When a new role opens up in an organisation, it is normal to consider different ways of recruiting to ensure that the right person is found for the role as smoothly and cost-effectively as possible. However, the fact of the matter is that well-executed recruitment always takes time and resources. It is therefore worth considering whether the organisation has the resources to complete the process itself, or whether it would be more efficient to seek an external partner.
The decision can be supported by taking into account the roles of the various stakeholders, the time they have available, the complexity of the recruitment process, the salary costs of the people involved and other possible costs. In this article, we look in more detail at the costs of recruitment as an in-house service and as an outsourced service.
The recruitment process costs resources
It is worth considering your organization’s resources and the cost of the process from a number of different angles when starting the recruitment process. Costs are divided into direct costs and additional costs. Direct costs include the salary costs of the employees involved in the recruitment process, while external costs are incurred, for example, when recruitment is outsourced.
Stakeholders, estimated working time and salary costs
The different stages of the recruitment process include:
- Definition of criteria
- Planning the recruitment strategy
- Writing a job advertisement
- Candidate communication
- Interviews
- Possible psychological assessments and case studies
- Negotiation phase and signing of the contract
Costs are therefore influenced by the time spent on recruitment, the number of stakeholders and people involved and their salary costs. At the start of the process, it is worth considering who will be actively involved in the recruitment process and identifying other people in the organisation who may need to be involved during the recruitment process. The costs should therefore include all the people involved in activities such as interviews, internal meetings or, for example, marketing the role.
Skills
To avoid hidden costs, it is worth ensuring that the organisation has thought through the skills, networks and timeframes of the recruiter who will be carrying out the search. Direct searches in particular require the ability to identify potential talent from a large pool of candidates. Knowledge and understanding of the industry and the labour market will support a successful direct search.
There may also be situations where there is no clear person in the company who is responsible for taking recruitment forward in a competent manner. In these situations, achieving cost-effective results can be a challenge, as it can take many months to achieve results. Moreover, the effects of prolonged recruitment may start to have an impact on the company’s finances and performance.
Marketing to gain visibility
Advertisements and different marketing campaigns for vacancies on various channels such as websites, social media, LinkedIn and recruitment channels (Duunitori, Jobly, Oikotie) should be included in the direct costs of recruitment. Any pre-recruitment research, for example on employer image, should be taken into account when planning resources. You can find out more about the employer image survey here.
Misrecruitment is a major additional cost that has a far-reaching impact on an organisation's operations
Erroneous recruitment represents a significant cost to the organisation. The situations listed as mis-recruitment are those where the recruited employee does not perform as expected in the role and has to be dismissed during the probationary period, or the employee leaves the role within the probationary period.
The costs of a non successful recruitment include the costs incurred in completing the recruitment process and the salary costs accumulated during the period of employment. The price tag is of course higher the higher the level of the role and the longer the employment relationship has lasted.
Recruitment costs also include opportunity costs, the magnitude of which is more pronounced in the case of misrecruitment. The opportunity cost refers to the lost revenue when an employee has spent time on recruitment instead of being billed for work. The opportunity cost can be simplified by multiplying the number of hours spent on recruitment by the number of hours of invoiced work.
Error recruitment can be effectively avoided by focusing on a clear definition of criteria at the beginning of the recruitment process. Straightforwardly moving the recruitment process forward and ensuring candidate experience will contribute to success. Psychological assessments also add objectivity to the recruitment decision.
Relying on a partner is an effective and reliable option
Relying on the services of a recruitment partner can sometimes feel like a big cost, but when considering all the resource needs of the organisation and potential costs discussed earlier in the article, organisations save both time and staff resources by working with a partner.
When working with Avila, the organisation will always be shared observations about the job and candidate market and any changes in it, and actively receive feedback from candidates during the recruitment process. We also aim to minimise the burden on the recruiting manager and other stakeholders involved in the recruitment process during the recruitment process, so that the client’s HR representatives and recruiting managers can spend their time developing the core business of the organisation. By working with a partner, organisations can also monitor and learn from the experts’ activities for future recruitment.
In general, when working with a partner, recruitments have a guarantee that protects the company even in the event of a termination of employment during the probationary period. In these cases, the partner is contractually obliged to restart the recruitment process. Avila always offers a 6-month recruitment guarantee for specialist and entry-level recruitment, and a 12-month guarantee for executive-level recruitment.
Price of recruitment in cooperation with a partner
When choosing a partner to support your recruitment, the price of the project will vary depending on the criteria of the role you are applying for. Generally, the direct recruitment fee is based on the monthly salary of the recruit. The pricing may also include a salary multiplier to reflect the challenging nature of the role you are recruiting for.
In Finland, the price of recruitment services is usually in the range of €5,000 to €15,000 for specialist level recruitment. Expert recruits usually refer to people with 2-8 years of experience in the field. For managerial level recruitment, the costs increase significantly and can reach tens of thousands of euros.
The billing models of direct placement and recruitment companies differ depending on the operator. Billing models include flat rate, success fee or a combination of both. Invoicing for a role can therefore take place either upfront, during the recruitment process, or only once the role has been filled and the employment contract has been signed. You can find out more about Avila’s direct hiring rates here.
When starting to work with a recruitment partner and comparing different offers, it is also worth considering the following aspects of the recruitment process:
- Guarantee: recruitment partners usually commit to providing a guarantee for the recruitment, covering a period of 6-12 months. This guarantee can also cover situations where qualified candidates cannot be found and recruitment or direct search must continue. The guarantee also covers contracts terminated during the probationary period or in the event of the employee’s own resignation.
- Recruitment execution: when working with a recruitment partner, the right approach to recruitment can be chosen between direct search, advertised search or a hybrid of the two. When looking at offers, it is worth checking the types of campaigns that are included in the recruitment process.
- Suitability assessments: at Avila, our recruitments automatically include two psychological assessments to ensure objective selection and to minimise the risk of misrecruitment. When comparing potential assessments from different operators, it is worth ensuring the reliability of the methodology and whether the assessment is carried out psychologically.
If your organization is considering different ways of carrying out its next recruitment process, we will be happy to help you find the most appropriate means.
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Mikko Savusalo
mikko.savusalo[at]avila.fi