Whether you’re shopping for groceries, building a house, or running a company, you need a budget to do it successfully. We’ll explain how to create and manage your recruiting budget in a way that minimizes waste, promotes high-quality hires, and helps achieve the company’s goals.
What is a Recruiting Budget?
A recruiting budget is a plan for allocating resources toward recruiting activities. It includes fixed costs, like salaries for recruiting staff, and variable costs, like advertising, referral bonuses, and recruiting specialized employees.
Your recruiting budget will be based on the number and type of candidates you want to attract. The organization’s larger goals, like growth or cost reduction, also dictate it. Having a strategically designed recruiting budget helps recruitment managers spend money in a way that supports these goals.
Importance of a Recruiting Budget
To understand why it’s important to have a recruiting budget, we must understand the importance of recruiting itself. Your recruiting efforts directly impact the quality of the staff you hire, and the quality of your workforce defines the company’s performance. Without a skilled, dependable staff, achieving the goals the company sets out will be near impossible.
Having a carefully constructed recruiting budget ensures funds are being spent thoughtfully where they will make the biggest impact, improvising results from year to year and eliminating waste where possible.
What Should a Recruiting Budget Include?
Your recruiting budget should include all expenses you can plan for and leave room for miscellaneous expenses you might not be able to anticipate. Here are a few major line items in most recruiting budgets.
For most companies, labor is going to be a significant recruiting expense. This includes salaries and benefits for internal staff, like your recruiting and/or HR team, and third-party recruiters you contract with.
The good thing about labor is that it’s a very predictable expense. You should have a fairly solid idea of how much labor will cost you for the entire year. Barring any extraordinary circumstances, it shouldn’t change much from your initial estimate.
Consider how much you typically spend to post your jobs on third-party listing sites, whether you pay per job or a monthly or annual subscription fee. If you’ve been paying for each posting individually, this is a great time to assess whether a subscription might be a more cost-efficient option.
This includes any time you pay to promote your job listings outside of the fee to simply place them on job boards. Things like sponsored posts on LinkedIn or Facebook and ads in trade publications fall into this category. Incorporating advertising into your recruiting budget is worthwhile because many ad mediums offer built-in analytics that can be a valuable source of insights.
Content marketing covers your initiatives to attract candidates to your open jobs organically. This might include social media, blog posts, videos that showcase your employer brand, etc. Consider the cost of the labor to produce content marketing materials and any required tools, like professional recording equipment.
Recruiting events like job fairs and on-campus meet-and-greets can be a great way to connect with active job seekers. These events come with registration fees and costs for things like handouts with your employer branding and free giveaways. Also, include the attendance cost of events like industry conferences, which help recruiters expand their professional networks.
Technology includes all the digital tools that make your job as a recruiter easier, like apps, candidate assessments, and applicant tracking systems. It also includes setups and ongoing maintenance of the careers section of your website, as well as any other online channels you use to collect and process applications.
This is an important category to examine closely, as seemingly small subscription fees can add up when you have several recruiting employees who are each using multiple apps.
Referral bonuses are paid to employees whose referral results in a successful hire. Historical data is useful for anticipating recruitment bonus costs.
If you’re launching a referral program for the first time, you can still use data from years past to help you make an accurate cost projection. On average, 30 to 50% of a company’s hires come from referrals. If you know how many employees you’re looking to hire this year, you can calculate how much that translates to referral fees.
While you can’t predict the unknown, you can at least plan for it financially. Make sure your recruiting budget has a cushion for unforeseen expenses like travel incidentals and unplanned job openings due to resignations and terminations.
How to Calculate Your Recruiting Budget
Determine recruiting goals
How many people will you need to hire? Which departments will be growing? What new skill sets do the company’s initiatives require?
Answering these questions is the first step in managing your recruiting budget because your goals should serve as a guide for the things you spend money on. Having clearly defined objectives will help you decide what needs to be scrapped, changed or added to your budget.
Look at last year’s spend
Conduct a careful examination of the prior year’s recruiting expenditures. Where did you receive the greatest ROI from your efforts? What initiatives fell short and can be eliminated or overhauled?
Some costs, like subscription fees, will remain the same and will be easy to carry over from one year’s budget to the next. Others will be subject to changes you can anticipate, like raises or bonuses for recruiting staff.
For the rest, analyze how your spending needs to change from the previous year. For example, if one of your recruiting goals is to improve the candidate experience, you might need to add a technology line item for a helpful chatbot on your website. If your goal is to strengthen company security, you might need to plan for some events to help you connect with InfoSec candidates.
Consider cost per hire
To find your average cost per hire, divide last year’s total recruiting costs by the number of employees you hired. This will give you a good estimate of how every new hire impacts your bottom line. It can also give you an idea of how your budget needs to shift up or down based on whether you plan to hire more or fewer employees this year.
Advice on How to Manage Your Recruiting Budget
Track and analyze KPIs
Anecdotal evidence can be helpful, but monitoring your success metrics is the only way to know which recruiting efforts are working. Make it a practice to thoroughly document your spending and the subsequent results over time and analyze these numbers regularly to ensure your budget still makes sense.
Consider specialized software
Spreadsheets work for managing recruiting budgets, but only to a point. Once your organization reaches a certain size, it’s incredibly helpful to use an app that’s designed specifically for recruiting purposes. A platform that incorporates applicant tracking and analytics, for example, can help you make more precise budgeting decisions based on the performance of each recruiting channel.
Don’t count out the cost of time
The cost of your time is often overlooked because it’s not as tangible as a flat fee for posting a job ad. But employees’ time, especially at the managerial level, costs money.
It takes an average of 30 to 40 days to hire one employee. The more time you spend on each hire, the fewer employees you can hire without upping your recruiting staff. So, when creating your recruiting budget, it’s also wise to look for investments that will help you shave days off your time to hire.
By creating a thoughtful, thorough recruiting budget, you’ll ensure funds are available to hire the best possible employees while achieving organizational objectives.