In today's competitive job market, recruiting and hiring top talent have become increasingly challenging and costly for employers. Over the past few years, the expenses of finding and hiring new employees have notably increased.
The average cost per hire rose from $4,129 in 2019 to $4,700 in 2023, marking a 14% increase, according to information reported in this article by software company Toggl. The surge in recruitment costs can be attributed to various factors, but there are actionable strategies that employers can adopt to navigate these expenses.
Here are some of the reasons behind the rise in recruitment costs:
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Intensified Competition: With the advent of digital platforms and remote work opportunities, talent competition has reached extraordinary levels. Employers are now engaged in battles to attract top candidates, leading to increased recruitment expenditures as organizations invest more resources in employer branding and talent acquisition strategies.
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Low Unemployment and an Aging Workforce: The available talent pool has significantly diminished, with national unemployment rates hitting the lowest levels in decades in recent years. This scarcity of candidates has intensified competition among employers, increasing expenses in sourcing, attracting, and retaining skilled workers. Simultaneously, the aging workforce presents its own set of challenges. With older workers remaining in the workforce longer, positions that would traditionally open become fewer and farther between, extending the time-to-fill for vacancies and driving up recruitment costs.
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Investment in Employer Branding: Building a compelling employer brand has become crucial to talent acquisition strategies. Employers allocate significant resources to showcase their company culture, values, and benefits to prospective candidates. From hosting recruitment events to leveraging social media and employer branding campaigns, these endeavors incur substantial costs that can add to the overall recruitment budget.
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Technological Advancements: Adopting recruitment technologies, such as applicant tracking systems, job boards, and artificial intelligence (AI) tools, has become increasingly common. While these technologies offer efficiency gains and streamline processes, they also come with associated costs, including subscription fees, implementation expenses, and training requirements.
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LinkedIn: LinkedIn has emerged as a dominant force in professional networking and talent acquisition. Employers often invest in LinkedIn Premium services, sponsored job postings, and advertising campaigns to enhance visibility and attract top talent. However, these services can constitute a significant expense, particularly for small and medium-sized organizations with constrained budgets.
The following are some strategies that employers can use to mitigate the expenses:
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Optimize Internal Recruitment: Encourage employee referrals and leverage existing talent. Internal candidates often require less time and resources to onboard to new roles, reducing recruitment costs. Employers Council has a recently updated whitepaper available to members that discusses the different types of referral programs and critical issues for organizations to consider in designing a successful employee referral program.
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Leverage Free or Low-Cost Recruitment Channels: Explore alternative recruitment channels, such as social media, industry-specific forums, and niche job boards that offer free or low-cost options for posting job openings.
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Negotiate Pricing with Service Providers: When engaging with recruitment agencies or subscription-based platforms, negotiate pricing terms and explore discounts for long-term contracts or bundled services. Employers should periodically review their contracts to ensure they get the best investment value.
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Invest in Employee Development: Prioritize training and upskilling programs for existing employees to fill skill gaps internally. Investing in the professional development of current employees improves retention and reduces the need for costly external hires. Employers Council has a variety of training classes available to members (at a reduced cost) and non-members. Check out the Training Catalog on our website.
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Utilize Data Analytics for Optimization: Employers can make informed decisions to optimize their recruitment processes and minimize costs by evaluating results. That may include measuring yield ratios (the number of applicants at one stage of the recruiting process to the number at the next stage), the cost per hire, the time it takes to fill a position, and offer-acceptance ratios (the number of offers extended compared to the number of offers accepted by candidates). Employers can then develop goals to help the organization meet their overall recruiting objectives.
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Develop a Strong Employer Brand: Highlighting unique aspects of company culture, career advancement opportunities, and employee benefits on the organization's website can help attract talent without relying solely on expensive recruitment platforms. Consult our Employers Guide to Managing Workplace Culture for additional guidance.
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Maximize LinkedIn Usage: While LinkedIn can be a significant expense, it is a powerful recruiting platform. Make sure you are utilizing its features effectively. Optimize your company profile, engage with potential candidates through content sharing and networking, and carefully target your job postings to reach the most relevant audience.
Employers Council members can learn more about the steps involved in an effective recruiting process in this recently updated whitepaper. If you need assistance with or have any questions about the recruiting and hiring process, contact us at info@employerscouncil.org.
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