Internal recruiting is the process of filling vacant positions using the company’s own workforce. This is opposed to external recruiting where the positions are filled from outside the company.
Let’s take a look at the process of recruiting internally from a financial perspective to get an idea of the costs and try to figure out which of the two options is better in the long run.
This is a great tool for tracking your budget. It’s the average amount of money a recruiter spends on a hire.
To standardize this figure, the Society of Human Resource Management (SHRM) and the American National Standards Institute (ANSI) created the formula for calculating this cost. It’s simply adding all the recruitment costs (internal and external) and dividing it by the total number of hires .
Several people think internal and external recruitment costs include the same fees, but there are several key differences between them.
Internal recruitment costs are all expenses that have to do with the internal employees of the company, as well as the cost of recruiting them for a position. This includes salaries, bonuses, and the cost of interviewing them.
On the other hand, external recruitment costs are expenses that are made outside the company for recruitment purposes. This includes the advertising costs, recruiting software, recruiting events, staffing agency fees, background check service fees, and others .
There are benefits to internal recruitment that can significantly reduce costs. From my experience, members of your company already understand company policies and will probably work with them in mind.
It’s also easier to integrate a recruit into a new team when they’re already familiar with the staff and company culture.
Although this may sound great, some people just think, “Oh! I could ask Brad from HR to take on this extra project. I’m sure it will save me a ton of money” instead of hiring externally. Of course, it can be beneficial to hire internally, however, most jobs hire people for their skillset.
For example, you can train your employee via job shadowing or other education routes, but this can take tremendous time and financial investment.
Let’s take a closer look at the costs of recruiting internally.
These direct costs can easily be identified as the total cost spent on internally recruited employees. They include
These are a bit harder to qualify by the dollar. But tracking them will reveal several ways they cost the company money over time
Recruitment Process Outsourcing (RPO) is a system whereby the company contracts a third-party staffing agency to take care of their recruitment processes .
Staffing agencies are popular among hiring companies for several reasons.
It may make more sense for a company – especially startups or small scale businesses who don’t have the luxury of spending too much money to take advantage of staffing agencies for their recruitment needs. Regardless, if companies choose to hire internally or externally, both options offer benefits. Hopefully, whoever is added to the team is worthy of that position.