Jayavelk_mba
Recruitment
Craig-R
Human Resource Management / Hr Metrics
+2 Others

As a part of our new HR metrics initiative I am trying to nail down an as accurate cost per hire metric as possible. I want this metric to include all labour costs on top of all recruitment expenses.

My problem is that I am having trouble including many different variables in order to come to an exact figure.

So far I am looking at:

1) Total recruitment costs
2) Recruiter efforts
a. Calculated: (average recruiter salary / # of work days) * 10%(see note) * average days to recruit * number of active recruiters
3) Total new hires

Note: 10% is an estimate of how much of the recruiter’s day is spent on recruitment (this doesn’t seem legitimate enough)

My formula looks something like: (1 + 2) / 3

For some reason, this figure looks too low and I think it has something to do with the recruiter effort step. This step does not take the number of new hires into consideration, and the amount of effort as the new hires number rises – whether this is an exponential or linear growth (I don’t know).

I hope I have made this as clear as possible, I will monitor this post to comment on any replies or questions you may have. Any help is appreciated.

Thanks,
sjak
12th January 2009 From Canada, Toronto
Hi,

I hope i shall also share my idea on cost per hire metrics so that things would be easier.

Before calculating a cost per hire metrics, we would consider the following criteria.

1. Recruitment channel - (Vendor, employee referral or internal recruitment)

a. Vendor - what is the invoice amount paid to the vendor for a particular hire.

b. Employee referral - What is the incentive paid to the employee for the referral.

c. Internal hiring - Though we might think internal hiring is of zero cost, It would also involve few costs which are to be taken into consideration like cost of the job sites, salary paid to the recruiters.

Now cost per hire will be

Vendor cost or Employee referral or direct cost (internal hiring) / total no of hires

This can be calculated number of hires for a particular month or for a stipulated time being.

For calculating the cost of the internal recruitment, consider these things.

Number of recruiters * their salary per month + Source of resource cost per month (like job portal / referral cost etc..)

for eg three recruiters for 10,000 salary per month and one job portal used @ 120000 per year will be

10000 * 3 + (1200000 / 12 ) which will result to 40,000

This is how the cost per hire metrics can be developed so that it would be really helpful for us to understand the cost per hire. Note that this is the additional cost excluding the salary offered to the candidate.

Hope this would be helpful and shall give you a small idea of developing the metrics.

Feel free for further queries @

Regards

K.Jayavel
12th January 2009 From India, Madras
Hello,
Regarding your cost per hire calculation, you should first be sure that you've included all possible recruitment costs. Depending on what you use to source this may include, advertising, online job boards, head hunter fees, employee referral incentives, etc.

The biggest issue I see with your calculation is that you've only allocated 10% of recruiters salaries to your recruitment costs. If the recruiter's sole job mission is talent acquisition, then I think it is reasonable to say 100% of their salaries should be included in your calculations. Obviously they will perform other administrative duties, as does every job, however the recruiters end product is staffing. One way to think about it is if you decided to completely outsource the recruitment function, will 100% of their salaries go away? If the answer is yes, then it is fair to allocate 100% of their overhead to recruiting costs. In some organizations a recruiter may also share other responsibilities, such as the role of an HR Generalist. If this is true for your organization then you should to allocate their time accordingly.

I hope this is helpful. Please feel free to contact me or post here with questions or follow-up discussion.

Craig

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21st January 2009 From United States, Temperance
I agree with above posters and if you care about the costs of recruiting, and you should, you ought to give how and what you measure around costs some serious thought. Think about getting some professional assistance with your analysis. It will pay for itself many times over.
24th January 2009 From India, Mangaluru
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