Recruiting a new employee costs hard cash. From advertising to networking to head-hunting fees, the hard dollar costs are often dismissed as a “cost of doing business”, or as if it were not real money. Let’s look at how high levels of engagement can cut that cost in half.
- Acme Productions Inc.
- Revenue: $25,000,000 per year.
- Employees: 50.
- Average annual salary: $50,000 (fully burdened, closer to $90,000).
- Average length of employee stay: 4 years.
Let’s make the recruitment process very simple, by hiring a head-hunter to find each new employee. Their fee is a modest 25% of each employee’s first year salary. We’ll ignore any internal interviewing we might have to do, and take the head-hunter firm’s fee as the total cost of the recruitment. We’ll also assume they have a 100% recruitment success rate. That is, they always make good hires.
With fifty employees, and a four-year employee retention rate, we will on average recruit twelve-and-a-half new employees every year. That’s 50 (employees) x $50,000 (average salary) x 1/4 (staff turnover) x 25% (fee) = $156,000 approximately. That’s just the actual recruiting fees, and does not take into consideration the disruption to management as they expend precious time interviewing candidates put forward by the head-hunter company.
A typical internal communication system for fifty employees will be about $24,000 per year, and it becomes the foundation for continued improvement in employee communication and improved employment engagement levels. Improved employee engagement levels translate into a direct reduction in employee recruitment costs. And that’s just one of the eleven ways such an investment pays back.