Managing a recruitment budget is up there as one of the least fun things about working in HR. It’s critically important to get right and is a major strategic step to manage at the start of each year. It can also be tedious and a bit daunting if you’re not used to working with numbers and spreadsheets.
This article aims to make managing and tracking recruitment costs a little bit easier. It will provide an overview of what you should include in a recruitment budget, steps for creating one, and some tips to make your life easier.
But first, let’s take a step back to make sure we’re clear on what a recruitment budget is, and why they’re essential.
What is a recruitment budget?
Recruitment budgets are an exhaustive list of all projected and real costs associated with hiring talent at your organization. They should align with your company’s strategic goals, and contain projected and actual metrics that showcase the efficiency of your recruitment activities.
In a nutshell, a good recruitment budget should project and track your total recruiting costs - both fixed and variable - and capture relevant results and efficiency metrics associated with those costs.
Recruitment budgets help various stakeholders keep track of what resources are available to the team, and how efficiently those resources are being used. For recruiters, a detailed budget provides a roadmap for how and where to spend their time and allotted money, and what the expected outcome is.
For management, recruitment budgets provide a clear picture of how effective - or ineffective - their team’s hiring activities have been, helping them make decisions on future funding and strategic direction.
What’s in a recruitment budget?
Recruitment budgets come in many different forms, depending on the size of your organization and the strategic importance you place on hiring talent. The goal is to get a complete, detailed breakdown of total recruiting costs.
To make this easier, recruiting budget templates are often split into fixed costs and variable costs.
Fixed costs
Fixed costs are recurring expenses that you can expect to pay every year, and will not typically shift once set in your recruitment budget.
Some example of fixed costs of recruiting employees include:
- Subscription fees (i.e. LinkedIn Premium)
- Recruiter salaries
- Partnership fees or commissions
- Technology expenses
- External recruiter fees (assuming contract-based arrangements)
- Staff resources and tools
- Professional development or training expenses
It’s true that all of the above expenses could increase or decrease throughout the year if you shift your strategy or onboard new people, processes, or tools. Fixed costs can move, but you generally have more control over them, making them easier to project and stick to.
Variables costs
Variable costs, on the other hand, are harder to predict. These costs include tactics and expenses that can shift throughout the year due to internal or external factors.
Some examples of variable costs of recruiting employees include:
- Job posting and advertising
- Candidate assessment activities
- Networking or job fair events
- Employer branding campaigns
- Referral bonuses
- Travel and accommodation
- Background checks
All of the above expenses can, and likely will, vary from your start-of-year projections once you start trying to hit your recruitment goals. It’s possible that you will spend more, or less, money on specific activities than you planned, or that some activities are less efficient and more costly than expected.
To manage and project variable costs more accurately, data from previous years is your best friend. Analyze your cost-per-hire and cost-per-activity metrics from last year’s budget to get a clear picture of what you’re likely to spend on each variable cost to achieve the desired outcome. Scale these projections up or down depending on your organization’s hiring needs.
How to create a recruiting budget template
After receiving your lump-sum budget from the executive team, the first step in creating a recruiting budget is to develop the template you’ll be using to project and track tasks. Choose a platform that fits your needs from a projection and tracking standpoint, and build a recruiting budget template that allows you to project and track all costs, results, and efficiency metrics.
Here are some of the key steps to take when creating a recruitment budget.
- Review last year’s budget and results.
Before you begin dividing and planning your expenses for the year, it’s critically important that you analyze the previous year’s budget and corresponding results. This will give you a clear picture and breakdown of:
- Monthly and quarterly costs
- Recurring costs
- Unexpected costs
- Costly and inefficient tactics
- Benchmark metrics to measure against
Looking at what you did last year, and analyzing the most and least cost-effective recruitment tactics or investments will provide a valuable roadmap for how you should manage your budget this year.
- Build a cost-per-hire and efficiency model to project results.
Based on previous years’ results, you should be able to project outcomes from your budget spend.
For example, if you know that your LinkedIn corporate license cost you $9,900 last year, and was directly involved in 5 new hires, then you can estimate a $1,980 cost-per-hire metric for that sourcing platform. You can repeat this logic for other major sourcing platforms and techniques. Keep in mind that this is a very general, high-level estimate of cost-per-hire-per-source. Having access to deeper website and recruitment analytics will give you a much clearer attribution model to base projections on.
By analyzing what you spent, where you spent it, and the outcomes, you will be in perfect shape to plan how to spend your recruitment budget in the new year. Even better, you’ll be able to logically project what the outcomes and efficiency metrics will be, and justify your team’s strategy to the higher-ups.
- Determine hiring and strategic needs for the year.
Before allocating funds toward a specific goal, you need to know what those goals are. If it’s not already part of your yearly strategy planning process, meet with your executive team and key hiring managers to determine what human resources will be needed throughout the year.
Based on your company’s strategic goals, you should be able to get an idea of how many new hires you’ll need to recruit, and how difficult it will be to fill those roles. Don’t forget to take into account staff turnover and replacement rates, which can be found by looking at previous years as well.
- Set aside some money for unplanned expenses.
Even the best-laid plans often go awry, as the saying goes. There will inevitably be unforeseen expenses, changes in strategy, and unexpected staff departures that will throw a wrench in your budgeting.
Therefore, you must build a buffer into your budget that can be used to cover unplanned expenses or take advantage of spontaneous opportunities. Planning for change is an important skill to have when managing any budget, but this is particularly true in recruitment.
- Build a recruiting budget template that shows costs versus KPIs
Once you have all of the above worked out, the last piece of the puzzle is to create a recruitment budget template that you can use to track progress throughout the year. Choose a template or platform that offers you the features and flexibility you need to manage your budget effectively.
Your hiring budget template should include:
- Projected cost
- Actual cost
- Projected KPI
- Actual KPI
- Efficiency metrics (i.e. cost-per-hire)
This will allow you to track expenses and give you a constant view of where your money is best spent and what the outcomes have been.
4 tips for managing recruitment costs
Creating and managing a recruitment budget is both time-consuming and critically important. It’s a process that should not be taken lightly and can impact the resources that your team is allotted by your company going forward.
Here are five tips that will make managing your recruitment budget easier.
1. Choose the right budgeting and tracking platform. Whether this is an Excel spreadsheet or a robust cost-tracking system that integrates with your ATS, picking the right platform will set you up for success in the long run.
2. Update your budget and outcomes regularly. Don’t set it and forget it. Update and check in with your budget document regularly, and use it as a roadmap for where and how to spend your resources.
3. Use recruitment analytics to identify waste points. Create and manage your budget alongside any recruitment analytics you have access to. If you find there are bottlenecks or waste points in your process, removing them will likely have a positive ripple effect on your budget efficiency.
4. Review budget outcomes at the end of each year. Stay on top of your budget management by regularly reviewing and learning from the previous year.
Additional reading: 6 strategies to improve cost-effective hiring
Conclusion
Creating a recruitment budget is often a dreaded task. It can be tedious and take time away from the activities that you’d rather be doing. Taking a methodical and strategic approach to your hiring budget will set you up for success in the long run and help you justify why and how you’re spending your resources.
