Reducing Recruitment Cost Per Hire with AI: On Balancing the HR Budget

Enter AI recruitment tools. They promise to streamline your hiring process, slash costs, and deliver stellar candidates—all without the usual headaches. But do they really live up to the hype when it comes to cutting the recruitment budget? Let's cut through the noise and see how AI can actually help you balance your HR budget and optimize your cost per hire. 

Cost Per Hire as an Important Metric of Talent Analytics

Recruiters have to spend a lot of time to pause and scrutinise where recruitment costs are flowing in the hunt for the perfect candidate. This is part of their talent acquisition and management process to maximise the budget while still snagging top talent. So, let’s dive into one of the most critical metrics in talent analytics: cost per hire (CPH).

What is Cost Per Hire?

Essentially, it’s the total amount you spend as your recruitment costs divided by the number of hires made in a specific period, typically a year. Think of it as the price tag on each new employee you bring into your fold.

Here’s a reliable cost per hire calculator for your recruitment budget! 

Calculating Cost Per Hire: The Nuts and Bolts

The factors that influence and are involved in the calculation of CPH (Cost Per Hire) help uncover opportunities for cost savings in the recruitment budget.

Internal Recruiting Costs

These are the expenses that come from within your organisation. They include:

• Talent Acquisition and Recruiter Salaries

• Employee Referral Program Bonuses

• Interview Costs

• Applicant Tracking System (ATS)

• Learning and Development Budgets for the Hiring Team

• Fixed Costs

External Recruiting Costs

These are the expenses incurred outside your organisation, and while they might be smaller individually, they add up:

• Agency Fees or External Recruiter Fees

• Marketing & Advertising Costs

• Aptitude Tests & Assessments

• Background Checks

• Employer Branding Activities

Variable Onboarding Costs

Depending on the candidate, type of contract, and type of organisation - the recruitment department, HR, or talent acquisition folks count/don’t count the following as part of the cost-per-hire expenses:

• Relocation costs

• Company assets

  
  

Making Sense of the Numbers

While CPH is a valuable metric, it’s just one piece of the puzzle. To get the full picture, you should also consider the following recruitment costs:

• Time to Hire: How long it takes to fill a position.

• Candidate Quality: The success and longevity of new hires.

• Employee Turnover: High turnover can inflate your CPH over time.

• Source of Hire: Which channels bring in the best candidates at the lowest cost.

Regularly reviewing these metrics can help you make informed decisions, optimise your recruitment strategy, and ensure that you’re getting the most bang for your buck.

In conclusion, while hiring can be expensive and time-consuming, investing the effort to understand your cost per hire can save you money and help you attract the best talent more efficiently. Just think of it as a necessary investment in your company’s future. And remember, always inspect the data rather than making hasty decisions – because no one likes to be stuck with a bad hire.

Recruitment challenges that directly have an impact on the cost-per-hire metrics (Source: employ)

Can AI Recruitment Tools Optimise the Recruitment Cost Per Hire

In the fast-evolving world of recruitment, the old-fashioned method of manually sifting through resumes and cover letters, followed by marathon interview sessions, is gradually becoming a thing of the past. Welcome to the AI-centric era of hiring, where efficiency and cost-effectiveness take centre stage. Let’s explore how AI recruitment tools are revolutionising the hiring process and optimising the recruitment cost, especially the cost per hire (CPH).

What Do AI Recruitment Tools Do?

AI recruitment tools streamline and enhance various aspects of the hiring process. These high-tech assistants can:

• Automate Resume Screening: AI recruitment tools quickly sift through mountains of resumes to identify the most promising candidates.

• Enhance Job Descriptions: AI recruitment tools refine and optimise job postings to attract the right talent.

• Schedule Interviews: Automated scheduling tools reduce the back-and-forth typically associated with setting up interviews.

• Candidate Screening: AI recruitment tools can assess candidates, at least for the first round or initial parts of the hiring/recruitment process.

• Analyze Interview Feedback: AI evaluates candidate responses and provides insights to hiring managers.

• Track and Report Metrics: These tools generate detailed reports on various hiring metrics, helping HR teams make data-driven decisions.

  
  

Reducing Cost Per Hire with AI

AI recruitment tools consolidate many of your external and internal recruitment expenses into one comprehensive software. This is significantly cheaper than acquiring individual services or software for different parts of the recruitment process. Let’s dive into the specifics:

1. Time-to-Hire Reduction: By automating repetitive tasks such as resume screening and interview scheduling, AI significantly cuts down the time required to fill positions. This reduction in time translates to lower costs, and the recruitment costs decrease.

2. Decreased Advertising Costs: AI can optimize job postings to attract more suitable candidates, reducing the need for extensive and costly advertising. Advanced algorithms ensure that job descriptions are precisely tailored to the target audience, enhancing visibility and effectiveness.

3. Improved Candidate Matching: AI tools use data analysis to match candidates more accurately with job requirements. This precision reduces the number of unsuitable applicants and increases the likelihood of finding the right hire quickly, saving both time and money.

4. Enhanced Data Analysis: AI systems provide robust analytics that help identify bottlenecks and inefficiencies in the hiring process. By pinpointing areas that need improvement, companies can streamline their processes, further reducing costs.

5. Consolidated Recruitment Expenses: AI recruitment tools often include multiple functionalities such as job posting, resume screening, interview scheduling, and candidate communication. This integration eliminates the need for separate tools and services, offering a cost-effective solution by bundling all necessary features into one platform.

   
   

Metrics AI Recruitment Tools Impact

AI recruitment tools influence several crucial recruitment cost metrics:

• Time-to-Hire: The period between opening a job requisition and extending an offer. AI reduces this time by automating various stages of the hiring process.

• Cost per Hire (CPH): The total expenditure on recruitment divided by the number of hires. AI lowers CPH by minimizing internal and external costs.

• Quality of Hire: Measures the performance and retention of new hires. AI improves this metric by enhancing candidate matching.

  
  

Leveraging AI for Better Recruitment Cost Outcomes

AI recruitment tools are not just about cutting recruitment costs; they’re about enhancing the entire recruitment lifecycle. By automating routine tasks and providing actionable insights, these tools free up HR professionals to focus on strategic activities, such as building relationships with top talent and improving the overall candidate experience.

Imagine having all your external recruitment expenses, like advertising and background checks, combined with some of your internal costs, all managed within one software. This integration is not only convenient but also a significant cost saver compared to juggling multiple services and platforms.

Calculating and Comparing Recruitment Cost Per Hire ROI

Calculating the ROI from AI recruitment tools is fairly simple. You can simply use talent analytics easily available from these tools and compare them to your traditional cost per hire (CPH). 

Factors to consider when comparing the ROI of AI recruitment tools to the traditional HR budget’s ROI

1. Comprehensive Tool Integration: Choose AI tools that offer a full suite of functionalities—resume screening, job posting, interview scheduling, candidate communication, and analytics. This integration ensures all costs are captured in one system, simplifying ROI calculations.

2. Implementation and Training Costs: Account for the initial setup, training of your HR team, and any potential disruptions during the transition period. These costs are crucial for a realistic ROI assessment.

3. Scalability and Flexibility: Assess whether the AI tool can scale with your hiring needs and adapt to various job markets and roles. The ability to handle varying volumes of recruitment activities efficiently impacts long-term ROI.

4. Efficiency Gains: Calculate the reduction in time-to-hire and associated costs with AI tools. Compare these to the time and costs involved in manual resume screening, scheduling, and interviewing.

5. Quality of Hire: Assess the quality and retention rates of hires made through AI tools versus traditional methods. High-quality hires reduce turnover costs and enhance productivity, positively impacting ROI.

6. Resource Allocation: Evaluate the bandwidth of your HR team before and after implementing AI tools. Determine if AI tools have freed up HR professionals to focus on more strategic tasks, leading to better overall team performance.

7. Cost Savings: Compare the direct cost savings from reduced advertising, agency fees, and other external expenses when using AI tools. Ensure these savings are reflected in your overall ROI calculation.

AI recruitment tools offer a comprehensive solution to streamline and optimise the hiring process. By consolidating multiple functionalities into a single platform, these tools simplify the calculation of ROI and provide clear insights into cost savings and efficiency gains. 

Choosing Round One AI

You want to adopt AI recruitment tools as a solution but there’s always a catch - will it replace you? Is it full of bias? How will we know whether we’ve picked the right candidate before it's too late? And endless objections from recruiters, HR, and talent acquisition folks…

To solve this challenge - you will be most comfortable in adopting an AI recruitment solution that checks the following boxes:

• Gives you a more control over the recruitment process

• Has consolidated integrations for each step of the recruiting process

• Fits into the ROI you can safely predict

You can reach out to us for more information on how you can optimize your recr