Need to cut your CPH down to size?
In today’s competitive job market, organisations are constantly looking for ways to reduce their recruitment costs while ensuring they attract the best talent. To achieve this, understanding, calculating, and effectively reducing your cost per hire (CPH) is crucial.
In this guide, we will explore what CPH is, how to calculate it, and provide 8 practical strategies to lower your cost per hire while still hiring top-quality employees.
What is Cost Per Hire, and How to Calculate It?
Cost per hire, often abbreviated as CPH or cost of hire, is a key recruitment metric used to measure the expenses associated with bringing a new employee on board.
To calculate your CPH, you can use the following formula:
Cost per hire = (Internal recruiting costs + External recruiting costs) / Total number of hires
For example, if your recruitment costs for a specific period amount to $2,000, and you’ve made two hires during that time, your CPH would be $1,000.
Understanding the breakdown of your CPH is essential because it is made up of various internal and external expenses. Internal costs include HR and recruiting staff compensation, hiring manager’s time cost, operational expenses, compliance costs, training, and onboarding costs. On the other hand, external costs involve job advertising, digital marketing campaigns, recruitment consultants, employee referral fees, and more.
8 Practical Ways to Reduce Your Cost Per Hire
1. Use Talent Assessments
Talent assessments are valuable tools to evaluate candidates objectively. They can be used in the later stages of the recruitment process, providing insights into a candidate’s knowledge, skills, and potential. Types of talent assessments include behavioural, cognitive, and integrity assessments.
By integrating these processes into your recruitment, your organisation can better identify high performers. This can help minimise the risk of making a poor hiring decision, saving your organisation money in the guise of rehiring costs in the long run.
2. Invite Candidates for an Onsite Meet-and-Greet
Streamline your interview process by organising onsite meet-and-greet sessions with candidates. This approach not only saves time but also offers a chance to assess candidates’ personalities and cultural fit more effectively. Seeing how they act in-person, especially when meeting the rest of the team, provides a great indication of their potential fit within the organisation.
Often, you’ll know pretty quickly which candidates will gel best, and often this simple step can help reduce the stages within your interview process, in turn saving time and costs.
3. Retain Your Top Performers
We’re always saying this, but we’ll say it again! The best recruitment advice is to avoid having to do it in the first place. Focusing on employee retention is one of the most effective ways to reduce hiring costs. And retention is more than just offering a high salary, although that helps of course.
Regular performance reviews and anonymous employee surveys can help you identify and address their needs, but generally flexibility, mobility, and showing that employees are valued will always help.
4. Focus on Your Best Sources of Hire
Not all recruitment sources yield the same results. Analyse your recruitment sources to identify which ones work best for your business. Allocate your budget more effectively by prioritising sources that consistently deliver high-quality candidates.
That’s not to say that you should only rely on one source, multi-channel recruitment is still the better choice. However, if you’ve found a great source of candidates from one source, try focusing on that first before expanding the search. For example, if you recently hired a couple of great developers through a referral program, try encouraging more for your next developer role!
5. Use a Recruitment Marketplace When Engaging Recruiters
Working with recruiters can actually save you money, despite the upfront cost of a recruitment fee. This is due to the money saved by a shorter time-to-hire, as well as the effort spent on other business activities.
By tapping into a recruitment marketplace such as TalentVine, these savings can be reduced even further. The platform can ensure you engage with recruiters who offer competitive rates, understand your industry, and deliver quality candidates, reducing the risk of a bad hire. This approach not only saves valuable time and effort but also contributes to a more efficient, cost-conscious recruitment process.
6. Add a Career Page to Your Website
Enhance your employer brand by creating a dedicated career page on your website. This page should showcase your company’s culture, values, and job opportunities. Optimising job postings for search can help candidates find your openings organically, reducing reliance on expensive third-party job boards which charge posting fees.
Even if you are not hiring at present, let prospective candidates know that they can still submit their CV for consideration for when you are next hiring. Building up a talent pool in this way ensures you have interested candidates to contact as soon as a suitable role opens up.
7. Create an Employee Referral Program
Implement an employee referral program to leverage your current workforce in the recruitment process. Encourage employees to refer top talent, as they can provide authentic insights into the company culture, which can lead to cost savings and improved quality of hire.
The other benefit of a referral program is access to passive candidates. As members of your existing employees’ networks, there’s also more chance they will suit your organisational culture.
8. Keep Your Talent Pipeline Engaged
Maintain a warm talent pipeline, even when you’re not actively hiring. Engage with past candidates, runner-up candidates, and former employees. An effective offboarding program and correct candidate rejection will help to ensure these candidates are open to the opportunity.
This approach can save time and resources when it’s time to fill positions, as you already have a pool of motivated talent to choose from.
Reducing your cost per hire is not only a financial benefit but also an indicator of an efficient hiring process. By implementing these practical strategies, you can lower your CPH while still attracting top-quality candidates.
Remember that achieving a balance between cost reduction and quality of hire is essential for maximising your recruitment ROI. Start by assessing your current recruitment process and identifying areas where these strategies can be applied to optimise your hiring efforts.
TalentVine streamlines your recruitment by connecting you with pre-vetted, top-quality recruitment agencies, ensuring you only work with the best in the business. This not only saves you time and effort but also minimises the risk of costly hiring mistakes. With TalentVine, you can make cost-effective, informed decisions, ultimately leading to a more efficient and cost-efficient hiring process.