How to effectively manage your recruitment budget for 2022
A recruitment budget is a formal document containing a detailed annual estimate of the total cost of hiring. It also includes the internal (recruiter’s pay) and external expenses (recruitment marketing, technology purchase), as well as unforeseen costs that may arise.
It’s crucial that your recruitment budget aligns with your company’s current, annual, and long-term business strategies, including the ongoing plans and unanticipated setbacks.
Further, it’s no secret that the pandemic has had a notable impact on the global economy. With all the uncertainty around, it is necessary for businesses to protect their financial interests and put a watertight recruitment budget in place. That way, you’ll know what to expect in terms of hiring and how to allocate resources throughout the year going forward.
Here are a few helpful tips in this regard.
1. Focus on forecasting
Start by considering the possible scenarios and then create a budget based on these projections and your hiring needs.
Create multiple projections of your hiring needs based on changing scenarios to better understand the various possibilities. You should also discuss and estimate the number of hires your company plans to make in the upcoming financial year with individual department heads. This will allow you to obtain a projected annual headcount.
During your planning, you’ll also need to identify if there are any skill gaps in the various departments. Don’t hesitate to get into the nitty-gritty of what’s lacking. After all, you don’t want to end up spending on hiring the wrong people. If you’re expecting to source external help for your hiring, like a recruitment agency, take that into consideration as well.
These steps will help you plan and manage your recruitment budget better.
2. Budget for your tech requirements
Allocate a reasonable portion of the budget towards adopting new technologies.
Modern recruiters use AI-based software, HRIS, ATS integrations, and other recruitment automations to ease their workload. If you plan to include any technology that enhances the strategic initiatives such as candidate search and outreach, online learning and career development, or employee self-service, you should budget for them.
You might already be using different recruitment tools and technologies from the start to the end of your hiring process. In either case, make a list of these resources with special emphasis on their pricing models. You may find that paying an annual fee for a certain software turns out cheaper than monthly fees. Or maybe a one-off fee could turn out even better. Compare and choose your plans.
3. Consider your expenses
You’ll need to calculate how much you regularly spend on recruitment by category and on a monthly basis. Take into account the following factors in your calculation:
- Cost per hire
- Career-related social network hiring costs (LinkedIn)
- Job advertisement costs (job portals, industry-specific job boards)
- Recruitment software and application costs
- Recruitment and networking events, such as graduate fairs and university recruitment
- Branding costs (company videos, banners, print materials)
- External recruitment agency fees, if applicable
- Candidate travel and accommodation costs, if applicable
- Background checks
- Onboarding costs
- Training costs
Knowing about these numbers will help you work out ways to spread out these costs (including those that are fixed and recurring) over the year.
4. Don’t forget about your past and fixed costs
Familiarise yourself with information about your historic and fixed costs (recruitment software, HR tools, events, etc.), especially if you’re committing to high-volume recruitment drives, such as graduate job fairs.
This will help you understand where you’re spending the most money and what’s costing the least. You’ll also know which recruitment channels effective and which ones are not profitable.
When considering your fixed costs, factor in the current annual recruitment costs and see if they’re likely to increase. If recruitment drives and job fairs have been helping you attract great talent, you’ll have to count those costs too. Developing stands, banners, flyers, and so on come at a price.
Overall, focus on the recruitment strategies that have worked for you in the past and allocate most of your budget there. Further, reviewing the efficacy of these strategies from time to time will give you the assurance that you are investing the money wisely.
5. Consider newly created roles, if any
The COVID pandemic has created a need for having full-time workers to monitor workplace health and safety. If you plan to hire for similar roles, you’ll need to factor this into your budget too.
For example, new positions and additional people may have been added in your organisation to ensure the implementation of health and safety guidelines as stipulated by OSHA and other governmental entities. Or maybe you’re hiring more remote workers, expanding the geographical scope for your recruitment.
Your budget should include any new changes in your recruitment practices. Remember, some changes are crucial to the growth and sustainability of the organisation. Cutting costs isn’t recommended, but you need to plan for them whilst also being prepared for unexpected costs. This brings us to our next point.
6. Plan for unanticipated issues
Your recruitment budget should include factors that may be beyond your control as well as unexpected changes.
The 2020 pandemic is a great example of why this planning for unforeseen expenses makes sense. The global economy and businesses all over the world were impacted by it.
The hard reality is, certain recruitment budget factors are beyond anyone’s control. The only way to deal with them is to develop a plan for these kind of changes as they might require more of the budget.
You’ll need to create several narratives of how an unanticipated situation might pan out, and your possible responses to deal with them effectively. You can then allocate funds accordingly.
7. Consider spends on retaining existing employees
Instead of hiring new staff, your team may want to focus on employee retention by offering better compensation, insurance, paid time offs, bonuses, and overtime pays. Add these costs too.
Employee retention is always a challenge for recruitment and HR teams. To deal with this, consider augmenting the current budget to offer higher compensation and perks. After all, the major reason for employees quitting their jobs is higher pay, flexible working hours, and a better work culture.
HR teams will do well to work on creating a culture where employees feel valued. Since recruitment costs more than retention, it makes sense to hold on to talent by offering them enhanced salaries, paid time-offs, bonuses, overtime pay, health insurance, and so on. All these elements need to be accounted for in your budget.
8. Get the necessary approvals
As the final step, present your budget to your leadership team and show them how invested you are in attracting the best talent.
Keep the details of your estimated spending and ROI (return on investment) ready. This will ensure you’re prepared to answer any challenging questions from your seniors, whilst also convincing them of your vision.
Of course, you’ll have to argue your case to make them realise the value of quality hiring. The aim is to prove that a sound investment in recruitment will help accomplish your organisation’s strategic goals more effectively.
Showing your leadership team that the potential ROI is higher than the projected recruitment expenses will help you gain their approval for the figures you have in your plan.
Having a healthy recruitment budget is vital for the success of an organisation’s hiring strategy. It’s important for recruiters to have a thorough overview of ongoing and upcoming expenses. This will help you know exactly how they’re molding the growth of the company. Hopefully, the above points have shed ample light on this critical aspect. Once you have all this information in place, you should be able to manage your budget effectively. Remember, a realistic recruitment budget can go a long way in helping you grab the best talent out there.
At RED Global, we’re committed to bridging the gap between people and technology. We’re here to assist organisations with building their dream team, to drive their digital transformation goals with SAP and other advanced technologies. We also provide our candidates with the guidance, resources, and connections they need to find a fulfilling SAP or tech role with a reputed employer.
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