhance the recruitment process. This includes video interviewing, artificial intelligence, ATS (applicant tracking systems), human capital management software, automation and candidate assessments.

Technology can be expensive. However, with the right product, you can make huge savings on recruitment costs.

CRM systems

Candidate tracking systems work just like customer CRM. The difference is with candidate systems. You can retain candidate profiles with records so they can be re-engaged when a suitable position becomes vacant. Too often, organisations fail to re-engage with past candidates and look for new candidates through recruiting channels. Creating extra (and sometimes unnecessary) costs in the process.

Job boards

Recruiting advertisements on job boards can be an expensive cost- even more so when advertisements are on many platforms to increase visibility. Assessing which job boards are the most successful for your industry is essential. Too much money is often wasted on job board advertising that has little success in delivering top quality talent and few applications.

Marketing for recruitment

Recruitment marketing extends way beyond using job boards. Today, companies' ads extend into social media, display ads, candidate nurturing, recruitment shows, pay per click (PPC), search engine optimization (SEO), and marketing automation. Employee acquisition techniques are evolving to mimic customer acquisition. Like customer acquisition, companies are now focusing more on digital marketing than traditional recruiting channels.

We are also seeing companies become more focused on the candidate experience with video interviews, candidate nurture marketing programs and employer branding initiatives. (More to come on these subjects in future blog posts!)

In-house recruitment salaries

Many organisations are now looking to improve their in-house recruitment, which sees a stark difference in recruiter’s salaries, but with the additional benefit of saving costs from outsourcing with recruitment agencies.

Other related in-house recruitment costs are:

  • Onboarding new staff costs (managing, training, uniforms etc)
  • Loss of previous training and development that went into departing employee
  • Loss of knowledge, and productivity of departing employee
  • The greater impact of the loss of employee on clients and customer service
  • Knock on effects to other employees (in the case of a manager leaving or increased workload on other employees temporarily)
  • Length of the hiring process

The length of the hiring process has an immense cost to the business. From job opening to an accepted offer, the average hiring time lasts 10-12 weeks. During this entire period, the job role is still unfulfilled, leading to a whole host of different costs, as mentioned above.

Importance of tracking recruitment costs

Did you know that between 90- 95% of businesses underestimate their recruitment costs? Getting the cost of your recruitment process right is extremely important. Failing to do so results in businesses making bad decisions that can increase the cost of recruitment instead of decreasing them!

It pays to track your previous years’ recruitment spending and activity to make accurate predictions on the budget needed for the future year's recruitment process. Monitoring the headcount and budget is also critical for identifying and determining any major changes needed to improve the recruitment process and reduce unnecessary costs.

Calculate your cost per hire

Before you get starting on your cost-cutting recruitment process, work out your current cost per hire. To do so is easy.  Add together all recruitment costs involved, including internal and external activity, then divide this by the number of hires within a time period. E.g. they spent £60,000 on external costs and £15,000 on internal recruitment activity. You also hired 15 people within the same time frame. (£75,000/ 15= £5,000). Therefore, your cost per hire is £5000.

How to reduce recruitment cost

As we highlighted, Human Resources doesn’t increase revenue for an organisation directly. But with the right HR decisions, cost-saving measures and planning, a business can save a considerable amount of money!

Reducing recruitment cost process:

1.   Understand your demand

There is a difference between planning your recruitment proactively and reacting to an urgent need in the business. Take your recruitment planning further by sourcing candidates before they are needed. I know this sounds crazy, but you can cut down hiring times by 3-4 weeks in doing so.

But aren’t all recruitment solutions reactive?

Unfortunately, only 20% of candidates are in the market looking for ads on job sites, databases or signed up with agencies when you are ready to begin sourcing your talent. To access this mere 20%, you also need to be signed up to every ad, database and agency. As a result, companies typically only have access to 2-3% of the available talent pool at one time.

With such a limit on access to talent, more and more organisations are turning to use ‘Talent Warehousing’ to be proactive in searching for the best candidates for your organisation.

Talent Warehousing is just like an ATS system and a data warehouse in one! A data warehouse stores, restructures and standardizes data to make it more easily found and easy to report from. An ATS works by saving data from a candidate. Then as the candidate moves through the recruitment process, the data is moved along with them, adding more information as you go along and sending the candidates automated messages, saving recruiters a huge amount of time!

2.   Employee Attrition

Over 20% of the workforce within a company leave within one year. Often employees don’t develop a strong rapport within their new place of work and feel it fit to leave. Talent Warehousing enables companies to engage with candidates longer than the length of time for the recruitment process. It's important to take a little longer to engage with candidates to become familiar with the culture, colleagues and workload.

3.    Be current with advocating activity

Opinions of others matter more than you think. When you look to buy something, eat somewhere or go on holiday, you typically search for reviews or ask for recommendations from trusted friends and family. Recruiters realise this and understand those job seekers take the same approach to find out more about an employer.

Social media and employer review sites are being more frequently visited for some inside perspective.

If you can get your employees to advocate for you proudly, then you’re on the right path to attracting the best talent. To achieve this, many organisations are making sure employees feel supported, engaged and happy at work. With a little encouragement to employees to share their experiences, satisfied employees will be more than happy to do so.

The best part, it’s cost-free!

4.   Use Social Media

We all know that social media is a powerful advertising tool.

Organisations who are transparent on social media and share an inside view of the day-to-day operations can communicate effectively what it’s like to work there. Your social media followers will all feel a connection, and those who feel a shared vision and value will feel they can fit within your company culture.

It’s not as slapdash as you think. Careful planning should go into your social media campaigns to send the right message and positively interact with your followers. Choose a social media channel that fits your market demographics.

You can share images, videos, polls, thoughts and even blog posts.

5.   Introduce a referral scheme

Referral schemes are a long game strategy and a great way to gain like-minded talent who fit within your working culture. Set aside a budget for thank you rewards to employees who recommend successful candidates. This will go a long way to encouraging loyalty and, in the long run, could reduce bad recruitment decisions- ultimately reducing recruitment costs.

6.   Be smarter with your advertising

Write job ads that are clear and compelling. Your advertising may be the first impression an applicant has of your branding and image. So it would help if you made a strong first impression.

Not only must your wording be convincing, but you should also consider SEO. This is ensuring the keywords within your description are optimized for search engines. This way, more applicants that fit your ad will find your post.

A great ad also clearly identifies the key responsibilities and requirements of the job. Poorly executed job postings that fail to achieve this may get huge, but unfit candidate pools that waste your time trying to whittle them down to appropriate candidates.

7.   Employ better recruitment tools

Using recruitment tools can seriously transform your recruitment process. Tools such as ATS, video interviewing, human capital management software, automation and candidate assessments all can help streamline and quicken your process- drastically reducing recruitment costs. That is if you choose the right platforms. Being able to reduce the recruitment time will lighten the burden on other costs affected throughout the organisation.

We will go into recruitment tools in more detail soon in another blog post, so stay tuned.

8.   Reduce the need to recruit

The easiest way to reduce recruitment costs is to reduce the need to recruit!

However, this is more complex than it seems. It’s also a little catch 22. The better fit the talent you recruit, the less you’ll need to recruit to replace again in the future.

Refine your recruitment process, improve your engagement and support with existing staff, and you’ll soon find a reduction in turnover.

Read our previous post here on how to streamline the recruitment process and have more successful recruits effectively.


We hope the above steps we’ve briefly introduced throughout this post help reduce recruitment costs in your organisation. As you’ll begin to realise, the recruitment costs stretch far beyond the advertising and agency fees that it seems to be on the surface. Having a carefully outlined recruitment plan, along with tools and supportive networks, will go a long way to reducing your recruitment costs.

We hope you enjoyed this post on how to reduce recruitment cost. If you found it useful, please share it on your social media. See you next time!

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