Anticipating recruitment costs: A practical guide
- Alexandre Lacote
Sommaire
Recruiting new talent is a key challenge for a growing company. But hiring represents a significant financial cost, which you obviously need to anticipate. A real challenge when you’re a start-up or a fast-growing company, navigating in an uncertain environment.
So how do you plan and finance recruitment without jeopardizing your company’s cash flow? How do you establish a strategy for attracting the best profiles on a limited budget? Here’s how.
Understanding the challenges of payroll management
Total payroll is the sum of the gross remuneration of a company’s employees. She is an essential financial indicator insofar as it constitutes a set of fixed expenses inherent in any company budgetIt can also be used to assess the impact of headcount on sales. Payroll is often the largest expense item of a company, particularly in the service sector. It is generally estimated that it represents 20% to 80% of total expenditure. Forecasting payroll trends is therefore vital. to manage your company’s profitability, all the more so if your business is growing fast. Managing payroll is halfway between finance and human resourceswhich involves finding a balance between two parameters:
- Set salaries that are high enough to motivate employees, and low enough to ensure the company’s profitability.
- Hire the right number of employees to manage the workload properly and meet targets.
How much does it cost to recruit?
To anticipate the financial impact of recruitment, you need to be aware of the costs involved. You must take into account the cost of salaries for new recruitsBut that’s not all: you also need to estimate a multitude of indirect costsincluding :
Indirect recruitment costs
In addition to the salary, you need to anticipate a number of costs as employer charges, the equipment, any relocation and installation assistance for your new employees, bonuses, transportation costs if they are paid for by your company… You also need to estimate the cost of integrating the employee. Car a new employee is never immediately operational on joining the company, an onboarding period is requiredduring which the employee is not productive, and provide forany training costs.
Costs related to the recruitment process
Estimate the time spent by the HR team if recruitment is managed internally, and by the future manager of the person recruited, to identify the right profiles and conduct interviews. As well as time spent by the administrative and legal team to draw up the contract. These working times, and the salaries of these employees represent a cost to be taken into account. To this must be added any recruitment management costs as talent sourcing tools, subscription to candidate databases, participation in recruitment fairsetc. And when the profile search is handled by an external service providerfor example, a recruitment agency, don’t forget to budget for the associated costs. This is often the case for hiring of technical profiles in digital and technology. The costs associated with the recruitment process should not be underestimated. Recruitment School, in France, the average is between €5,000 and €8,000 for each new hire.
Recruitment budget: HR and finance teams must work closely together
The financial anticipation of a company’s recruitments can only work if HR and Finance teams work hand in hand.
In fact, the preliminary work involved in estimating projected recruitment costs is based on the gathering of internal requirements, as well as the drawing up of job descriptions and salary scales, which are tasks that generally fall to human resources. A good recruitment budget therefore depends on a relationship of trust and good information sharing between HR and finance.
In return, the finance team needs to be able to give the HR team clear visibility of the budget envelope dedicated to recruitment, and its breakdown, to enable them to set up efficient hiring processes. For example, when recruiting, the HR team needs to know the expected salary range, so that it can target suitable profiles and conduct effective salary negotiations.
Finally, HR and finance must work together to find ways of reducing recruitment costs, such as :
- Employee loyalty to avoid turnover and replacement costs
- Developing a strong employer brand, to attract talent while limiting sourcing costs
- Reduce the number of unsuccessful recruitments, to avoid the sometimes disastrous financial consequences.
- Specific initiatives, such as co-optation offers, to acquire new profiles at lower cost
Budget recrutement : une étroite collaboration nécessaire entre équipe RH et équipe finance
L’anticipation financière des recrutements d’une entreprise ne peut fonctionner qu’à condition que les équipes RH et Finance travaillent main dans la main.
En effet, le travail préalable de chiffrer les dépenses prévisionnelles liées aux recrutements repose sur le recueil des besoins en interne, ainsi que sur l’élaboration de fiches de postes et de grilles de salaires, qui sont des tâches qui incombent généralement aux ressources humaines. Un bon budget recrutement dépend donc d’une relation de confiance et d’un bon partage d’informations entre RH et finance.
En contrepartie, l’équipe finance doit être en mesure de donner à l’équipe RH une visibilité claire sur l’enveloppe budgétaire dédiée aux recrutements, et de sa répartition, pour lui permettre de mettre en place des processus d’embauche efficaces. Au moment de lancer un recrutement, l’équipe RH doit par exemple savoir la fourchette de rémunération prévue, pour cibler les profils adaptés et mener des négociations salariales efficaces.
Enfin, RH et finance doivent collaborer pour trouver des leviers de diminution des coûts de recrutement, comme :
- La fidélisation des salariés pour éviter le turnover et les coûts de remplacement
- Le développement d’une marque employeur forte, pour attirer les talents en limitant les dépenses liées au sourcing
- La diminution du nombre de recrutements ratés, pour en éviter les conéquences financières, parfois désastreuses
- Des initiatives spécifiques comme des offres de cooptation, pour acquérir de nouveaux profils à moindre coût
Recruiting: how do you build your budget?
Recruiting an employee is a real investment. This investment can quickly become astronomical if your company recruits like crazy, without any real recruitment plan and, above all, without any financial management.
It is therefore strongly recommended to draw up a provisional budget, generally on an annual basis, to anticipate your recruitment needs, and make any necessary trade-offs. Here are a few best practices.
Anticipating recruitment costs
First, it’s essential to understand your company’s vision and ambitions, as well as its operational situation. What are your growth targets? Are the current teams capable of achieving them, or do they need to be reinforced? What are the staffing shortfalls to achieve them, team by team?
To sum up, you need to scenario the future, and question the ROI of each hiring possibility to prioritize the most strategic recruitments. You’ll then be able to define a typology of target profiles and the remuneration to be expected. The aim is to link your company’s financial objectives to its workforce and payroll planning objectives.
Remember to anticipate parameters such as salary increases for existing employees, as well as expected turnover. In fact, in addition to forecasting hiring for new positions, you need to consider the cost of replacing employees who have left the company during the year to embark on new adventures.
Another contingency to bear in mind is the cost of failed recruitments, i.e. if a new employee leaves your company less than a year after being hired. According to recruitment firm Hays, this cost averages 45,000 euros, although it depends very much on the level of responsibility of the employee in question.
Take stock of available financing
Once you have a clear picture of your company’s recruitment needs, all that remains is to assess the financial resources required to make them possible.
In addition to the financing generated by your company’s activity, or from fund-raising, you can turn to grants or endowments, and public aid for job creation.
In Ile-de-France, for example, the PM’up scheme offers a subsidy covering up to 50% of eligible expenses, including structural recruitment. If you’re looking to hire juniors, work-study contracts are also heavily subsidized by the French government.
It’s only after you’ve done this dual task of assessing your expenses and your resources that you’ll be able to draw up a solid budget forecast. Our recommendation: do everything you can to realize your company’s ambitions, but be realistic. If you don’t have the means to achieve your ambitions, don’t plan to hire people who are not feasible, or who could jeopardize your company’s financial health.
Conclusion
Anticipating the financial impact of recruitment is vital to ensure healthy, controlled growth. Drawing up a budget is a key step in managing your payroll, especially for start-ups and scale-ups who are planning to hire large numbers of people to support their development. It’s not always easy, but it’s essential!
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