Important aspects of calculating the ROI of recruitment

There are four main aspects to consider when calculating the ROI of recruitment: the benefits, the costs, the time frame, and the benchmarks.

  • The benefits are the positive outcomes of hiring new employees, such as increased productivity, revenue, customer satisfaction, innovation, or quality. The benefits can be measured in different ways, depending on the goals and objectives of the organisation and the role of the new hires. For example, you can ¬†sales data, performance indicators, customer feedback, or employee engagement survey
  • The costs are the expenses incurred in the recruitment process, such as advertising, screening, interviewing, hiring, and training. The costs can be divided into direct and indirect costs. Direct costs are the ones that are directly related to the recruitment process, such as fees for job boards, agencies, or assessments. Indirect costs are the ones that are not directly related to the recruitment process but still affect the overall budget, such as the time and resources of the hiring managers, the HR staff, or the existing employees who are involved in the process.
  • The time frame is the period over which the benefits and costs are measured. The time frame can vary depending on the nature and duration of the recruitment process, the role and level of the new hires, and the expected time to reach full productivity. For example, you can use a monthly, quarterly, or annual time frame, or a specific project or contract duration. The time frame should be consistent and realistic, and reflect the actual impact of the recruitment process on the organisation.
  • The benchmarks are the standards or references that are used to compare and evaluate the ROI of recruitment. The benchmarks can be internal or external. Internal benchmarks are the ones that are based on the historical or expected performance of the organisation or the department, such as the average turnover rate, the average time to fill, or the average cost per hire. External benchmarks are the ones that are based on the industry or market data, such as the average salary, the average productivity, or the average customer satisfaction. The benchmarks should be relevant and reliable, and help you identify the strengths and weaknesses of your recruitment process.

How to Calculate the ROI of Recruitment

Once you have identified and measured the benefits, the costs, the time frame, and the benchmarks, you can use the following formula to calculate the ROI of recruitment:

ROI of recruitment = (Benefits – Costs) / Costs x 100%

This formula will give you the percentage of return that you get from your recruitment process, based on the benefits and costs that you have measured. For example, if you have spent GBP10,000 on recruitment costs, and gained $15,000 in benefits, your ROI of recruitment will be:

ROI of recruitment = (GBP15,000 – GBP10,000) / GBP10,000 x 100% = 50%

This means that for every Pound that you have spent on recruitment, you have gained GBP1.50 in benefits.

You can also use the ROI of recruitment formula to compare different recruitment strategies, methods, or sources, and see which ones are more effective and efficient. For example, you can compare the ROI of recruitment of different job boards, agencies, or referrals, and see which ones generate more benefits and less costs.

Conclusion

Recruitment is a vital and strategic process for any organization, as it affects the quality and performance of the workforce, the organisational culture, and the overall business outcomes. However, recruitment also involves significant costs, such as advertising, screening, interviewing, hiring, and training. Therefore, it is important to measure the return on investment (ROI) of recruitment, which is the ratio of the benefits gained from hiring new employees to the costs incurred in the process.

To calculate the ROI of recruitment, you need to consider four main aspects: the benefits, the costs, the time frame, and the benchmarks. You can use the following formula to calculate the ROI of recruitment:

ROI of recruitment = (Benefits – Costs) / Costs x 100%

This formula will give you the percentage of return that you get from your recruitment process, based on the benefits and costs that you have measured. You can also use the ROI of recruitment formula to compare different recruitment strategies, methods, or sources, and see which ones are more effective and efficient.

To optimise the ROI of recruitment best practices include, defining your recruitment goals and objectives, planning your recruitment budget and resources, using data and analytics, focusing on quality over quantity, and reviewing and evaluating your recruitment process. By doing so, you can improve your recruitment process, and align it with your organisational goals and objectives.

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