True cost of Staff Recruitment exposed

If you asked your Human Resources Department how much staff recruitment really costs your organisation the real cost can be much higher than imagined. Elaine Porteous, an Independent Procurement Consultant tells Smart Procurement that there are many costly “hassle factors” both internally and externally that are usually not accounted for.

She says the following issues are prevalent when sourcing service providers for staff recruitment.
• Differing fee structures and billing methods across many service providers
• Little or no management information from the supplier
• Some contractual terms in place but without any quality measures
• Poor internal forecasting of volumes
• Poor job specifications and unclear briefing of the supplier
• Low level of compliance to deals
• Managers expressing their personal preferences of supplier

“Some indirect HR costs of recruitment of staff are quite well hidden and probably beyond the control of any procurement influence, even the direct costs are not very transparent. With the trend towards flexible staffing and the growing use of contracted staff there is an opportunity to control and manage the fees that you pay to external suppliers of recruitment services,” says Porteus

Opportunities regarding temporary staff recruited through an agency
“The direct cost of a temporary staff member is made up of the salary paid to the person hired, the statutory and administrative costs, and the supplier’s mark-up. Assuming the salary is market-related and the statutory costs are fixed, what is negotiable is the salary administration and payroll cost and the mark-up.
Managing the mark-up can be a quick win. Most agencies have a preferred mark-up % which can be influenced by your volume of placements, length of the placements, lead time to fill your gap and your reporting requirements. Is their mark-up based on the salary only or is it based on the salary plus admin cost? The more efficient your internal processes are, the better deals you can get.”

Costs relating to Permanent staff
“The trends in permanent recruitment are influenced by many factors, economic, social and by technology. Currently there is a world-wide shortage of certain professional skills and this impacts on the cost of recruitment activity.
International firms are now favouring an outsource model of panels of service providers which covers their needs for both function-specific staff, e.g. for I.T.,engineering or accounting, and for general administrative and support staff. The use of “cyber-searching” on the internet is growing which will impact the fee models used by suppliers. E-recruitment is a tool which can assist candidates, agencies and the client. ”

“How can your permanent staff recruitment be more effective for less cost?”
• Contract with panels of preferred suppliers which will provide you with volume leverage, national and regional coverage, a wider variety of suitable candidates and some internal choice of supplier
• Rationalize placement fees by agreeing and implementing the same cost model with all preferred suppliers with minimum variations. Know their margin!
• Explore new e-recruitment sites and use in conjunction with conventional recruitment methods
• Have a tight Service Level Agreement which defines the delivery expectations – agencies must work for their fees.
• Actively manage your suppliers, specify the management reporting content and frequency that you require and use it to get value-added services.

“As with all procurement interventions the full cooperation of user community is essential for success. Human Resources staff has knowledge and expertise which can be utilized to ensure a sustainable result for the company. In the longer term, well thought out retention strategies can be used to reduce the cost of recruitment. ”

“Staff recruitment is a commodity where there is an active and competitive market place. It is necessary to do regular supply market reviews and do continuous benchmarking of suppliers, both on price and value-added services, to ensure that your Company is ahead of the game,” says Porteus.

The Author, Elaine Porteous can be contacted on 082 412 5831
About the Author: Elaine Porteous has extensive procurement experience in multinational organizations and is a sourcing specialist in the procurement of services. She has a Master’s degree in Human Resource Management from Wits Business School.

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