7 Steps to Effectively Managing Your Hiring Budget

A hiring budget is a comprehensive annual estimate of the total cost of hiring in your organization, which is comprised of internal costs (such as recruiting salaries) and external costs (such as hiring technology, advertising costs). This includes unplanned costs resulting from the departure of staff. It goes without saying that your talent budget should align with your organization’s long-term and annual business strategies, including the current plans set by your CEO and board of directors.

So now that we’ve figured out what a hiring budget is, let’s dive into our step-by-step guide to make sure your budget is working for you.

1. Make your annual recruiting plan:

At this stage, you need to spend a lot of time. To avoid taking a siled approach to hiring year after year, we recommend that you work on the following:

• How many new employees does your company plan to hire?
• Determine if certain roles are more difficult than others. If so, will they cost more?
• Is there seasonal hiring?
• What about mass recruiting, such as recruiting graduates?
• What is your staff turnover rate?

Knowing the answers to the questions above will help you create a hiring plan for at least a quarter. In addition, you will know how many annual appointments you need to prepare by the department. Meeting with department heads and/or hiring managers to estimate the number of employees your company plans to hire in the next fiscal year is critical to this step.

If you know you need to hire people with certain skills, you may need outside help, such as a recruiting agency or headhunter. In this case, allow more time for this. By talking to your managers, you can better plan and budget for the type of candidate you need to hire. For example, hiring interns or junior employees will cost less, and hiring senior managers and directors will inevitably be more expensive.

Any self-respecting hiring professional will have a good understanding of your company’s turnover. Within this understanding, it is helpful to consider the general demographics and culture of your company before setting hiring costs. For example, is your workforce predominantly young with high turnover? Or is your company mostly made up of people interested in a secure position, whether they prefer it or are dictated by the economy? Of course, these are two extremes. But we mean that understanding your turnover and its reasons will help you calculate your annual costs more accurately.

2. Break down your expenses:

Calculate how much you regularly spend on hiring by category and by month. The following headings may be helpful in performing these calculations:

• Rent price
• Job Posting Cost (e.g. Indeed, Career Builder, Industry Dashboards)
• Social media referral costs (e.g. LinkedIn)
• Recruitment software costs (upfront and recurring costs)
• Recruitment and networking events, including alumni fairs
• Branding (e.g. corporate videos, social media, banners, print materials, etc.)
• Checking the data of potential employees
• Outsourcing agency fees (if you use them)
• Interview costs (travel and accommodation costs of the candidate, if offered to candidates)
• Salary is included in a separate heading if you are hiring temporary agency staff.
• Onboarding costs, including travel costs for candidates (again, if offered)
• Training costs (during adaptation and annual professional development)

If you have what appears to be a seemingly high annual recruitment, don’t be fooled. It’s very important to take everything into consideration in step 3 (more on that in a second), and then assess how you will allocate those monthly expenses, including fixed and recurring fees. After all, the devil is in the details.

3. Keep track of historical/fixed costs:

Be clear about your past and ongoing costs, especially if you are going to host larger recruiting events like alumni fairs. It will help you understand the most expensive elements of your recruiting costs, including things like hiring tools, agency costs, events, job fairs, HR technology, and more. You will also gain a better understanding of which recruiting channels have worked and brought fruitful results, and more importantly which ones have not.

When looking at your fixed costs, remember to ask yourself: How much were your annual recruiting costs, and do you expect them to increase? If so, why?

Be sure to factor the cost of attending events on your hiring calendars, such as college recruiting days and job fairs. If you know these events are attracting good candidates (this is often the case if you partner with quality colleges), you will need to reflect these costs. For example, you may have to pay for stands, brochures, banners, etc. Money should only be spent on recruiting strategies that have been successful in the past. An annual or even quarterly review of these strategies gives you the big picture you need to make sure your budget is fully utilized.

Plus, there may have been a large influx of employees in your business last year. If this was something unique, your projected budget should be adjusted accordingly. It’s also worth noting that historical costs can also include agency costs. If, for example, your organization uses agencies to hire temporary staff, you should consider these fees. You can also use agencies to recruit more complex, specialized, or high-level positions. Agencies typically charge about 20% of the base salary but can double that amount for a senior position.

4. Don’t forget about technology costs:

Embrace innovation. Technology can be a recruiter’s best friend. With the right recruiting software at your disposal, you can save valuable time and effort while improving the quality of your recruitment. Investing in decent recruiting tools to help you weed out inappropriate apps is worth its weight in gold, so don’t miss out on top talent by cutting those costs out of your budget.

Chances are, you are already using different recruiting tools throughout the hiring process. These include candidate tracking systems, candidate relationship management tools, programmatic job advertising software, pre-hiring verification tools, and other types of technologies. Make a list of all the tools you use. When considering your costs, consider pricing models. Do you pay monthly or yearly fees? Are you paying for the candidate? Or did you pay a one-time fee?

Tip: Make sure your software integrates with your existing tools. For example, the background verification services you use to verify your candidates’ previous employers, education, and criminal records should connect to your ATS or CRM to complete profiles of existing candidates.

5. Control your time and expenses:

Remember, your time and your hiring department’s time are also worth money. Your budget will work best for you if you know how long it usually takes for your business to hire someone. Research shows that the smaller the company, the longer it takes to hire. For example, a company with 1-500 employees takes an average of 41 days, while a company with more than 5,000 employees takes only 25 days.

6. Engage your employees:

Your current staff is your ambassadors. So, the budget for the referral bonus plan. If you have a strong system that promotes internal promotion and tells candidates when they will join you, this can be a great incentive. Rewards can include cash, a day off, a tangible gift like a shop or vacation/gym vouchers, or an experimental gift like a cooking class or wine tasting. Any of these are great motivators for existing staff, so make sure everyone knows about them. Publishing information about your referral bonus scheme through internal communication channels such as the staff newsletter and intranet is a good starting point.

Tip: Make sure your online application form has a button/field asking how the candidate found out about the job. Be sure to include “employee recommendation” as an option and space for that person’s name.

7. Get approval from your executives for your hiring budget:

Be prepared to present your budget, make a case for your position, and show your leadership team how you are investing in attracting the best talent. Facts are always at hand. You may need to clarify your mission statement, so consider the details of your projected costs and ROI. This way you will be better prepared for any delicate issues that come your way.

Needless to say, you will need to demonstrate the value of quality hiring to your senior management. How will these expenses affect the financial/corporate income of the company? If you can demonstrate how best to achieve your company’s strategic goals through serious investment in recruiting, you are halfway there.

Plus, if you’re fully aware of how your company’s competitors are hiring, you might argue that you can stay a few steps ahead of the game. Arm yourself with information about the tools your competitors are using, their hiring strategies, and the benefits. Being able to show your management team your potential return on investment (ROI) will help you validate your budget. In other words, how much of a hiring cost per hire is compared to the financial contribution that hiring will bring to your company.

Ready to start managing your hiring budget more efficiently?

Like it or not, having an adequate hiring budget is a key to any successful hiring strategy. Most importantly, you must have a complete understanding of your expenses and how you are going to grow your business. You can then use this information to help you manage your budget effectively. After all, a realistic hiring budget will help you find the best talent for your company.

So what are you waiting for? Put our seven-step guide into action today and start better managing your hiring budget.

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