Best Methods for Reducing Cost-Per-Hire In Blue-Collar Industries

Reducing cost-per-hire isn't optional; it's a must for your bottom line. Here’s how to calculate and reduce cost-per-hire to optimize your HR budget.

Desiree Grosman
September 15, 2023

Did you know HR professionals are clocking 13 grueling hours a week to source candidates for just one open position? As days pass and that position sits vacant, your cost-per-hire escalates, worsened by high turnover rates.

The average cost to hire an employee is already estimated at $4,129 — but that’s before even accounting for hidden expenses like job board fees and training.

With turnover costs potentially reaching 250% of an employee's annual salary, reducing your cost-per-hire isn't optional; it's a must for your bottom line. This article will guide you through calculating and reducing cost-per-hire to optimize your HR budget effectively.

The Reality of Turnover and Cost-Per-Hire

Recent data reveals that employers now take an average of 44 days to make a hire. But if you're in the blue-collar arena, you're clocking in even more time — a staggering 47 days!

You can almost hear the clock ticking louder with each day that a role remains unfilled. It's not just about the money spent on sourcing and recruiting; it's also about the ripple effect on your current team's productivity and morale.

In a perfect world, your turnover rate would hover around the 10-15% mark. But what’s reality?

The average turnover in blue-collar sectors in 2022 was 47%! In specific sectors like construction and manufacturing, that number was even more alarming, reaching as high as 54%!

What are the consequences of high turnover?

  • Surge in recruitment and training costs.
  • Plunge in team productivity.
  • Deterioration of employee morale, leading to a vicious cycle of even higher turnover.

In this environment, it’s crucial to identify the drivers behind your high turnover rate and actively work to improve employee retention.

Breaking Down the True Cost of Hiring in Blue Collar Industries

Let's dig deeper into what adds up to your total cost-per-hire. To get a full picture of what you're spending on bringing in new talent, you need to consider a number of line items. We're not just talking about the salary you offer to lure skilled workers away from competitors. Here’s everything that might contribute to your cost-per-hire:

Third-Party Recruiting Agencies

Sure, they promise to fill that vacancy quickly, but at what cost? Typically, these firms charge between 15-25% of the new hire's annual salary. When you're already battling a labor shortage, that fee can feel like a financial punch in the gut.

In-House HR Expenses

Let's not forget your HR team. Their salary ranges usually fall between $91,000 and $144,000 per year. To get a better grip on the cost-per-hire, you'd need to break that down into an hourly rate and then multiply it by the number of hours they spend on recruiting.

Job Board Costs

Ah, the digital marketplace where a perfect candidate seems just a click away, except each click comes with a price tag. Posting fees can range from pay-per-click models to flat fees, and they add up quicker than you might think…

Background Checks & Special Clearances

For some roles, a simple background check won't cut it. Depending on the industry, additional security clearances might be mandatory, and these don't come cheap.

Training & Onboarding

Picture the first week on the job — new hires shadowing veterans, learning the ropes, and maybe even causing a hiccup or two. All this has a cost, from formal training sessions to IT setup and even the loss of productivity during the adjustment period.

Direct Employment Costs

The costs don’t stop once you hand over that first paycheck… There are benefits, taxes, and maybe even a signing bonus.

Alternative Recruitment Channels

Think job fairs, company career pages, social media recruitment marketing, or even referral programs. These less traditional avenues can sometimes offer a better ROI, but they still come with their own price tag.

Understanding each of these elements in depth is the first step in getting a handle on your actual cost-per-hire.

Measuring Your True Cost-Per-Hire

Before you can tackle your budget issues, you've got to know the numbers you're dealing with. Calculating cost-per-hire involves summing up all the specific costs involved in your recruitment efforts.

Here's a sample breakdown for illustration:

  • HR Team Time: $7,500
  • Job Board Listing: $249
  • Standard Background Screening: $50
  • Tech Setup: $150
  • Training Program: $400
  • On-the-Job Mentorship: $5,000
  • Signing Bonus for New Hire: $2,000

Summing it up, your total cost-per-hire would be $15,349! By precisely tallying your cost-per-hire, you're arming yourself with the data you need to pinpoint where financial streamlining can be applied. Yet many employers don’t calculate it.

Strategies to Reduce Cost-Per-Hire

You need boots on the ground, but you can't just snap your fingers and make it happen — especially in the face of a labor shortage that's biting hard. So, what can you do?

Here are some tried-and-true strategies for reducing cost-per-hire and getting more bang for your HR buck:

Effective Sourcing and Recruiting Techniques

First things first, let's tackle the way you're pulling in candidates:

  • Optimize Job Descriptions: Job descriptions need to be as sharp as a tack. Use clear, relatable language. Talk about the skills needed, sure, but also throw in what life's like on the shop floor.
  • Target the Right Job Boards: No point in posting openings on LinkedIn if your ideal employee frequents Indeed. The places you're posting these roles have got to be where your ideal candidates hang out. Find the right job board, and ideally, an industry-specific job board.
  • Leverage Social Media: Use these platforms to give a sneak peek of what it's like to work for you. Post content highlighting employee experiences and employment opportunities.
  • Create a “Careers” Page: Have a landing page on your website that’s dedicated to hiring and optimized to convert.

Leveraging Existing Talent Pool

Believe it or not, you're sitting on a treasure trove — your current workforce. Who knows the job better than someone already doing something similar? Let them bring in like-minded individuals with an employee referral program.  Or offer skill-building programs that prepare your existing staff for more advanced roles.

Here are some do’s and don’ts to launch your employee referral program successfully.

Streamlining the Hiring Process

Time is money. And in a sector like this, where roles often have a rapid turnaround, the clock is ticking double-time. Streamline the process to reduce time-to-hire and minimize associated expenses:

Improving Employee Retention

One of the most effective ways to reduce the cost-per-hire is by improving employee retention. If you can keep your current crew happy and motivated, you're winning half the battle!

By investing in enhanced onboarding processes, providing competitive compensation and benefits packages, and creating opportunities for career growth and development, you can increase employee satisfaction and decrease turnover rates.

Utilizing Technology and Automation

If you're serious about reducing cost-per-hire, you need more than just good intentions; you need a rock-solid strategy backed by the right tech. Automation can make HR processes for recruiting, hiring, and onboarding smoother than a well-oiled machine by:

  • Reducing manual labor
  • Creating a quicker screening processes
  • Personalizing the candidate experience
  • Keeping each step in the hiring process moving with automation

Don't let the best talent slip through your fingers or drain your HR budget. Instead, optimize your entire recruitment and retention strategy with Team Engine. Click here for a risk-free trial!

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