This article has been submitted by Hireserve
When you’re investing in recruitment software, it’s essential to understand how much of a return you’re going to reap. Finding tangible ways to measure your ROI can be challenging, however.
So how can you accurately measure your Return on Investment? Here are our 4 easy steps to calculating your recruitment software ROI:
- Hires per annum
Step one is determining how many vacancies you’ll be recruiting for in the next twelve months.
How can you predict this accurately? A simple method is to take your number of employees (including temporary staff) and multiply this by your percentage of attrition.
Let’s create an example. In this scenario, you have 425 employees and your rate of attrition stands at 7.5%. Multiply your number of employees by that 7.5%, and you’ll end up with around 32 hires per annum.
Try it with your organisation’s actual figures – how do the numbers look? Do bear in mind that that 32 hires per annum doesn’t take into account new jobs, departments or openings.
- Costs associated with your hires
Now estimate how many applications you’ll receive per hire and take note of what the annual cost of a Recruitment Administrator stands at.
In our example scenario, let’s say that £33,333 is the annual salary of your Recruitment Administrator, and that you receive 50 applications per hire.
- Administrative time
You now need to take note of the amount of time spent processing each application by a Recruitment Administrator if you don’t have an ATS.
From screening CVs and scheduling interviews to emailing referees back and forth, how much time is spent by your administrator on zero value-add activities?
Going back to our example, we’ve suggested at least 15 minutes would be spent on each application. Which, considering the 50 applications per hire we mentioned above – multiplied by the 32 hires per year we calculated in step one – adds up to a significant amount of time.
In fact, based on the figures above, we’ve calculated that your recruitment administration cost on low value work stands at £6,811 per year. By implementing an ATS, our expectation is that that figure will fall significantly.
So there’s your first saving: Over £6000 per annum.
- Agency costs
When working with new customers we often hear that one of their key aims is to reduce their use of recruitment agencies. To help measure your ROI after implementing recruitment software, it’s useful to work out what percentage of your hires are derived from agencies.
It’ll also be helpful to consider what your average salary is per hire. This can be tricky if you’re recruiting for a diverse range of roles, but for the purpose of measuring your recruitment software ROI, opt for the mean average. The purpose of this is to give some indication of what your agency placement fees will be.
Let’s say £33,333 is the mean average salary in your organisation. In our example scenario, we’ll suggest that 60% of your hires are placed by recruitment agencies, and at a 15% placement fee.
Based on these figures, this can add up to a lot of spending on agency recruitment each year.
So going back to our example – out of our 32 hires, 19 will be placed by an agency. If we then apply the 15% placement fee to your £33,333 average salary – and multiply that by the 19 placements – you’re looking at an annual cost of agency fees of £95,624.
Where does your recruitment software offer Return on Investment here? We usually find that using an ATS can reduce agency usage by 50% compared to before it was implemented. Which means that in our example scenario, you could be reducing your annual agency spend by £47,812.
The true cost of recruitment software
Still with us? So far you’ve saved £54,623 on unnecessary recruitment admin and agency fees.
These are, of course, ballpark figures – but they are realistic. Why not try them with your own recruitment metrics? How do they look?
Implementing an ATS can be a significant spend to an organisation – you’ll need to consider your implementation or set-up fee, and then your annual system licence fee.
However, based on the above figures, within just one year your recruitment software should have made up for the cost – and every year you should see a solid ROI in terms of administration and agency costs.
And that’s without even considering your print advertising savings…