How much does it cost to hire?

How much does it cost to hire someone?

Sasha Recruiting Leave a Comment

To answer this question, we list different methods of hiring staff with averages.

Companies that hire for you

  1. Headhunting service – these companies usually charge a retainer (example R60,000 per month for 6 months) or a standard placement rate of around 20% – 25% of annual salary of the placed candidate (average R72,000 EX VAT once off per hire).
  2. Using a recruitment agency – they work on 8% – 20% of annual salary of the person you hire (you can generally work on an average of R25,000 EX VAT once off per hire).
  3. Job portal placement – usually work on 15% of annual salary (looking on average R45,000 EX VAT once off per hire) looking at www.offerzen.com

Hiring yourself

  1. Job advert postings – some are free or start around R500 to R3,500 per job advert for 1 month (www.careerjunction.co.za as an example) .
  2. Sourcing – you can hire a sourcing expert who usually charge you per hour on average R1,500 with about 4-12 hours of sourcing required (depending on the role).
  3. Job portal – most of these work on a subscription basis for 12 months at around R4,500 EX VAT per month for 12 months (this is if you want to use this option) (www.pnet.co.za  as an example).
  4. Screening – this is your time so if you want to cost it take your salary per month divide by 173 (this is the average number of working hours in a month) and take about 6 hours for screening.
  5. Interviewing – your time again so use above formula and add in anyone else who is interviewing with you, suggest interviewing about 10 candidates at an hour each = 10 hours.
  6. Assessments – this can start with some free assessments to around R500 per assessment (if you are looking at Psychometrics to be done on average R3,500 EX VAT for one).
  7. Background checks – depends which checks you would like to do but they start at around R30 – R350 depending on checks (https://jobcrystal.co.za/our-rates.php).
  8. Reference checks – this is a time thing to get hold of references so take formula 3 and multiple by around 2-3 hours for 2 references.
  9. Legal costs – offer letters, employment contracts drawn up – work on around R3,500.
  10. Add an additional 10 hours for emailing, following up on candidates, setting up interviews.

In summary prices come out at:

Having a company do most of the work for you (from most expensive to least)

HeadhuntingR360,000*retainer
Job Portal PlacementR45,000*at 15%
Recruitment agencyR24,000*at 10%
Hiring yourselfR21,194*no portal or opportunity cost taken into account

Hire yourself calculations – R1500 (mid-range for advert) + R9000 (sourcing) + R1038 (screening) + R3460 (interviewing with 2 people) + R1000 (assessments) + R350 (background checks) + R346 (reference checks) + R3500 (legal) + R1730 (admin) = R20,194

Conclusion

It may look like hiring on your own is the cheapest option, yet we have learnt in business, having subjective eyes over the process helps to hire better and using a specialist is what works best. Building your own house is cheaper, in the short run.

Price WaterHouse Coopers study shows that a bad hire can cost on average R250,000! How do they get to this amount? Take your hiring cost, induction, and training costs (using time of your staff to train a new hire), IR and HR costs to assist in performance management and getting to a dismissal you get close to R250,000 and include wasted time and energy.

As Steve Jobs said, ‘Hiring the best is your most important task.’

*Note we worked on an average salary of R25,000 for the hire

*Employee hiring salary we worked on R30,000 per month

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