Recruitment Costs: Types, Calculating, Budgeting, and Decreasing

These are expenses incurred when a business hires new employees. This can include advertising and recruitment fees, as well as the cost of screening, interviewing, and training a new employee.

The cost of recruiting a new employee can be classified into three categories:

1. Advertising Costs:

The cost of placing an ad in a newspaper, magazine, on the radio, or on television in order to find candidates. This also includes the cost of creating and mailing recruitment materials such as brochures and applications.

2. Employment Agency Fees:

These are external recruiting costs charged by a recruitment agency for finding a qualified candidate for a job opening.

3. Other Recruiting Costs:

The cost of recruiting outside of the traditional methods, such as headhunters, campus recruiting, and job fairs. This also includes the cost of travel and hotel expenses for interviewees.

Who is responsible for recruitment costs

The person or organization responsible for recruiting costs will vary depending on the method used to find candidates. If a recruitment agency is used , the agency will be responsible for the fees. If advertising is used, the company usually human resource management will be responsible for the costs. Other recruiting costs can vary depending on the method used, but typically the company will be responsible for these expenses.

Types of recruitment methods that carry costs

There are different ways to go about recruiting new employees, and each one has its own associated costs.


  • The most common method is advertising, which can be done in a variety of ways, including online, through job boards, and in newspapers and magazines. Advertising can be expensive, particularly if you want to reach a large audience.

Recruitment Agencies

  • Another recruitment method that can carry costs is recruiting agencies. These agencies charge a fee for their services, which can include screening candidates, conducting interviews, and helping with the negotiation process. While this can be an expensive option, it can also be helpful in finding the right candidate for the job.

Conducting employee referrals

  • Employee referrals can be an effective and low-cost way to fill vacancies. When employees know people who are looking for work, they can refer them to the company and potentially earn a referral bonus while drastically reducing internal recruitment costs.
  • The first step in conducting employee referrals is to create a system for tracking referrals. This could include a database or spreadsheet where employees can enter the name of the person they referred, as well as any contact information. It’s important to have a process in place so that you can track the number of referrals and bonuses paid out.
  • Once the system is in place, employees should be made aware of the program and encouraged to participate. In order to get the most out of employee referrals, it’s important to have a rewards program in place. This could include a monetary bonus or other perk, such as extra vacation days.
  • Employees should also be given a brief overview of the company’s hiring process so that they can better assess whether or not their referral would be a good fit. It’s also important to make sure that employees understand your company’s values and culture so that they can refer candidates who are a good match.

Pros and cons of each type of method

Each recruiting method has its own unique advantages and disadvantages.

  • Advertising is a great way to reach a large number of people in a short period of time. It can also be relatively affordable, especially if the company uses online advertising. However, some people may be turned off by advertising, especially if it is too aggressive or if it feels like the company is trying to sell them something they don’t want.
  • Referrals are a great way to find qualified candidates, as they come with the endorsement of someone the company trusts. However, referrals can be difficult to track and quantify, and it can be hard to determine whether or not a potential candidate is actually qualified.
  • Networking is a great way to connect with potential candidates who may be a good fit for the company. It also allows companies to build relationships with potential employees before they even need to hire them. However, networking can be time-consuming and it can be difficult to find the right people through networking alone.

How to calculate recruitment costs

Both external recruiting costs and internal recruiting costs can be difficult to calculate, as they can vary greatly depending on the position being filled and the level of experience required for the role. However, there are some basic steps that can be followed to get a rough estimate of the recruitment cost.

1. Determine the advertising budget

This will include marketing costs such as job postings on websites or in newspapers, and unpaid advertising, such as word-of-mouth or networking.

2. Determine the hiring agency fee

Hiring agencies typically charge a percentage of the employee’s annual salary, so this fee should be multiplied by the number of years the employee is expected to work.

3. Calculate the cost of interviewing candidates

This includes travel expenses for the interviewer, as well as any costs associated with hosting interviews, such as renting a meeting room or providing refreshments.

Once the recruiting budget has been determined so can the rough estimate of the recruitment costs.

What shouldn’t be included in recruitment costs

Recruitment costs should not include the costs of employee lunches, employee parking, or employee transportation. These costs are considered benefits, not recruitment costs.

Recruitment costs should not include employee referral bonuses. Employee referral bonuses are a way to reward employees for referring qualified candidates to the company. The bonus could be in the form of cash, extra paid time off, or even a gift card.

How to reduce costs in the hiring process

One way to reduce costs in the hiring process is to create an applicant tracking system that allows for a more streamlined recruitment process. This can be done by creating a standard application that can be used for all positions, and by having a pool of qualified candidates who are pre-screened and ready to be interviewed. Additionally, online recruiting can help to reduce costs by allowing candidates to apply directly to the company website.

Reasons to increase costs for the recruitment process

There are a couple reasons to increase the costs for the recruitment process. One reason is that it could help to weed out candidates who are not serious about the job. If the process is more expensive, then only candidates who are truly interested in the position will be willing to go through with it. This could save the company time and money in the long run.

Another reason to increase the cost of recruitment is to ensure that candidates are qualified for the job. By requiring candidates to pass a test or go through a more rigorous interview process, the company can be sure that they are hiring someone who is competent and capable of doing the job. This can help to avoid costly mistakes down the road.

Steps to create a budget for recruitment costs

Creating a recruiting budget can be tricky. It’s important to consider all of the associated expenses, such as advertising and hiring fees. Here are some tips to help you get started:

  1. Decide which recruitment methods you will use. There are a variety of options available, including online advertising, job fairs, and newspaper ads.
  2. Estimate the cost of each method. This includes the price of advertising space or time, as well as any associated fees.
  3. Add up all of the costs to get a total budget amount. Be sure to allow for some flexibility, as prices may vary depending on the location or time of year.
  4. Make sure you have enough money allocated for recruiting new employees. The cost of recruitment can be significant, so it’s important to have a plan in place.
  5. By creating a budget for recruitment costs, you can ensure that you’re spending your money wisely and getting the most out of your recruitment efforts.

Typical costs of recruitment

Recruitment costs vary depending on the method used, but typically include advertising fees, placement agency fees, and headhunter fees. Advertising fees may include costs for newspaper or online job ads, job fairs, and employee referral programs. Placement agency fees are typically a percentage of the employee’s first-year salary, and headhunter fees are a percentage of the employee’s annual salary.


The cost of recruitment is a high price to pay, but it is necessary to ensure that the right person is hired for the job. By using a variety of methods to identify candidates and assessing their qualifications, the cost of recruitment can be reduced while still ensuring that the best candidate is hired.