Important key figures: How the recruitment cost ratio is calculated

In the business world and in HR management, there is a lot of key figures and numbers thrown around that are important. Gross profit margin, return on investment and so on. A key figure for the Recruitment however, is often overlooked: the recruitment cost ratio.

This little-known metric shows how much your company spends on recruitment compared to the number of new hires. It is a valuable metric for evaluating your company's performance and identifying opportunities for improvement.

Read on to find out more about calculating the recruitment cost ratio and why it is important for your company.

How are recruitment costs calculated?

Recruitment costs can quickly add up, so it's important to calculate them carefully. The first step is to determine the number of employees you need to hire. This will depend on factors such as turnover rate, the skills required for the job and the size of your company.

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Once this figure is determined, you can estimate the cost of advertising, sourcing candidates and conducting video interviews. You will also need to consider factors such as the cost of training or orientation programs for new employees.

Also, don't forget to factor in costs for things like background checks and reference checks. By taking the time to calculate these costs upfront, you can ensure that your hiring process is as efficient and cost-effective as possible.

What is the recruitment cost ratio?

The term "recruitment cost ratio" is used in business to describe the amount spent on recruitment divided by the number of new hires. In other words, it is a measure of how much it costs to fill a vacancy.

The recruitment cost ratio can be a useful metric for companies as it can help them improve their recruitment process and reduce their overall spend.

For example, if a company has a high recruitment cost ratio, it should consider investing in more efficient recruitment software or increasing its recruitment budget.

Although the recruitment cost ratio is not the only factor that should be considered when making recruitment decisions, it can be a helpful tool for companies looking to improve their bottom line.

Business analysts and HR coordinators can be a great help in estimating hiring costs. Learn more about other important positions for your company here.

Recruitment cost ratio vs. cost per hire

The recruitment cost ratio is the average amount of money that a company spends on recruitment. Recruitment divided by the number of hires it makes. The cost per hire is simply the sum of all recruitment-related costs divided by the total number of hires made.

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While cost per hire is a simple number to work with, it does little to tell you how effective your recruiting efforts are.

Instead, the recruitment cost ratio provides a more holistic view of your recruitment efforts by taking into account both spend and the number of hires. It is therefore a more useful metric for evaluating the effectiveness of your recruitment strategy.

How do you calculate the recruitment cost ratio?

The recruitment cost ratio is simply the ratio of recruitment costs to the number of hires made, i.e. essentially how much it costs you to fill a position.

This figure can be helpful when evaluating different recruitment strategies. Of course, there are other factors to consider when making hiring decisions, but the recruitment cost ratio is a helpful metric to keep in mind.