External hiring costs arise where we pay someone outside our organisation (advertising placement, recruiter fees, referral bonuses, travel costs, relocation costs), and internal hiring costs are self-evident (advertising content or co-ordination, travel/interview/referee costs, and staff time). Apparently 90% of hiring costs - "including testing, reference checking, hiring manager time, and administrative support" - are likely to be external costs (Phillips & Gully, 2015, p. 156).
Recruitment costs, or costs per hire/CPH, used to be guesstimated at something like $13k per person, which I would guesstimate to be more like $20k today. In the USA in 2016 this was considered to a little over $4100 (SHRM, 2016). This is a simplistic model, largely only including direct costs (advertising, testing, verifying, contracts), not indirect costs (screening, interviewing, reviews) or the six or so months it takes for a new staff member to become acculturated to organisational processes, procedures, and to build networks.
Those more complex recruitment costs - including training investment - for trainee accountants were calculated out to a staggering 241% of an accounting graduand's annual salary (Twiname et al., 2011). However, those accounting students require two expensive professional exams to become Chartered Accountants once they have clocked up the appropriate number of hours, which significantly inflates costs in this profession (Twiname et al., 2011). It would be interesting to know whether the percentage has shifted since the original study, and what costs doctors and lawyers rack up!
It is interesting just how pricey it is. I began making a rough list of what needs to be factored in, and came up with quite a substantial list (see the image accompanying this post). And I forgot job sizing.
It is a complex bucket of stuff!
Sam
References:
Phillips, J. M., & Gully, S. M. (2015). Strategic Staffing (3rd global ed.). Pearson Education (UK) Ltd.
SHRM. (2016, August 8). SHRM Benchmarking Report: $4,129 Average Cost-per-Hire. Society of Human Resource Management. https://www.shrm.org/topics-tools/news/shrm-benchmarking-report-4129-average-cost-per-hire
Tsarenko, A., & Krishnamurthy, D. (2021). Understanding and Improving Quality in Firm Recruitment Processes: A case study [report 2021:035]. University of Gothenburg. https://d1wqtxts1xzle7.cloudfront.net/97248696/483817839-libre.pdf
Twiname, L. J., Samujh, H., & Rae, S. (2011). Accounting for the costs of recruiting and training [paper]. Cambridge Business and Economics Conference (CBEC), Cambridge UK, 27-29 June 2011. https://researchcommons.waikato.ac.nz/server/api/core/bitstreams/1fc33677-9d09-4f9c-a9de-8a69368f7ab2/content


















