Let’s talk numbers, shall we? We’ve spoken about hiring, all the details, and all of the how-to’s but now we need to talk about cost. How do I afford to hire? Where’s the money going to come from? How do I create a budget? What do I include on that budget? If you’ve asked yourself these questions and you’re in a bit of a predicament, we’ve got you covered. Check out our blog below on How to Plan a Hiring Budget.

What is a Hiring Budget?

It’s exactly how it sounds: a recruiting budget is something the hiring manager or recruiting team creates to set aside costs per hire to fill those open positions. It’s crucial that the budget is set accordingly to your exact needs to avoid the potential issues of an mis-calculated budget. Before we continue, let’s talk about “cost-per-hire”. According to resources.workable.com, “Cost per hire is the average amount of money you spent on making a hire. This metric is useful when you are creating or tracking your recruiting budget. For example, if you plan to hire 100 people in a year, and your cost per hire is $4,000, you can estimate a total spend of $400,000 for recruiting. You can compare annual cost per hire over several years to spot any significant changes.”

Harver also has a great quote on the topic: “Recruitment plans are about much more than just knowing what roles need to be filled in the near future—they’re an opportunity to align company goals and skills gaps with your hiring efforts in order to strategically plan for the year ahead. A strategic recruitment plan should include the positions you need to hire for, a recruitment calendar, budget information, tracking and assessment tools, and other important details about how you’ll manage your recruiting efforts.” Basically, aside from the price, this is your time to shine and get all of your metaphorical recruiting ducks in a row. PREPARE, PEOPLE!

What You Need to Know

According to our site, the average cost to hire is $4,425. So, depending on the number of hires needed, it can get pricey - Make sure you’re prepared for that. Additionally, it’s important that you’re prepared to hire: you know which position, you know the kind of person you’re looking for, you have an onboarding/training package prepared, etc. It’s crucial that you’re fully prepared and have a hiring plan in place so that you can calculate the most accurate budget possible. If you’re able to benchmark your costs to hire at the minimum of 3K, your odds of success can only go up from there - Just don’t expect anything less...Seriously.

The Expenses

• Calculate the Number of Hires- This is an obvious one. When you’re hiring, you must know how many people you are looking to hire and also how many people you can afford to hire - There’s a difference. Once you realize that you need 3 civil engineers, you can begin to really build out that hiring plan.

• Estimate the Costs- Next is the part where it gets a bit tricky - You have to start estimating the costs. It’s hard to ball-park something as important as the hiring process but it’s in every resource on the subject and is something you must take into account. How? According to that same blog from resources.workable.com, you:

  • “Use your average cost per hire- Calculate it by adding the actual recruiting expenses from last year and divide by the number of hires you made. Then, multiply your average cost per hire by the number of hires you plan to make this year.”

  • “Add all projected internal and external costs- For example, imagine you plan to hire 50 people next year. If you decide that you need 50 job listings on three different job boards, you can multiply each job board’s fee by 50 and then add all three numbers to get the total projected cost of job boards.”

• Estimate Any Technological Costs- Once you calculate those initial costs, you have to consider any technological costs you might obtain such as: any technological software you used, any video interview software, background checking, or ATS. It gets pretty costly...

• Calculate Costs Per Hire- Now is the time to calculate your costs per hire. You found the average before, but now it’s time to get down to business. Luckily for you, there’s a simple formula to follow when doing so:

  Cost per hire = Internal Cost + External Cost / Total Number of Hire

  Hackerearth says: “Ensure that your cost per hire should not increase exponentially for any given year and should be in sync with inflation, revenue growth, and a number of hires.” Pretty solid advice, if we do say so ourselves..

Have you created a hiring budget before? If so, let us know if these are the steps you took and if they are, what do you wish you would’ve done differently?