External Recruiting as a Budget Line Item

Vector Illustration of Business People Budgeting for Their Company

Companies are discovering the implications of a 50-year low unemployment rate through a painful trial and error based learning curve. The 3% unemployment rate alone does not tell the whole story. Not only are there fewer overall workers available, but only a small percentage of these available workers are employable. Aging workers reentering the workforce, lack of relevant training programs, and geographic imbalances have resulted in what is essentially a 0% unemployment rate. This new reality means two things:

  1. Your next hire is happily working for someone else right now.
  2. You are most likely going to pay for someone (i.e. a recruiter) to go find them.

Old Hiring Practices Aren’t Working Anymore

With a critical shortage of employees in the workforce, even companies that were traditionally able to fill positions through internal hires, open calls, or job boards are no longer able to do so. The resource pool of internal employees is too limited and the caliber of candidates who respond to job postings is at an all-time low. As has happened in the past, companies are beginning to increase the pay of open positions in an effort to attract talent. Unfortunately, employees who will jump to a new job for a few dollars more are not typically good long-term investments. They will fill your position until the next best offer comes along.

Larger companies already staff traditional in-house recruiters (and the salaries and fully loaded benefits that come along with them). But the role of a recruiter is expanding. Recruiting is no longer about posting jobs and screening applicants. Recruiters are switching from screeners to salespeople – working to convince their candidates of all the reasons they should join a particular company. In most cases, recruiters are not skilled at cold calling and selling to currently employed talent. So the effectiveness of old school recruiting is has become limited as well.

Smaller companies without a robust talent acquisition staff and companies with difficult to fill jobs are being forced to turn to external recruiters for help. Most companies are either unaware of or underestimate the time and money associated with working with an effective external recruiter.

Too Few are Budgeting for Recruiting

Active recruiting has emerged as the most viable way of procuring top talent. It should be a recruiter’s job to find talent wherever it’s hiding and to sell candidates on the idea of leaving their present position to work for your company.

The problem is: no one is budgeting for recruiting!

Some companies have a minimal budget set aside for job postings, but most are leaving out this essential element completely. Instead, they’re still relying on the “we’ll deal with it when the time comes and cross our fingers that it doesn’t” type plan. This gamble may have paid off in the past, but what happens when you have openings you can’t fill? You’ll be left with an unanticipated, unbudgeted expense for hiring. By the time you find out that this is not an inexpensive proposition, it will have been too late.

If you don’t have the budget to hire, you’re likely to:

  • Be short-staffed
  • Compromise on the talent you’re willing to hire
  • Cut money from another part of your company’s budget
  • Create problems within other parts of your business

We at Pivotal Talent Search see this every day. If you are anticipating growth in the coming year or if high turnover is part of your business model – the time to budget for recruiting is NOW before next year’s budget goes into effect.

How Much Should I Budget for Recruiting?

There’s no crystal ball that can perfectly predict hiring needs due to promotion, retirement, or resignation. The best any company can do is estimate based on turnover data from the past 1-5 years combined with growth projections for the future.

Pivotal recommends companies budget 10% of the anticipated salary for the positions that will need to be replaced based on historical data and future growth plans. For instance, if you are likely to have to hire for $500,000 in salaries, you ought to budget $50,000 for hiring expenses. Some of your positions will fill with internal promotions/lateral moves, from outside referrals, or through your own internal recruiting efforts. The others will require an investment in a proactive, effective recruiting company that can find you the right person for each position you need filled.

Get the Most Bang for Your Buck

If you’re going to have to budget for hiring, you might as well get the most bang for your buck. Pivotal Talent Search can deliver above industry value for below industry pricing. Our unique pricing model based on negotiated hourly recruiting rates allows us to save our clients upwards of 40% in fees compared to traditional recruiters. Plus, we offer flexible recruiting services. We can swoop in at the last minute when a hiring need arises or help you fill a planned series of positions on an ongoing basis. We can help with high turnover, hourly, and even seasonal positions as well as long term executive positions. No matter your need, you’ll only pay for the time we spend actively searching for and engaging candidates on your behalf – rather than the usual flat percentage rate (usually 20%!) of the salary you’re hiring for.

5 Hours of Recruiting Services for FREE

Pivotal Talent Search will help make budgeting for recruiting affordable for your large or small business. Give us a call today to get started! New clients receive 5 hours of recruiting services for FREE when retaining us to fill one or more of your open positions.