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I Want to Cut My Recruitment Costs!

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Your organisation needs to hire. Therefore your question as a company director/hiring authority will be how you can do this at minimum cost and impact on time whilst ensuring the right result and a clear return on your investment?

When beginning your hiring process there are a number of solutions for you to consider:

1. Recruit yourself
2. Hire an Internal Recruiter
3. Hire a Recruitment Outsourcing firm
4. Outsource the hiring to recruitment agencies

Solution One: Recruiting Yourself

Very often the initial and preferred solution. However, it can also take considerable time, involve repetitive and sometimes tedious work and will not always guarantee you the desired result. More often than not, those who choose to recruit directly will end up having to resort to other solutions further down the line. In the scenario where you are responsible for recruiting, it is essential that you take the opportunity to evaluate the cost of your time with regards to moving away from your core business tasks. If recruiting yourself will take 14 days, what is your daily rate? How would your time be better spent?

For example, say you value your time at £500 per day and it takes you 10 days to recruit for one position, that would be a cost £5,000. To this you must also add the cost of using CV databases (i.e. one CV database costs between £500 - £1000 per month), advertising and other costly methods of recruitment. The price does add up! Of course you may have contacts within your industry that could organise referrals or introductions and this would be ideal but make sure you always consider a contingency plan.

Solution Two: Hiring an internal recruiter

In recent years it has become commonplace for organisations to develop recruitment strategies aimed at cutting agency costs and improving processes through the method of engaging a dedicated in-house recruiter. In some cases internal recruiters have proved invaluable assets; however, this is not always the case and in numerous instances companies have found themselves paying additional agency fees when the internal recruiter cannot deliver. When deciding on whether hiring an internal recruiter is the best option for you, it is important to consider the cost of their basic salary and any bonuses they may acquire. In addition, you will need to take into consideration the cost of ensuring they have all the necessary tools to do the job i.e. CV databases; advertising budgets etc.

For example, basic salary + bonus + advertising budget + CV databases + time costs of managing the internal recruiter = minimum £3,000 - £5,000 per month. If you calculate this over a year you could find yourself paying around £36,000 per annum, if not more. You also need to factor in that one recruiter will never be able to fill every role so at some point it is very likely that you will find yourself using the services of an agency. With access to 5-10 CV databases, networking sites, advertising etc agencies will often be in a much better position to deliver the talent you need when your internal recruiter can not. Therefore, just bear in mind that it is not always fundamentally cheaper to hire an internal recruiter, if you want to go down this route do careful spreadsheet analysis to make sure you are actually going to save costs.

Solution 3: Recruitment Process Outsourcing (RPO)

RPO can help you save costs if you appoint the right company to work however this is not always straightforward or relevant. Whether or not Recruitment Process Outsourcing is right for your organisation will depend on your level of hiring and requirements. Generally, RPOs are of most use to companies with extensive recruitment needs however, within the SMB marketplace there are definitely some new firms offering flexible 'on-demand' recruitment outsourcing that could offer flexible solutions to companies looking to try this solution. As with all the above options, when considering using an RPO scheme, ensure that you spend some time looking at your future recruitment plans; budgets and potential costs.

Finally, Solution 4: Outsourcing to Recruitment Agencies

I am sure this isn't the solution you instinctively want to implement; however, in some cases when you evaluate the costs carefully it will often be the case that agencies are the cheaper alternative. If you are going to use agencies it is important, in order to get the best service, to ensure that from the outset you are clear, concise and strict on what you are looking for.

Checklist:

  • Make sure they are representing your brand and promoting it in the marketplace
  • Be clear about when they should call, when you want CV's and when you want to interview
  • Set a maximum price with them for the hire (negotiate)
  • Set timeframes and performance expectations
  • Consider exclusive if you get the level of service you are looking for at a lower cost
  • Negotiate prolonged rebate periods
  • Agree to pay in installments to cut upfront cost

For all the above solutions to your hiring needs there are numerous factors to consider. Each solution has its own merits and you need to consider which is best for your business. Before employing any of these solutions run a cost analysis spreadsheet and don't forget to consider time as a cost, it is in short supply these days.

21st July 2009

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