What is recruitment cost?

Recruitment cost is the expense incurred by a startup in hiring a candidate - starting from the posting a job on different platforms to them joining the organization. It also accounts for candidates who drop off from the process at any stage of hiring. Essentially, it’s the measure of how much you spend to fill one position.

Recruitment cost includes:

It’s important to track these expenses to understand how effective or efficient your hiring process is. Not putting efforts into reducing recruitment costs has led to several startups going bankrupt, but it is an easily avoidable circumstance. We’ll show you how.

9 strategies to reduce recruitment costs


1. Choose quality over quantity of candidates


While it’s important to attract the right talent, it’s not necessary to attract as many candidates as possible. Evaluating a large number of candidates ends up costing a lot more than evaluating a few talented candidates. 

This also helps cut down your spending on sponsored job postings. If you’re sponsoring the ad for 2 weeks, try cutting it down to 1 week or less. This not only helps you focus on all the candidates without rushing it, but it also shortens the hiring timeline which naturally leads to lower recruitment costs. Also, ensure that your job descriptions are detailed and specific to make sure only the right candidates apply.

"It's nice to receive applications from a wide pool of interested candidates, but this can backfire if the talent pool is not a qualified fit for the role you're advertising. This could place a heavy burden on your HR team and may even lead to exorbitant recruitment costs, especially if you conduct paid interview tests."

—Aaron Gray, Co-founder, Agency 101


2. Reduce spending on job boards like LinkedIn, Indeed, etc


The right HR software comes with multiple job board integrations that not only let you manage all the postings through a single dashboard but also cost significantly lower than subscribing to each job board individually.

HR software also enables you to track which job board is giving you the best candidates so you can stop subscribing to the ones that don’t give you the right ROI. 

3. Use social media to attract candidates

Social recruiting is emerging as one of the most cost-effective ways to hire employees. Studies show that 70% of hiring managers say they’ve successfully hired with social media in 2021 and that recruitment through social media is much faster than other channels. 

To make the process even better, the right HR software helps you post to platforms like Facebook, Twitter, Google +, etc in one click. Having employees share these posts can get 2x higher click-through rates and attract more candidates at no cost.

"One of the easiest ways to reduce recruitment costs is to utilize social media as a free resource to recruit qualified workers. As opposed to standard recruitment platforms, social media recruitment is less about the cost and more about the effort."

— Ian Kelly, CEO, NuLeaf Naturals


4. Choose automation over external recruiting agencies


While having an external recruitment agency might seem more economical, in the long run, it ends up costing a lot more than having an in-house recruitment team. But not all startups have the budget to hire a large team of recruiters—which is why HR software is useful for startups in this scenario. 

HR software makes it easier for small recruitment teams to automate routine but critical HR processes like:

And much more. While each of the processes mentioned above is important, they can also be easily automated and optimized at almost no cost. HR software also eliminates the need to pay an external agency to do these tasks so that your recruitment costs come down drastically. 

"Automating certain areas of recruitment is a proven money saver, in that it reduces billable time that can be used elsewhere. Automated screening tests, assessments, and automated interview scheduling are just some of the options. Keep the human touch in the areas that matter most, and automate the more monotonous parts."

— Dale Cullen, Senior Manager, DevSkiller

5. Schedule online interviews


While meeting face-to-face was once imperative for hiring a candidate, the pandemic has changed that notion. Startups across the world have started hiring remotely, and scheduling interviews online eliminates the logistical costs incurred during face-to-face interviews. 

Interview scheduling can also be automated to reduce confusion and time taken to agree upon a suitable time. HR software not only does this but also provides easy access to candidate information during the interview thereby making the hiring process more efficient and cost-effective. 


6. Encourage employee referral


Employee referral is one of the most reliable and economical methods of recruiting. It is the method of hiring where the startup shares information about job openings with its employees along with a referral link where they can upload resumes of candidates that they know. Usually, the employees are rewarded with gift cards or bonuses when the candidates they refer are hired. 

HR software enables startups to run referral campaigns at no cost—so this makes it the best way to attract more candidates and reduce recruitment costs.

7. Maintain a talent pool 

When you receive resumes that are impressive but not required at the moment, store them in your talent pool for later perusal. 

This is one of the fastest and most cost-effective methods of filling skill gaps. Candidates from the talent pool can be directly contacted as and when the right role opens up. And since the candidate has already shown interest in working for your startup, they are easier to hire too. 

"I prefer creating a talent pool to reduce recruitment costs. A well-organized list of prospective applicants from previous job openings lowers the cost of future job advertising and recruitment. And, since these candidates have already been reviewed by an HR department, the amount of time for reviewing them — and the associated HR costs — decrease as well."

— Stephen Light, CEO, Nolah Mattress


8. Refine your candidate assessment process


Set online assessment tests to gauge the apt skills of candidates that apply to positions like customer support, IT, and marketing to weed out ineligible candidates in the initial stages. The fewer the candidates that progress to subsequent levels, the higher the quality of hires—and not to mention, it reduces the recruitment cost too.

HR software for startups like Freshteam enables automatic candidate assessments to be sent as part of the hiring workflow. You can also send out automated emails that inform candidates about whether they will be progressing to the next stage or not. 


9. Stay on top of your data


Recruitment analytics helps reduce the recruitment cost by helping you track the areas in your hiring process that are proving to be expensive or inefficient.

HR Reporting Software gives you a bird’s eye view of your HR processes at every stage:

And much more. Startups can tweak and perfect their hiring process to reduce recruitment costs to the maximum possible level, while also ensuring that they’re able to attract, hire and retain the best candidates without compromising.


Which sources of recruitment help in decreasing the cost of recruitment?

Here are the top 5 sources of recruitment that reduce the cost of recruitment:

1. Employee referral

2. Internal hiring

3. Organic social media engagement

4. Posting on job boards using Free ATS or HR software for startups

5. Writing clear, concise job descriptions that attract the right candidates


How much does recruitment software cost?

This depends on the type of software your startup requires. Does it have a pay-per-recruiter pricing model, a pay-per-hire, or a pay-per-employee model? Each comes at a different cost. But there are plenty of options that are specifically tailored for startups and are priced at reasonable ranges, have Free-Forever pricing plans, and most importantly come with free trials. 

Use the free trials to evaluate which option works best for your startup and whether it would help you reduce your recruitment costs truly. Good luck!