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Recruitment: What is the cost of recruitment?

Recruitment is the process an employer goes through to find a new employee. The recruitment process typically has five main phases: the job ad and applications; interviews and testing; assessment and selection, and finally employment. Everyone knows that recruitment costs, yet a lot of expenses are still forgotten in the planning.

In addition to the well-known and tangible costs for e.g. the job ad, personality tests, recruitment consultants and time spent on interviews, there are several other costs associated with recruitment and new appointments. Are you recruiting a new employee? Then I am about to give you an overview of the costs you need to factor in for the recruitment process and new appointments, so you can prepare yourself for finding the best candidate for the job.

What is recruitment?

The aim of the recruitment process is to find a new employee for a vacant position. The best candidate for the job in question must meet a number of requirements, and those requirements often affect the complexity and time required for the recruitment process itself. For example, hiring an accountant will often not require the same resources as appointing a CFO. A thorough recruitment process consists of a series of tasks:

  • Job analysis
  • Job and person description;
  • Job advert
  • Advertising
  • Search
  • 1st, 2nd and potentially 3rd interview
  • Tests
  • Analysis
  • Selection
  • Employment contract

The amount of time spent on each task may vary, and as previously mentioned, this depends on the individual position and requirements in terms of the employee's skills.

Why is proper recruitment important? Bad hires are expensive!

First of all, proper recruitment is important because you need to find the right employee for the job. The right employees have the skills to handle the tasks associated with the position, and it is obviously preferable that the newly hired employee can add even more value to the position. Secondly, bad hires can be a costly mistake. Cases in which a new recruit cannot – or does not want to – continue in the job will mean that all costs associated with the recruitment will be wasted, and you will need to start the process again.

A bad hire can cost between 75 and 150% of the annual salary of a newly recruited employee, and the following sections will explain why these numbers are so high. Proper recruitment can minimise the risk of bad hires, e.g. by ensuring a proper job analysis is performed so you know exactly what skills, experience and qualities you are looking for.

What costs should I factor in for recruitment and new appointments?

Of course, there will be a big difference between completing all phases of the recruitment process versus knowing someone in your network who is the right person for the job. The cost of recruitment and new appointments can vary from DKK 0 to more than DKK 1.2 million. The costs will also rise if you need more than one employee. This is because the more people you need, the harder it becomes to recruit new employees with the right skills. You can split the costs of recruitment and new appointments into three categories:

  • Recruitment costs
  • Adaption costs
  • Disruption costs

Recruitment costs include the aforementioned tasks during the recruitment process, such as interviews and testing. These are the costs most often associated with recruitment, because they are tangible costs that can be measured. Adaption costs relate to the new employee's lack of productivity and formal training through e.g. courses. It takes a new employee around 80 days to reach the average level of productivity, and in the time leading up to this, the employee is 30% less effective. Disruption costs relate to times when you or your existing employees need to help the new recruit, thus becoming less productive. An existing employee will spend an average of 99 hours on informal training for a new recruit.

Why are recruitment and new appointments so expensive?

The majority of the costs associated with new appointments are actually incurred after the appointment. Some 79% of the costs are incurred after the employment contract has been signed, but the time spent on all three of the above cost categories is often the most significant. However, you should not try to cut back on the time spent training and integrating a new employee into your company. There must be opportunity and time to onboard a new employee, because the right new recruit must be given a reason to stay in the job.

  • 22% of all new employees leave their position within the first year
  • 4% never return after the first working day

You must therefore carry out a well-planned and thorough recruitment process when you need to find a new employee.

Primary source: Dansk HR

Need help with recruitment?

At Azets, we have consultants with experience and skills in everything from job adverts and personality tests to drafting employment contracts and staff policies. We can help with everything relating to HR.



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