Recruiting new staff is an inevitable part of running a business. With the average staff turnover rate at around 15%depending on the industry, the cost of recruitment needs to be considered when planning budgets – particularly at a time when people are moving jobs to access better pay.
That’s why the latest version of our Resourcing and Talent Planning Report 2022, delivered in conjunction with CIPD, is an essential tool to understanding the landscape around the cost of recruiting for your business. The report researched key areas including the level of recruitment activity, hiring costs and budget implications, and data collection to inform your decision making for 2023.
Vacancies
With the number of jobs still at record highs despite a slowdown in activity, it’s clear there will be a knock-on impact on recruitment budgets. All sectors faced a period of significant demand for new talent last year. Our own report with the CIPD showed that 72% of organisations surveyed have attempted to recruit for permanent positions in the last 12 months and 49% of businesses have tried to fill short-term vacancies. This equates to almost 50% of organisations across the UK being involved in some form of recruitment in the last year. Of those organisations involved in the study, less than a fifth of small private sector organisations had not attempted to recruit for any vacancies in the last twelve months.
For businesses, the increased competition for talent has had a rather interesting impact on broader recruitment costs. The study revealed that the median cost of hiring senior managers has stayed at £3000, the same as last year. But the median cost to recruit other employees has increased from £1000 in 2021 to £1500 in 2022.
The recruitment budget
There has also been an impact on financial planning for recruitment and around two-fifths of organisations are expecting an increase to their recruitment and talent management budgets over the coming year. This shows the need to be competitive in a tight labour market, along with an increased focus on retaining staff to ensure a strong workforce is created to meet company demands.
Hiring budgets do vary between private, non-profit and public sector organisations. Public sector organisations are more likely to report a freeze on budgets which isn’t surprising taking into account wider public sector spending. In comparison, both private and non-profit sector organisations were more likely to report an anticipated increase in both recruitment and talent management budgets.
Despite an increasingly competitive talent market only 13% of organisations measured the return on investment of their recruitment processes, showing that recruitment costs are broadly accepted at face value without a focus on efficiency and value. This is further corroborated by the fact that 63% of organisations collect some data to inform their resourcing decisions. We could be starting to see a turning point though, as a further 14% of firms said they plan to introduce measures to do this in the coming year. The information collated is usually cost per hire, new hire performance and the turnover rate giving a starting point at a surface level to conduct the analysis needed to potentially reduce recruitment costs or create more effective processes.
The exception to this monitoring is for diversity and inclusion purposes, with both public and non-profit almost twice as likely than private sector organisations to use the diversity information gathered to inform recruitment choices.
It’s not only recruiting that’s becoming tougher. Retaining top talent also presents a growing challenge. With less than two-fifths of employers surveyed comparing pay and benefits offerings with competitors, there’s a risk that packages could be out of line with the overall market. This would not only damage recruitment prospects for new hires, but also hinders a brand’s ability to keep existing talent within the business. This is an area which could have an impact on both recruitment and talent management budgets longer term.
The key consideration that does need to be factored in to talent strategies here is how the cost of replacing an individual weighs against offering an increase in salary. With the cost of living crisis impacting households across the UK and a steady flow of jobs still available, people are willing to job ship for more money. For firms that are being cautious around budgets, replacing staff rather than offering better remuneration might not necessarily be the most financially savvy choice.
It’s encouraging to see that the job market remains relatively stable despite a slowdown, but the impact the continued competition for talent will have on recruitment budgets can’t be ignored.
To find out more about the cost of recruitment for public and private sector businesses, and what the longer-term implications could be, take a look at our Resourcing and Talent Planning Report 2022.
