Recruitment Costs: How Much Are You Investing in Hiring & When Will You Get a ROI?

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Today, technology is ingrained into most aspects of our lives. Everywhere you turn, someone is scrolling, clicking or tapping, taking advantage of the convenience offered by software. Because of this, the demand for software developers is soaring across the globe — and so are the costs of hiring them.

In the UK, tech and IT-related job vacancies make up 12% of all open UK job vacancies. In the US, we can see a similar trend, as there has been an average of 13,000 new IT jobs released each month so far in 2021. While it’s great to see the tech sector thriving across the globe after a difficult couple of years, the focus must now shift to filling these positions, which is proving challenging.

Despite a growing number of applicants to computer science courses, companies find it difficult to source qualified, experienced candidates, resulting in a hike in hiring costs. In this article, we will explore how much companies invest in recruiting top software engineers and how harnessing technology could help ensure a higher ROI on employees.

The Cost of Hiring a Software Developer

In the UK, the average cost of recruitment for a new hire is £3,000. This sum includes both the external costs, such as sourcing, background checks and marketing, and internal costs, such as referral rewards.

When hiring for technical roles, you can expect to pay even more due to the higher demand. For instance, third-party recruitment agencies charge astronomical fees (between 15% to a staggering 40% of the employee’s first-year salary) for sourcing developers because of the limited pool of skilled, experienced candidates, meaning employers are at a disadvantage right off the bat.

In addition to the initial recruitment costs, businesses need to be prepared for other indirect expenses related to dips in productivity during the process. The average hiring cycle, which lasts 55 days for tech specialists, plus the time invested in onboarding the new employee, means it can take several months for productivity levels to reach the average level of an organisation. 

It’s also getting more expensive to integrate software development talent into SMEs due to the need for tech talent driving up salary expectations. Despite the coronavirus pandemic wreaking financial havoc across most other industries, the average salary of software developers increased 6% in 2020, making it difficult for those with smaller budgets to compete. 

Finally, it’s not uncommon for companies to hire the wrong person, leading to even more expenses. Between talent poaching and the pressing need for tech specialists, hiring managers may be left feeling like they have no other option but to hire the first software developer who accepts the offer. But, this can have serious consequences on the company’s bottom line.

How to Avoid Expensive Mis-hires

A mis-hire can be described as someone who leaves the company (voluntarily or due to termination) within the first six months of their arrival, and it can happen for an array of reasons:

  • Employers have a poor understanding of the new employee’s skill level from the hiring process so once the employee commences in the role, they are not the match that either the employee or the employer expected..
  • Unconscious bias, where people behave according to subconscious attitudes they hold which generally have no relation to the situation at hand. These could be a result of past experiences, social circumstance, their socio-economic level, race or a variety of other factors. For example, someone within a workplace who has a university education may treat a colleague poorly because they have informal training rather than a university education, even though both individuals have positions at the same level and both hold equal knowledge. 
  • The employee may be a bad cultural fit for the company for example, there might be team clashes, personality mis-matches or even process misalignments.

Whatever the reason, a mis-hire can be a costly mistake for the company, particularly in highly technical settings. In fact, according to recruiter advice from the co-founder of CodinGame, Aude Barrel, the cost of a mis-hire can be anywhere from 5 to 27 times an employee’s actual salary. This figure includes the costs of severance pay, training, lost productivity and re-hiring. However, there are ways to reduce the risk of hiring mistakes.

  1. Harness technology. Using tools like BlueOptima’s Predictive Assessment solution during the hiring process can ensure you get an accurate overview of your candidate’s skills, productivity levels and potential.
  1. Assess soft skills. A candidate’s soft skills can determine whether they will be a good cultural fit for your company. For example, are they team players? Do they have strong communication skills? Are they enthusiastic?
  1. Introduce candidates to the team. An informal meet-and-greet gives employees the chance to find out if their values are aligned with those of the company.

Using Data to Ensure a Healthy ROI

Calculating the return on investment (ROI) of a new employee helps you weigh the costs of your new hire against the potential benefits. In other words, it lets you determine how much value they create for your business.

The simplest way to measure the ROI of employees is to divide the benefits of the investment (consider elements such as their productivity, skillset, and how these relate to the profits) by the cost of the investment (recruitment, training, resource cost).

Using AI-powered data analytics, you can accurately predict the expected ROI of an employee before taking the plunge and hiring someone. 

How the Predictive Assessment Solution Works

Hiring managers and tech recruiters often use traditional programming tests to evaluate the technical skills of software developers. But they have their limitations. For instance, employers can only use the tests to verify whether the candidate reached the correct conclusion, failing to take into account the process and efficiency of the code.

Meanwhile, our Predictive Assessment tool automatically verifies whether the code is correct to save time, analyses the efficiency of the code and uses AI to predict the potential performance and productivity levels of the candidate in the future.

Using these insights, you can find out whether they represent a good potential ROI, discover where their skills lie and how they might perform in the real world. With the Predictive Assessment solution, you can make data-driven business decisions while accelerating your time-to-hire, thanks to a consistent hiring process. 

Control Your Hiring Spend with BlueOptima

Hiring talent is an investment — but ensuring that it’s a good investment is critical for your bottom line. Our Predictive Assessment can empower you to reduce the cost of hiring software developers by:

Ensuring top talent is hired. When you hire a software developer, you hire for the future. Backed by real-world data, the Predictive Assessment tool helps you source highly skilled, highly-productive candidates.

Speeding up the recruitment process. Reduce the time and resources required for the hiring process by automating the testing phase.

Predicting future performance. With insights into how employees may perform in the future, you can offer accurate remuneration packages aligned with their skills.
Start using the power of data to drive your hiring process, bolster your decision-making and cut your recruitment costs today. Start your free trial of our Predictive Assessment solution now.

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