Ask anyone with stake in a business and they will tell you – “it takes money to make money.” Each and every day difficult decisions must be made on where to best invest raised capital in order to propel the company forward. And, one of the single most important investments that any business will ever make is in attracting new talent.
Whether you are new to the hiring game or you’ve been at it for a while, the reality is that you’re up against some pretty hard truths. Hiring is no easy feat – especially in today’s market. It takes a great amount of skill, patience, time and money to recruit the right person to fill an open role. From a purely informational standpoint, we’re focused on the final item on that list – what is the true cost of hiring an employee, and what can you do to optimize that spend or maybe even reduce it?
There is much to consider when attempting to determine the costs of hiring an employee, and some of those costs might be specific to the unique environment of the hiring business. Having said that, when it comes to hiring new talent, the majority of businesses go through a comparatively similar process.
Below we’ve outlined five of the most common costs associated with hiring, across all industries, so that you can develop a clearer picture of the true cost of hiring and explained how partnering with an external agency can help you reduce hiring costs.
The Most Common Hiring Costs
- External Hiring Teams: For a growing number of businesses, having a dedicated HR team simply does not make financial sense. Start-ups and small businesses are quickly becoming the norm, and it’s been proven time over that teams of a dozen or fewer people can successfully run a business. There are two factors that must be considered:
- With a team this small, it isn’t necessary to have an internal hiring expert.
- Because the team is so small, every new hire is critical to the overall success of the company as a whole.
More importantly, small business owners will spend nearly 40% of their time focusing on tasks (such as hiring) that take them away from growing their business and generating revenue.
For these businesses, it is almost always better to seek outside assistance. There are a number of reputable hiring agencies that are well-qualified and capable of helping to fill any open role from entry-level all the way up to C-level and beyond.
Agencies, like People Store, work on a fee model where they are paid for results, ex. payment is due only when they’ve been successful in recruiting a new candidate. The price for this services varies, depending on a number of factors, but the right agency should be willing to try to work within your budget.
- Internal HR Team: As a company grows, it might eventually start to make sense to onboard an internal HR expert or even a dedicated internal HR team. However, that will always come at a cost.
In order to have the basic minimum, you would need at least one HR manager. Salaries differ from region to region, but the general estimate for an HR Manager in Ontario ranges from $69,000 to $100,000 per year or more. The HR manager could be expected to do everything from creating job ads, to advertising on job boards, sourcing and screening applicants, interviewing potential candidates, generating offer letters and more.
Of course, the responsibility of an HR manager doesn’t end there, HR managers are often tasked with a lot more than simply hiring. If the company is large enough for the HR manager to be involved in an array of other tasks, it will always be a better use of resources and time to outsource to an external hiring agency.
- Job Fairs: Despite them any great technological advances we’ve seen in recent years, nothing will ever have as strong of an impact as human interaction. Employers might choose to attend job fairs and other recruitment events in order to ‘put their name out there’ and interact with potential candidates.
Not only do these events take time and money (for example, a booth at Toronto’s annual Job Fair starts at $895 and that doesn’t even account for marketing or promo material), they also require key personnel to be away from the office – focusing on non-income generating tasks. That is, unless you engage with an external hiring agency who can manage these task on your behalf (and often without added fees.)
- Job Boards: With job posting sites, like Indeed, raising the costs and changing their business models multiple times over the course of just a few short years, employers are left scrambling trying to find ways to advertise their open positions – without having to invest a significant amount of money into a single job post. (LinkedIn has a fee model of $495 for a single post, over 30 days. Other job board’s work on a pay-per-click basis, which can see fees quickly climb into the thousands of dollars range or see employers placed low on the list simply because they’ve set a fixed budget.)
External hiring agencies have memberships with most of the leading job posting sites and because they advertise for multiple open positions at any given time they are able to benefit from preferred pricing models and never expect their clients to pay for these services.
- Background Verification: After you’ve found a candidate you’d like to hire, it’s practical to want to learn more about them prior to extending an offer. This is why running candidate background checks is becoming common practice.
Nowadays, it is easy to screen anything from educational history to criminal record clearance. However, just because it is easy doesn’t mean it is cheap. Depending on the service and the depth of the screen used, a single record check can cost upwards of $80, per applicant.
Most hiring agencies include these services, at no cost to the employer, in their standard agreement.
How to Decrease Hiring Costs
What if we told you that it was possible to reduce the costs associated with two of the most important parts of employee hiring – candidate sourcing and screening? That is exactly what People Store has been doing for the last 15 years – sourcing and identifying top talent across multiple industries for the Nation’s leading companies.
We’ve been able to solve one of the biggest challenges in hiring – effective candidate screening – and have developed a process that ensures our clients only see the best and most well-qualified applicants, saving them time and money in their hiring pursuits.
Referring to the examples provided in items 3 through 5, choosing to partner with an external agency could easily save you a minimum of $1,000 (per candidate / open position) on advertising, sourcing and screening alone. When you begin to include things like time and other invaluable resources, the savings start to add up quickly.
If you believe that your business could better optimize its hiring process to save time and money, we’d love to have a conversation. It is our goal to introduce you to better quality candidates, while putting money back in your budget and time back in your schedule.