Recruiting Cost Savings - Cost Per Hire
Not only are an employer’s recruiting costs reduced by converting an intern into a fulltime hire because the employer has had the ability to gauge both technical competence and cultural fit through the internship period, but many of the hard costs related to recruiting and hiring are eliminated. To determine the cost savings in this area, it is important to perform a Cost Per Hire analysis (CpH).
According to the Staffing Metric Study, a survey conducted jointly by the Employment Management Association (EMA) and the Society for Human Resources (SHRM) of 636 human resource professionals, the most common costs included in a CpH calculation are:
| Advertising and event costs (76%) | Converting an intern to a full-time hire eliminates the need for newspaper, journal or other print ads. |
| Internet services (63%) | While Internet membership fees will always be a factor, the fee associated with individual postings can be counted as a savings. |
| Third-party agency contract & fees (52%) | Large companies would typically not engage a recruiting agency to fill an entry to mid-level position; however, due to staffing issues and lack of dedicated HR function, smaller to –mid-sized companies often incur these costs. |
| Reference/background check costs (50%) | |
| Referral bonus costs (49%) | Recruitment staff attendance at job fairs, preparation of job ads, resume review, interview time and phone pre-screens are some of the staff time that can be eliminated through internship hires |
| Travel costs (for applicant) (43%) | |
| Domestic relocation costs (40%) | |
| Signing bonus (37%) | Most employers would not offer a sign-on bonus to a converted intern hire. In addition, employers report paying below market salaries to interns who convert to new hires. |
| Training costs (24%) | |
| Technology-based hiring management (19%) | The Internet has vastly increased the number of resumes an employer must track for employment and EEO reporting purposes. Many businesses have invested in front-end resume databases for their business. Costs associated with data entry and sorting resumes received are eliminated with intern hires. |
SHRM surveys also report exempt positions are at $6,943 CpH. Non-exempt positions are reported at $2,546 per hire. CpH for high skills, such as information technology vacancies, range from $9,777 to $19,219. Overall, it is reported that companies typically spend $10,000 - $50,000 in tangible costs alone to replace and retrain after the departure of a single employee.
An organization’s largest expense is its employees. The cost to hire a single employee is calculated differently among HR professionals, and it is affected by the size and structure of the hiring organization, but calculating the CpH can help each employer assess its individual return on investment (ROI) for various recruitment strategies. The ROI for converting an intern into a fulltime employee is calculated as follows:
| ROI = |
CpH Employee - CpH Intern |
|
CpH Intern |
In addition, hiring managers devote time to the recruitment process through second interviews, interfacing with the recruiter, and collaborating on the position.