While outsourcing your entire recruiting operation may sound expensive, when you break down the costs of a highly functional internal recruiting team you may be surprised. There are also several factors beyond cost that should be evaluated when considering the benefit of an in-house recruiting function versus outsourcing this strategic element of your business. This month we will take a look at the actual cost of running a Recruiting Department.

The six critical areas of an internal recruiting operation are: Internal Labor Costs, External Labor Costs, Advertising, Administrative, Facility and Opportunity Costs. Let’s take a look at each of these.

Labor Costs

• Recruiting Manager – Someone has to be in charge of the overall direction of the recruiting team as well as manage the day-to-day operations of the department. This person is also responsible for hiring, training and developing the recruiting staff

• Recruiters

• Sourcing support – These are your internet, big data, find candidates under hard to find rocks members of your team

• Administrative Support – The members of the team that help schedule interviews, coordinate background checks, generate reports and keep the team running smoothly

• Labor Overhead – Employer-paid taxes and benefits will run between 25% - 40% of your actual labor costs

External Labor Costs

• Contract recruiter fees and expenses

• Contingency recruitment fees – these range from 20% - 30% per search

Advertising

• Annual subscription fees to sites like LinkedIn, CareerBuilder, Dice, Indeed and Ladders can be has high as several thousand dollars per person utilizing the service

• Unique website fees

• Fees associated with employment websites specific to a geographic area

• Print advertising

• Career Fairs

• Social media marketing expenses

Administrative Expenses

• Applicant Tracking System expenses – These are recurring monthly expenses as well as additional fees for specialized reporting or customization

• Background Checks

• Reference Checking

Facilities

• Physical Space – Every employee tied to recruiting needs 225 – 250 square foot of physical space. Multiply this by your per square foot rental cost or building operational cost.

• IT expenses – It is estimated that the average employee costs a company $7,000 per year in overall IT expenses. These expenses include computers, phones, phone utilization, IT supplies and Internet expenses.

• Office Supplies – On average an employee uses $200 per year in miscellaneous office supplies.

Opportunity Costs

When Human Resources professionals analyze how much time they have to spend on recruiting activities, the result is often stunning. When a company is going through growth mode, it can take up a significant amount of their time. HR professionals don’t always make the best recruiters. Direct-recruiting passive candidates is a lot closer to Sales than traditional HR functions and it may not be a strength of some HR professionals. Personally doing the recruiting, or managing a recruiting team, can take away from an HR leader’s ability to be a true business partner to the organization. Strategic initiatives, employee engagement and operational effectiveness can be greatly improved by having your talented HR professionals focus on what they do best.

When a true review of the financial expense of running your own Recruiting Department is reviewed against the costs of outsourcing this function to the right vendor, it often becomes clear that outsourcing can provide significant cost savings. In addition to the financial savings, companies find that by utilizing a vendor that provides highly skilled recruiters, they can increase their quality of hires, decrease turnover, improve time to fill, as well as make their HR team and department managers more productive and functional. Next month we will review how to pick the right firm to consider, factors that must be considered, how to evaluate the results, and elements that must be built into an outsourced agreement.