Recruiting top talent is crucial for any company's success. However, understanding the cost implications of different hiring strategies is equally important. One such strategy that stands out is Recruitment Process Outsourcing (RPO).
What is Cost Per Hire (CPH)?
Cost per hire (CPH) is a metric that provides insight into the expenses incurred during the hiring process for various positions. It's an essential tool for evaluating the effectiveness of different sourcing strategies. However, calculating CPH involves considering multiple factors to get a comprehensive view.
Factors Contributing to Cost Per Hire
When calculating the CPH for an internal recruiting team, several elements must be considered:
- Recruiter Salary: The recruiter is a fixed cost since they are an employee of the company.
- Hardware Costs: This includes expenses for computers, telephones, and other necessary equipment.
- Advertising Expenses: Costs associated with job fairs, job boards, referral bonuses, and the applicant tracking system (ATS).
- Training and Onboarding: Expenses related to training new hires and onboarding processes.
- Turnover Costs: Costs incurred due to employee turnover.
Companies can determine the total cost per hire by adding up these costs. This total remains relatively constant regardless of the position being filled because the same recruiter handles all recruiting efforts. However, internal recruiters have a fixed capacity and may struggle to manage hiring surges.
Recruiting Agency Costs
An alternative to internal recruiting is using a recruiting agency. The cost per hire through a recruiting agency encompasses most of the items considered in the internal recruiting CPH calculation.
Contingency Firms
Contingency firms are paid only when a candidate is successfully placed in a position. They typically charge 15-30% of the candidate's annual salary. For instance, hiring an employee with a $50,000 salary through a contingency firm would cost between $7,500 and $15,000 per hire. This can be a substantial fee for companies.
Recruitment Process Outsourcing (RPO)
RPO offers a more cost-effective solution. RPO allows companies to outsource part or all of their recruitment functions. Typically, RPOs result in a cost per hire of 5-10% of the candidate's salary. Using the same $50,000 salary example, an RPO would cost between $2,500 and $5,000 per hire. Even at the highest RPO rate, companies save a minimum of $2,500 compared to the lowest rate of a contingency firm.
The Exponential Savings of RPO
When companies face high-volume hiring needs, the savings with an RPO increase exponentially. For example, hiring five sales personnel with a $50,000 salary each through an RPO could save a company between $7,500 and $50,000 compared to using a contingency firm.
Why Choose RPO?
Utilizing an RPO, such as Hunter Recruitment Advisors, provides a cost-effective CPH while offering flexibility and scalability to meet your hiring needs. In today's market, where many internal recruiting teams are at their smallest size, RPO helps companies avoid fixed costs associated with the CPH calculation.
For more information on how Hunter Recruitment Advisors can help your company recruit top talent through RPO, learn more about our solutions, or explore career opportunities.