When comparing costs of suppliers across different categories, it is essential that employers ensure all steps in the hiring process are accounted for. 

SIA’s new report, The True Cost of Hiring, reviews which factors are most important and which recruitment models are most appropriate based on the company, role and location. This helps companies navigate which recruiting model best optimizes costs, efficiency, quality and risk for their particular situation.

The report compares the different hiring channels available to employers, from internal hiring to RPO, direct hire via a staffing firm and various job board related models. The report also provides an overview of pricing methodologies available through the different services.

“There are numerous methods available to identify and hire full-time employees,” writes John Nurthen, SIA’s executive director of global research and author of the report. “The costs and processes included within each method vary widely, which makes it difficult to determine what the true cost is, including external costs (third-party fees) and your own internal costs.”

Hidden Costs

When comparing vendor fees for different services, there are many hidden internal costs that should be taken into account.

For example, a job board typically would not go through résumés and create a short list of candidates (though there are exceptions), whereas a staffing firm most often would create a short list. Hence, when comparing the cost of using a job board to the cost of using a staffing supplier, a company may need to account for the cost of any internal resources it is spending going through résumés and responding to all candidates.

“As each type of service varies in what it covers, a service that may look cheaper on the surface may end up costing the company a lot more once you factor in all the additional internal processes that you’d need to deal with,” Nurthen says.

Sourcing and Recruiting Steps

When comparing the costs of suppliers across recruiting models, make sure all steps in the hiring process are accounted for. Sourcing and recruiting steps contributing to hard costs — and the components of each step — could include:

• Before candidate sourcing (employer branding, talent pool curation, workforce planning)
• Candidate sourcing (creating requisition, broadcasting requisition, identifying candidates for prescreening)
• Candidate prescreening (résumé reviews, skill tests, interviews, reference checks, drug screens, criminal history checks, credit checks, identity verification)
• Creating and extending offer to candidate 
• Negotiation with accepted candidate 
• Notifying rejected candidates
• Onboarding accepted candidate (orientation/training, IT setup/badges/passwords, adding employee to payroll/benefits setup)
• Integration with ATS and HRIS
• Coordination of steps above
• Additional steps (any additional steps a company may have in their hiring process)

And after accounting for all steps in the process — including soft costs — the “cheaper” option is not always best, nor necessarily the cheapest, according to the report.

Efficiency, Quality and Risk

Hard costs are not the only factor to consider. Efficiency, such as the time-to-fill or time-to-start metrics, is also important.

However, even a quick time to start will not help if employees quit early into their employment, the report states. Turnover, both voluntary and involuntary, can be reduced by improving the quality of candidates.

The quality of the candidate can be measured by manager feedback, peer reviews or customer feedback. However, tracking often stops once the candidate is hired or is transferred to a separate platform such as a human capital management system. If measuring the quality of the hire — and therefore the effectiveness of the sourcing method — stops once the candidate starts working, there may be a significant hidden cost.

“The prioritization of cost vs. efficiency vs. quality vs. risk will depend on the roles for which your company is recruiting and the volume of its recruiting,” the report states. “High-volume, low-skilled roles will likely make cost and efficiency a priority. In a search for a new CEO, on the other hand, a white-glove executive search firm will generally advertise and succeed on quality more than cost and efficiency.”

When comparing recruiting providers and models, a company will be well served to account for all costs in the hiring process and also consider quality and efficiency issues, Nurthen writes in the report.

“Moreover, what makes sense now may change as the company and the environment it operates in may change,” he says. “While finding and maintaining the optimal cost, efficiency, quality and risk is not easy, it can afford a significant competitive advantage, as a company’s workforce is often its greatest investment.” 

The full The True Cost of Hiring report is available online to SIA’s CWS Council members and Corporate Membership members. It provides a broad outline to help hirers gauge which option is likely to offer the best and most cost-effective outcome. It also includes a Hiring Cost Comparison Tool, which employers can use to estimate their own costs.