Soaring Average Cost of Recruitment

Soaring Average Cost of Recruitment - Recruitment Agencies - HR Blog - HR Expertise

Organizations are not only paying more to hire and retain employees, but they are also struggling to find suitably experienced candidates for their vacancies. A recent survey of over 1,500 HR professionals across ANZ conducted by ELMO Software found that it is costing organizations an average of $23,860 to hire one employee and taking on average 40 days to fill a vacancy in Australia. This is a big contrast from $10,500 to fill a vacancy in 2020, it has more than doubled. This figure is by any means a substantial cost in order to hire an employee whilst factoring in that retention is not guaranteed.  Is the alternative, recruitment agencies as they offer a replacement guarantee? We’ll explore this a bit more in this article.


HR Industry Benchmark Report (ELMO)


For reference, the average hiring costs per level of seniority are –

• Executive is $19,624;

• Senior-level Managers is $11,721;

• Mid-level Managers is $9,542; and

• Entry-level positions $3,543.


Key Recruitment Challenges

If you are finding recruitment challenging, rest assured you aren’t alone, and alarmingly, recruitment presents a real challenge for one in six (approx. 16%) Australian companies. In addition to the skyrocketing cost to hire, the competition to attract and hire talent is also on the rise. This added pressure to be able to compete for talent further drives the cost of recruitment and turns it into an astronomically costly exercise for businesses. For recruitment solutions, see our other article The Not So ‘Great Resignation’ and Recruitment Solutions.


The pandemic potentially had an impact on the recruitment efforts observed in 2021 but it is a different scenario in 2022. Hiring efforts have been renewed and employee mobility is at an all-time high. As a result, talent acquisition plans are crucial in order to compete in the fierce War for Talent that is back with a vengeance.


In their Future of Work report, PWC postulates that the biggest differentiator aside from technology and specialist recruitment skills will be Employee Value Propositions (EVPs). As a point of differentiation, companies need to understand and appeal to their team members and prospective ones by redefining their EVPs to accentuate flexible working arrangements, remuneration and benefits, learning and development, and wellbeing. Surveys are an effective way to establish what parts of your employee experience (EX) need uplifting or what is working as it was intended.


Understanding where the key challenges present themselves is helpful to understanding where you need to turn your attention, and according to the ELMO report, the three key challenges were reported as follows.

1. Skills shortage – 54%

2. Competition for talent – 53%

3. Attracting the right candidates – 47%


Key recruitment challenges report


Recruitment Channels

Talent is sourced via different methods depending on the size of an organization, the industry, and or the expertise required, no one approach suits all and it needs to be constantly reviewed to stay competitive. Therefore, it is pertinent for us to examine what the data from the ELMO reports identify as the most effective recruitment channels.


Some of the standouts for extremely effective channels are established external talent pools, employee referrals, and internal talent/succession programs. In the effective category, job boards, external recruiters, and internal talent/succession programs scored highly. Worth noting that internal talent/succession programs scored highly in both categories.


Which channel is most effective in finding most suitable candidate


Not surprisingly, employee referral is scoring highly in the extremely effective category. After all, it is unlikely that an employee would refer someone that they didn’t believe could succeed and thrive in the organization. Furthermore, candidates are better placed to get a good read on the organization by asking someone with firsthand experience of what it is like to work there. This is an extremely useful method when attempting to attract passive candidates that haven’t quite yet made the decision to move but are open to hearing about potential opportunities. This could the decisive factor that wins them over.


The most effective channel proved to be the internal talent pool/succession program channel with a combined score of 74% between the two categories. Once again unsurprising as internal talent have intricate knowledge of the organization and relationships that they have nurtured that should enable them to have a higher rate of success with internal vacancies. Coupled with an effective learning and development program in-house, the internal talent pool/succession program channel can be extremely successful as the data indicates. However, it is peculiar that it is only utilized by 44% of respondents. If you form part of the other 56%, consider implementing a sound internal talent pool/succession program.


External recruiter/recruitment agencies was the next highest combined score with 70% of respondents stating it is either extremely effective or effective. To answer the question posed at the start of the article, it appears that recruitment agencies are an effective way of sourcing talent despite potential associated costs. This might not be a viable solution for all businesses, so look at some of the other high-scoring options available such as job boards which have a combined score of 69%. Irrespective of the recruitment channel you decide on, ensure it’s not the only one, track your cost per hire and seek advice if you need it.


Recruitment Tools

An important aspect of recruitment effectiveness is the tools available to decrease the time to hire and quality results. Timely recruitment could be the difference between securing highly sought-after candidates versus missing out. Nowadays, applicant tracking software (ATS) caters to end-to-end recruitment including advertising, shortlisting, and interviewing. As a result, ATS is the most utilized tool for recruitment at 32%.


Background screening tools at 26% and psychometric assessments at 29% are also very popular. This indicates that employers and recruitment agencies alike are evaluating their hiring choices carefully and supporting them with concrete data to support it. A poor hire is not only financially costly, but it is also extremely taxing on time, resources, morale, and brand reputation. According to HRM and an article by Performia Australia ‘a bad hire can cost 2.5 times the employee’s salary after taking into account recruiting, replacement and onboarding expenses’. Hiring is not only expensive, but attrition is also a high cost to incur for businesses.


2022 HR Industry Benchmark Report (ELMO) - Recruitment Agencies - HR Blog - HR Expertise



The cost of hiring is undeniably on the rise, and it is crucial to better understand your cost per hire and your time to hire as a business. Factor in the most common recruitment challenges and plan solutions on how to overcome them. Furthermore, take the time to understand the most effective recruitment channels and what would work for your business and prospective candidates. Lastly, ensure you utilize the right tools to get the job done.


At HR Expertise, we provide different recruitment solutions to help businesses throughout the recruitment process. We work with the clients from beginning to end, providing a robust recruitment solution. We use various recruitment tactics and marketing channels to locate and entice the best and most competent candidates for the position. So, if you are planning to recruit, don’t forget to contact HR Expertise. We would love to work with you.