How much do companies spend on recruiting? I found very few examples of a detailed recruiting budget template on the webosphere. So, I pinged my smart recruiting friends to help guide me. Below is what I found.

1. Simple Recruiting Budget (# of Hires * Cost-per-Hire)

A good place to start your recruiting budget is to establish your hiring volume over a specific period. This can be as simple as 500 hires over the next 12 months.

The hiring # number multiplied by the average cost of hire can give you a rough estimate of how much you’ll spend on recruiting. You’re just using a simple formula:

An average cost-per-hire is easy to find. Resources like SHRM and Bersin peg the average cost-per-hire at around $4,000 to $4,500.

So, let’s use the midpoint of that range: $4,250. Then, you simply multiply your $4,250 assumed cost-per-hire by the hires you need in a year (500 in our example). See below:

Example of Simple Recruiting Budget

If your hiring mix is fairly even and you’re not using external recruiters, the simple {# of Hires * Cost-per-Hire} formula gives you a solid ballpark for what you might spend on recruiting.

But, to fine-tune your recruiting spend, it’s worth trying the next 2 approaches below:

Need more recruiting budget line items? Here are some other thoughts:

Recruiting Budget Line Items

Elaine Davidson, CEO of Beacon Lane Consulting, a global (but boutique) talent consulting firm, has clients with budgets ranging from $1 million to over $10 million USD.

Elaine says the exact list of recruiting budget items depends on what the employer’s focus is at the moment  (e.g., implementing a new ATS, adding on a sourcing tool, Candidate experience tool, etc.).

She finds the following are the main items her clients spend on recruiting:

• Fully Loaded Personnel Costs
• ATS Annual Licenses
• LinkedIn Licenses
• Online Presence: Employer Brand, Social Media, Glassdoor, etc.
• AI Scheduling
• Digital Interviewing
• Digital Job Analyzer/Text Analyer
• Career SiteBuilder
• Executive Search
• Other Job Boards
• Background Check Vendor

Brad Cook, the Vice President of Talent Acquisition at Intuitive, tends to break recruiting budget down into these 8 categories:

• People costs (FTE and contingent)
• Recruiting Tools (must have)
• Recruiting Tools (nice to have)
• Travel
• Search fees (if used)
• College
• Employee Referral Programs
• Programmatic Media Buying

Diversity Recruiting: A New Budget Line Item

More and more employers are adding “Diversity Recruiting” to their recruiting budget.

Fintech startup Petal (97 employees) told BuiltIn:

“With our Series C [funding], we knew we’d be doubling the Petal team size within 12 months and viewed it as an opportunity to continue diversifying our employee base. So the people team made a detailed DEI strategy, which included a six-month budget of $50,000, and a 12-month plan of up to $70,000 more. Budgets included paid services like partnerships with DEI-focused recruiting agencies, sponsorships for organizations and conferences that support Black and Brown tech communities, workshops led by DEI and leadership experts and employer branding that targeted underrepresented groups.

But interestingly, we found that our biggest impact to date has come from internal efforts. We appointed our first diversity officer. There’s now a bonus of up to $3,000 when employees refer an underrepresented candidate to an open job at Petal.”

Recruiting Budget Bonus Tips

Here are some extra stats/tips that might be helpful to calculate how much you’ll spend on recruiting:

Set Hiring Goals

Discuss your hiring goals with the hiring manager to ensure recruitment activities are well-coordinated and timed to meet business needs.

Clearly outline your timelines, including the number of hires, types of roles, and hiring timelines. And make your goals SMART, for example: 

“Hire 10 software engineers within the next three months to support the new product development.”

Determine which roles are most critical to prevent overspending on less critical positions.

Take Advantage of Cost-Effective Recruiting Channels

Post your job openings on free job boards, social media, and online professional networks. Implement employee referral program, which are relatively cheaper but result in better quality of hire. 

Optimize Job Advertising

Use targeted job ads on LinkedIn and Facebook to reach certain demographics. You can target candidates via job titles, locations, past job searches, career history, and if they’ve previously seen your job ad. 

According to Appcast’s Recruitment Marketing Benchmark Report,  the median cost per click dropped in 2023 at $0.85, compared to $1.07 in 2022, while the number of people who apply after clicking the job ad grew by 22.5%.  Additionally, the median cost-per-application declined to $19.40 in 2023, down 29.6% when compared to 2022 

So, if you’re considering investing in target job advertising, now is the best time. For best results, continuously monitor the performance of your job ad and adjust them accordingly. 

Track and Analyze Recruitment Spending

Regularly track hiring expenses against your budget: job ads, agency fees, background checks, and referral bonuses.  For accuracy, use software tools to keep detailed records. 

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Evaluate your ROI for each recruitment channel and method. Compare your cost-per-hire against the industry average to identify areas for improvement. Focus on those channels that yield the most number of qualified candidates.  

Monitor your time to fill recruiting metrics. Reducing time-to-hire can lower costs associated with prolonged vacancies and lost productivity.

Negotiate with Vendors

Negotiate contracts and fees with staffing agencies, job boards, and background-checking services to get the best deals. 

To save money, consider purchasing bulk packages for job postings or background checks. If you’ll be hiring all year round, consider annual memberships in ATS and other HR software to reduce subscription fees. 

Prepare for Seasonal or Short-Term Hiring

Increase your budget during peak hiring seasons or when you anticipate higher turnover. Distribute recruitment expenses evenly throughout the year to avoid unnecessary spending or budget spikes.

Use temp staffing agencies for short-term needs or when managing recruitment surges. Consider hiring contractors or freelancers for project-based work to save on long-term employment costs. 

Have Flexibility

Implement a process for budget adjustments to accommodate unexpected hiring situations like market conditions, industry changes, or sudden changes in your staffing level. 

Set aside 5-10% of your recruiting budget for a contingency fund. It will cover unexpected expenses like urgent hires or spikes in job advertising costs. Adjust this percentage based on your company size and industry. 

Consider Internal Mobility

Invest in training and development programs to make your current employees  ‘promotable’ and advance to higher levels. Promotion reduces external hiring costs and improves employee retention. 

Launch internships and mentoring programs to build a talent pool of future employees. These programs can be cost-effective ways to evaluate potential hires. 

Continuously Improve

Reviewing your recruiting budget regularly (quarterly or annually) helps identify and address inefficiencies, allowing you to optimize your resources and save money. 

Collect feedback from your candidates and hiring managers to see what can be improved in your recruiting process. Check your analytics dashboard to see which channels or strategies are most effective. Analyze your competitors’ recruitment practices to identify techniques you can adopt. Stay informed with the latest recruiting trends and best practices to adapt your recruitment strategies accordingly.