Hiring the right candidates is crucial for organisations, and even more so for start-ups. This is because start-ups have small teams and the performance of each employee matters significantly. Any given candidate has the potential to make or break the start-up. In other words, the performance of the selected candidate can either contribute to the success or failure of the start-up.
Although hiring the right candidate is important, many start-ups may not be able to use recruitment strategies as big businesses because of budgetary constraints. This involves much more than just the typical salaries, which often appear higher at start-ups than at large organisations. Therefore, start-ups need to develop recruitment strategies within a limited budget to hire the best talent.
A typical recruitment process goes through several stages such as advertising for the vacancy, receiving applications, shortlisting candidates, conducting skill/aptitude tests, interviewing, and onboarding. While this is a broad overview of the recruitment process, several ancillary activities are also performed to complete the recruitment process. These include processes like employer branding, marketing, job fairs, campus hiring, etc. Each of these recruitment-related activities has specific cost implications adding to the overall recruitment costs.
Examples of external costs are:
Internal costs include expenses such as:
These cost heads are indicative only. Each organisation may have more/fewer elements or different elements depending on the nature of operations and hiring needs.
It’s sufficient to say that the recruitment process entails several cost heads that constitute a significant factor to be considered during the budget planning of the start-up.
Finding the right talent and hiring them is a lengthy and complex process with cost implications at each stage. A start-up needs to ensure that it does not exceed the recruitment budget so that the overall financial planning does not get impacted. Hence, start-ups need to consider each cost head and optimise the costs. They need to cut off any unnecessary expenses and minimise costs where possible. For instance, they can reduce traveling expenses by completing processes virtually where feasible.
The recruitment expense planning must be done before proceeding with the hiring process. A good metric to assess recruitment costs is the cost-per-hire.
One of the most critical cost components of recruitment for a start-up is cost per hire or assessing how much it costs to hire an employee.
Cost per hire estimates the average expenses incurred while hiring each new employee. This includes costs like sourcing, advertising new positions, referral bonus, onboarding, and more.
Cost per hire is calculated as:
(External costs + Internal costs) / total number of hires
It provides a realistic view of recruitment expenses and the cost of hard-to-fill roles. Based on these inputs you plan cost-effective recruitment strategies.
1. Look within
Before you start looking at external sources, it is a good idea to look at your existing talent pool and assess if you can move any employee to the required role. It might be possible to train an existing employee to fulfill the new role. Finding the right talent within the organisation saves a lot of expenses. Besides, the candidate is already familiar with the organisation and its work culture.
2. Focus on merit
Instead of having a large number of candidates, refine your search to shortlist the candidates based on merit. Managing a large database of candidates slows down the hiring process and makes it complicated. You waste a lot of time on candidates who probably do not fit your requirement.
3. Social recruiting
Hiring through social media channels has gained popularity in recent years. It is also proving to be a cost-effective recruitment strategy. Social media channels have a wide reach and platforms like LinkedIn have the potential to provide you with the right talent.
4. Employee referrals
Start-ups can share information about job openings with their existing employees and encourage them to refer candidates who can fill the vacancies. Most businesses offer a referral bonus to the employees where the referred candidate is hired. Despite the cost of the bonus, employee referrals are not an expensive hiring option. This method is also likely to provide quicker results.
Technologies like Artificial Intelligence (AI) are spearheading disruption in recruitment functions. Software bots promise to enhance the speed and accuracy of recruitment by automating several routine processes. Besides, AI can manage large volumes of structured and unstructured data to provide valuable insights that enable hiring the best candidates. However, automation software is expensive to procure and it might not prove to be a cost-effective option. Investment in technology is worthwhile from a long-term perspective. Automation fosters growth by making it easier for the business to scale.
6. Working with an RPO
One of the most cost-effective strategies to reduce recruitment costs for a start-up is partnering with a Recruitment Process Outsourcing (RPO) service provider. Outsourcing hiring needs to an RPO resolves multiple recruitment issues that start-ups face.
When you work with an RPO agency, the agency manages the end-to-end recruitment cycle for your start-up.
Hiring candidates with specific technical/non-technical skills might be difficult for a start-up if they do not have experts in the field in-house. RPO agencies overcome this shortcoming because they have specialist recruiters who can assess candidates with different skills.
An RPO service provider is experienced in the field and can spot the right talent early. They have the expertise in attracting candidates to your company.
Access to technology
It is an established fact that automation boosts the efficiency of recruitment. However, budget constraints may not allow you to leverage automation. You can enjoy the benefits of automated hiring by partnering with an RPO without directly investing in one.
Relieves HR professionals
When you outsource recruitment to an RPO, your HR team is relieved of laborious tasks like advertising, creating job descriptions, shortlisting candidates, and more. An RPO agency takes care of all these aspects leaving your team free for interacting with the candidates.
Also, when an RPO agency takes care of the end-to-end hiring process, you do not require an extensive HR team. You can do this with fewer people who also manage other facets of the HR function.
The hiring process gets completed much faster when working with an RPO because the RPO company is well-experienced in spotting the right talent and they use automation to speed up the process. As a result, you can fill the vacant positions much faster than if you had to do it in-house.
Access to a large talent pool
Since RPO agencies have been in the field for a long period they have a large network and access to a vast talent pool. Hence, they can fulfill your hiring needs much faster.
Focus on the growth of your business
When an RPO agency takes care of end-to-end recruitment, you can give undivided attention to the growth of your business. This is because you have peace of mind that your hiring needs are being taken care of by experts and you can hire the best talent as and when you need. You can channelise your time and resources towards meeting your goals.
In a nutshell, when you outsource recruitment, you have access to a large talent pool, technology, services of specialist recruiters, and a faster recruitment process that leaves you free to focus on the growth of your start-up. An RPO partner takes care of the entire process for a fixed compensation. On comparing this with the expenses incurred at different stages of the hiring process, you will find that you save on recruitment costs while working with an RPO. In addition to saving costs and time, an RPO agency provides you with the best talent.
Optimising costs is vital for every start-up because they work on shoestring budgets. A start-up can minimise its recruitment costs in different ways. One of the best strategies is outsourcing recruitment to an RPO. Careernet is a leading RPO service provider that works with its clients to provide them with best in class cost-effective hiring solutions.
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