15 Feb How to Calculate Your Recruiting Cost Ratio (Formula)
The Recruiting Cost Ratio (or RCR) is a critical calculation to understand if a company is looking to improve on how or how much they spend on acquiring new talent.
What is a Recruiting Cost Ratio?
The Recruiting Cost Ratio is a formula that calculates the amount of money a business is spending to complete all the activities around finding, attracting and hiring new employees into their organization.
Why should you care about your Recruiting Cost Ratio?
This formula is critical for all companies to understand the efficiency of their talent acquisition process. Getting clear on your company’s RCR, helps organizations become more efficient and enables them to better plan/prepare for future hiring projections.
Unlike the cost-to-recruit ratio, RCR takes into account productivity and resource utilization giving business managers the clearest picture of the current state of their hiring.
Here’s how to calculate your company’s RCR to determine the true impact of the recruiting and talent acquisition processes.
of All New Hires for the Year (x 100) = Your Recruiting Cost Ratio Percentage
Here’s an example:
If… External costs equal $100,000 (this includes all external cost related to hiring: ATS tool, advertisements, CRM tool, job board postings, outsourced recruiting fees, etc.)
And… Internal costs equal $100,000 (this includes labor cost of employees, benefits, etc.)
And… The Total FY compensation of new hires is equal to $2,000,000
Then… $100,000 + $100,000 / $2,000,000 x 100 = 10%
This means that for every dollar of first-year compensation spent, the organization is spending $0.10 cents on activities related to acquiring that talent.
Today’s data suggests that the current RCR national average is 13.9%. This is the bar set to help you give some frame of reference for your results. Higher numbers are usually indicative of inefficient processes, poor candidate selections, inadequate training or on-boarding, etc.
Related: The 39 Benefits (RPO full list)
What is your company’s Recruiting Cost Ratio?
If your company is looking to improve on your RCR, recruitment process outsourcing can help.
The RPO staffing model is designed to offer companies a current state analysis of their processes and the candidate experience they are giving job seekers. They are given full access to data, analytics and real-time reporting of candidate activity specific to their hiring situation. RPO also looks to implement a recruiting process that will result in better quality hires than seen before operating under the RPO model. All of these benefits make RPO an excellent option of any company needing to improve their RCR.
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Ashley Lane Boyle
Empowered Partnerships LLC