Calculating Return on Investment (ROI) in Recruitment
People are an organisation’s most important asset which makes recruitment one of the most critical functions in an organisation. People directly impact culture, performance and overall success of the company. However, recruitment is often seen as a cost centre rather than strategic investment or profit enabler. For this perception to change, it’s essential to measure the Return on Investment (ROI) of your organisation’s recruitment efforts.
Recruitment ROI measures the effectiveness of your organisation’s hiring efforts by evaluating the extent to which costs invested in recruitment drive tangible benefits to the business. To calculate recruitment ROI, start by adding up the costs involved in the hiring process – such as job advertising, recruiter fees, TA salaries and onboarding and training expenses. Then, compare these costs to the value generated by new hires in terms of increased productivity, improved job performance, and revenue growth. A positive ROI shows that your recruitment strategies are delivering business value, while a negative one suggests the need for adjustments to improve efficiency and impact.
The CIPD’s Resource and talent planning report, supported by Omni, revealed that only 24% of respondents are measuring their recruitment ROI, even though doing so allows organisations to effectively plan for current and future workforce needs. While planning horizons vary significantly among companies – with 31% adopting a short-term approach of up to six months and 18% planning over two years ahead – understanding Recruitment ROI enables more strategic decision-making and, ultimately, a far greater likelihood of business success.
Notably, 46% of respondents report that talent management has been a key priority for their CEO over the past 12 months, indicating a shift back towards pre-pandemic levels of focus on talent acquisition. This highlights the growing importance of aligning recruitment strategies with broader business goals and the bottom line, and the need to prioritise and optimise efforts effectively.
Measuring ROI on recruitment is essential for understanding the true cost and value of your hiring efforts. It helps organisations determine how effectively their recruitment strategies (both permanent and contingent) align with business goals and whether resources are being used efficiently. Organisations tuned into this practice, measure Recruitment ROI to ensure:
A good ROI means you’re spending money wisely to find the best talent, which leads to better business performance. It also highlights areas where you might be overspending or not getting enough value, helping you improve your strategies. Calculating recruitment ROI offers many benefits:
To help calculate recruitment ROI and understand its impact on the business, you need to track and monitor certain key measures, including:
1. Time-to-hire
Definition: Time-to-hire measures the time between a candidate application and the moment the candidate accepts the offer.
Why it Matters: A longer time-to-hire may indicate inefficiencies in the recruitment process, which can drive up costs and lead to missed opportunities for talent. Also, the longer a vacancy remains open, the less productive you’ll be which can also have a knock-on effect on other team members and ultimately your customers.
How to Measure: Track the number of days from candidate application to offer acceptance.
2. Cost-per-hire (CPH)
Definition: Cost-per-hire calculates the average expense to fill a job vacancy, including both external and internal recruitment costs.
Why it Matters: This is a critical metric in understanding the financial investment required to fill positions and is central to ROI calculations.
How to Measure: Add all external and internal hiring costs and divide by the number of hires during a set period.
3. First-Year Attrition Rate
Definition: This measures the percentage of new hires who leave within their first year.
Why it Matters: Recruitment begins with retention – You’ve heard of the ‘leaky bucket’ metaphor, right? A high attrition rate can seriously damage your ROI, signalling either poor recruitment decisions (which lead to re-hiring costs) or issues with your onboarding and induction processes.
How to Measure: Track the number of employees who leave within 12 months divided by the total number of hires.
4. Quality of Hire
Definition: This metric assesses how well new hires perform and fit within the company, contributing to the business’s long-term goals.
Why it Matters: High-quality hires are more likely to stay with the company, perform well and support business growth, thus delivering a better return on the recruitment investment.
How to Measure: Typically evaluated using performance reviews, aligned with the company values, and productivity during the first year.
5. Offer Acceptance Rate (OAR)
Definition: The proportion of job offers extended by the organisation that are accepted by candidates.
Why it Matters: A low OAR indicates potential issues in the recruitment process or misalignment between the candidate’s expectations and the offer made.
How to Measure: Track the number of jobs accepted divided by the total number of offers made
6. Candidate dropout rate
Definition: The percentage of candidates who accept an offer but withdraw before their start date or do not turn up on their first day.
Why it Matters: Every candidate who drops out after accepting an offer means repeating at least some, if not all, of the recruitment process, adding significant cost and time the vacancy stays open. A high candidate dropout rate can point to gaps in how recruiters secure candidate commitment and assess flight risk, a long delay between offer and start date, or limited contact with candidates during that period.
How to Measure: Subtract the number of job starts from the number of accepted offers, divide the result by the number of accepted offers, then multiply by 100. For example, if 100 candidates accept offers and 90 start, your candidate dropout rate is 10%. Measure starts against the same group of accepted offers, so that people accepting offers late in one period and starting in the next or not miscounted.
7. Revenue per Employee
Definition: This measures the financial contribution that each employee brings to the company.
Why it Matters: Revenue per employee is a good indicator of the overall productivity and financial impact of new hires.
How to Measure: Total company revenue divided by the total number of employees.*
*This is an organisation-level indicator and should be tracked over time alongside hiring activity.
To calculate ROI accurately, you need to understand both external and internal costs associated with recruitment. Recruitment costs generally fall into two main categories:
1. External costs
These are expenses incurred from outside your organisation during the recruitment process. Common external costs include:
2. Internal costs
Internal costs involve the time and resources your internal employees spend on recruitment activities. Examples include:
Add up the costs
By adding both external and internal costs, you can get the Total Recruitment Costs for your organisation over a specific period.
To help you get started here, you can use Omni’s Recruitment Cost Calculator to assess what your current hiring strategy is costing your organisation.
So, you have an idea of the costs of recruitment and of the value created by the new hires. A general formula which can be used to show you where you stand is:
Recruitment ROI = Total Value of New Hires LESS Total Recruitment Cost DIVIDED by Total Recruitment Cost x 100
A positive ROI indicates that your recruitment efforts are adding value to the organisation. A negative ROI suggests that costs outweigh the benefits, signalling a need to reviw and adjust your recruitment strategies.
Once you calculate your ROI, review areas where you can improve your recruitment effectiveness. This is where a good grasp of your measures really pays dividends.
Think about:
Retention strategies – Particularly in the first year of employment. Does the reality of the role reflect how it was positioned during the recruitment process? Is the culture created by your management team inclusive with the individual contributions valued and recognised?
EVP and brand activation – What personas are you looking to engage and why would they want to work for you? Be targeted, don’t ‘spray and pray’ and try to differentiate yourself from competitors by elevating your employer brand to attract the same talent as competitors. There may be some upfront investment here, but it will absolutely have its rewards in terms of reduced time-to-hire and improvements to hire quality.
Recruitment marketing – What channels work best and deliver the greatest ‘bang for your buck’ in terms of candidate engagement. Make sure you spend your budget where you get the best results.
Agency spend – Keep a close eye on this and rationalise your suppliers wherever possible to generate enhanced commitment and better commercial rates. Look at your workforce planning and how best to optimise your use of permanent, fixed term and contingent resources. In our partnership with ISS, our team at Omni achieved a direct sourcing hit ratio of 92% resulting in a considerable cost saving in agency spend.
Recruitment process – Is your recruitment process cumbersome delivering a poor candidate experience? Candidates will naturally drop out if this is the case and you will miss out on talent, impacting time-to-hire. Can you automate to improve the candidate experience and deliver improved ROI?
Recruiter skills – How effective are your recruiters in gauging candidate commitment and assessing flight risks post job offer? How engaging is your onboarding process? Remember it is vital to check in before they checkout if you are to reduce the cost burden of re-hiring.
Beyond recruitment – Focus should move to shaping productive and engaged employees looking at ways to:
At Omni, we work with organisations of all sizes across both private and public sectors to help them understand and quantify their recruitment effectiveness, developing talent strategies designed to deliver ROI.
Measuring ROI on recruitment is not just about justifying expenses but about transforming the hiring process into a strategic advantage for your organisation. By understanding and calculating recruitment ROI, businesses can make informed decisions, optimise their recruitment strategies, and ultimately drive greater bottom-line value from their hiring investments.
At Omni, we specialise in helping organisations maximise their recruitment ROI through data-driven strategies and expert guidance. To help get started with this and get your head around your cost base and the impact of attrition, you can use Omni’s Recruitment Cost Calculator.
Contact us today to learn how we can support your recruitment needs and help you achieve measurable results.
Include both external and internal costs. External costs include agency fees, job board advertising, background checks and recruitment technology licenses. Internal costs include the time your HR, talent acquisition and hiring team spend on recruitment, referral rewards and onboarding and training. Cost-per-hire should include resourcing technology (e.g. LinkedIn license), in-house resourcing time, advertising costs, agency or search fees, psychometric and selection tests, cost of offers (e.g. vetting) and onboarding. Count each cost only once, particularly software, which can appear in both categories.
There is no single benchmark, because recruitment ROI varies by sector, role type and how each organisation calculates the value of its hires. Any positive ROI shows that recruitment is delivering more value than it costs. The most useful approach is to set your own baseline, then track ROI over time and compare it across roles, hiring channels and recruitment partners to see where your investment works hardest.
Time-to-fill measures the whole recruitment process, from the date vacancy is approved to the date a candidate accepts the offer. Time-to-hire measures only the candidate’s journey, from when they apply to when they accept. Tracking both helps you see whether any delays come from the internal approvals and advertising, or from your hiring and selection process.
Recruitment Process Outsourcing (RPO) can significantly enhance your Talent Acquisition strategy by providing specialised expertise, scalability, and strategic partnership. Here’s how:
Specialised Expertise: RPO providers have dedicated teams of recruiters who specialise in various industries, roles, and skill sets. These experts possess in-depth knowledge of the labour market, industry trends, and sourcing techniques, allowing them to identify and attract high-quality candidates efficiently. By leveraging their specialised expertise, RPO partners, like Omni, can access niche talent pools and ensure high-quality people for your organisation.
Scalability: One of the key advantages of recruitment RPO is its scalability. RPO providers can quickly scale recruitment efforts up or down based on your organisation’s hiring needs. Whether you’re experiencing rapid growth, seasonal fluctuations, or project-based hiring spikes, RPO can adapt to accommodate your changing requirements. This flexibility ensures that you have the right resources in place to meet demand without overburdening your internal HR team or sacrificing recruitment quality.
Cost-Effectiveness: RPO recruitment can offer cost savings when compared to traditional hiring methods. While there may be an initial investment in outsourcing recruitment to an RPO partner, the long-term benefits often outweigh the costs. RPO can help reduce time-to-fill, cost-per-hire, and turnover rates, resulting in overall cost savings for your organisation.
Strategic Partnership: RPO goes beyond transactional recruiting by forging a strategic partnership between the RPO partner, like Omni, and your organisation. At Omni, we become an extension of your employer brand and we work closely to understand business objectives, culture, and talent requirements. This collaborative approach allows RPOs to tailor recruitment strategies that align with your organisation’s goals. By working as an extension of your HR team, RPO providers can provide valuable insights, leading practices, and innovative solutions to help achieve talent acquisition objectives.
