Think Inside the Box: How Hiring Internally Could Help Lower Hidden Recruitment Costs

23rd January 2015

The cost of hiring a new employee can be considerable, with many factors to consider before then new hire even reaches the office. From paying for cover to expensive advertising fees, there are hidden costs that must be addressed in order to make the transition easier for both the candidate and the company. This week, we look at the true cost of recruiting and the benefits of hiring internally.

The Costs
Hiring a new employee can be a time consuming practice unless every step is made to ensure the costs are kept to a minimum without compromising on the quality of applicants. The price tag for new recruits can come in at an excess of £30,000, including fees, salary for temporary staff and loss of productivity whilst the new member is being trained. Let’s go over the costs:
• Advertising: Depending on what source you use to look for your new employee, the cost of advertising can be expensive. However, there are numerous websites that are either free or very low lost regarding advertising, or professional networks like LinkedIn can be a good, free source for advertising jobs and communicating with potential candidates.
• Interview Time: Interviews can be an all-consuming process as management take time from their work day in order to speak to candidates. The cost to managers during this time is an average of just over £700, which adds up should there be multiple hires for one company.
• Temporary Cover: As an employee leaves and a new one is being looked for, there is an interim period during which the job is likely to be performed by temporary staff or a single member of staff will spread themselves over two positions. This can cost a company money either way, temporary staff cost an average of over £3,000.
• Agency Fees: Using a low cost online recruitment agency (like ours!) can help keep costs to a minimum while also maximising the chances of finding quality candidates over a variety of sources. Different agencies have different charges so it is important to do extensive research into the best kind of agency for your company’s needs.
• New Hire Training: It takes up to 28 weeks for a new employee to perform their job at the optimum level of productivity - still being paid a full salary and yet not performing at a level which warrants such pay can cost companies dearly.

Hiring Internally for Lower Costs
A great deal of money and time could potentially be saved by looking at existing employees when attempting to fill a newly vacant position. Whereas hiring from outside the office could bring in a new atmosphere, managers can rest assured that hiring internally will mean having an employee who is already aware of the company’s ethos and who knows the inner working of the services provided, without having to be extensively trained. Some of the benefits of hiring internally include:
• No Advertising: There will be little need to go to great lengths to advertise your vacant job. Hiring internally means the job only needs to be seen by those already working for the company, which means advertising through the company intranet, emails or perhaps even staff meetings.
• Minimal Training: While the job specification may differ from an existing employee’s previous role, the training refers simply to the day to day tasks and goals, rather than that of the overall company.
• Smaller Chance of Exit: Recruitment agency CleanTelligent published an article which determined that hiring internally lowers the chances of team members leaving as they are already comfortable working for the company and have recognised scope for personal growth.
• Better Employee Reviews: CleanTelligent also suggested that utilizing staff who are already there for different aspects of the business can lead to better performance and less time spent forming relationships and building bonds.

There are of course benefits to hiring outside the company, mainly bringing fresh blood with fresh ideas. Often salaries for brand new candidates are higher than those for existing candidates, which is bad for the pockets of the company, but it may be that a fresh pair of eyes can increase productivity in the long term, whilst costing money in the short term.

The Statistics
It can be down to the opinion of management whether they feel that hiring internally will benefit the company and its productivity. However, there are statistics that may help make the decision slightly easier. A study conducted by Cornerstone on Demand titled Internal Recruitment Issues in the European Market found that for the majority, internal recruitment counts for a third of overall hires. However, 93% of HR employees say that internal hiring has benefited their company.

In the UK, 36% of employers say they hire externally to avoid looking as though they are favouring existing employees without giving anyone else the opportunity to try for the position. Similarly, 51% said they were afraid of missing out on top class talent by showing preference to employees who already work for them. Europe and the UK differ on the way in which a job should be applied for. In Europe, 73% believe it should be up to the employee to show willingness and apply for an internal vacancy, whereas in the UK just 2% believe it to be the employee’s duty to ask, rather relying on the HR department instead.

So although the benefits of internal hiring are numerous and significant, there are still plenty out there in favour of external hiring – and if that’s you, you need us!

"In Europe, 73% believe it should be up to the employee to show willingness and apply for an internal vacancy, whereas in the UK just 2% believe it to be the employee’s duty to ask, rather relying on the HR department instead. "