Recruitment Budget- A Complete Guide


Company operations and activities require resources for successful accomplishment. These resources include employees, finances, equipment, machinery, and infrastructure. Company resources must be properly allocated and utilized to guarantee profitability. For this reason, conclusive plans and budgets need to be developed in advance. What is the Recruitment Budget?

A recruitment budget refers to the total cost of hiring for a given period in an organization. It is the projected and real cost of acquiring new employees for an organization. This cost includes the resources used both internally and externally to facilitate the hiring process. In this article, we will look at the costings, importance, challenges, and steps during the preparation of the recruitment budget.

Costings for a Recruitment Budget


All stakeholders involved in the hiring process have to create time in their schedules to participate in the various roles associated with this process. Preparations have to be made before, during, and after the hiring process. This implies that other duties are put on hold to make this process successful and achieve the goals. 

Employer Branding

This refers to the value proposition for candidates. They are constantly trying to establish the reasons why they should pick one employer over the other. The easiest way to make comparisons is by analyzing the compensation and rewards packages from various employers. These remuneration packages are an expense to the company. It is also the cost of attracting suitable talent.

Recruitment Team

There are several employees required in the hiring process. This includes different members of the HR department. The payroll cost associated with these employees must be included in the budget. During the hiring period, they are dedicated to this process at the expense of other duties such as, preparing adverts, shortlisting, operating software, and making communication to candidates

Interview Costs 

The interview session will require the presence of both the panelists and candidates. In some cases, support from administrative assistants is also necessary to ensure that the process runs smoothly. The administrative costs have to be considered as part of the budget. These costs include salaries, wages, utilities, stationery, transport, and meals, just to mention a few.

Assessment Costs

This refers to recruitment tests that the HR department may prescribe as part of the interview process. In some cases, these tests are found in the existing HR software. However, more often than not, the HR department will need to contact external agencies that specialize in these assessments. These consultants or contractors charge for the assessment services, therefore, their costs must be included in the budget. Some of these assessments include aptitude tests, personality tests, and quotient tests, among others. 


To get the best value for money, recruiters are often forced to invite candidates from varied locations. For instance, headhunting will yield extremely qualified candidates; unfortunately, they may be regionally or internationally based. In this scenario, the recruiter will be required to make arrangements for their accommodation during the interviews.


Some companies are located in extremely remote or “hardship” areas. For instance, research institutes, oil and gas companies, and mining companies, just to mention a few. These companies understand the logistical nightmare of reaching their offices. Travel arrangements are made as an incentive to ensure they attend the interview sessions. This may be picking and dropping the interview candidates using company vehicles or giving them reimbursement upon using public services. International and regional candidates may also get this service due to the distance involved in traveling to and from the interview venues in a foreign country or town.


During the interview session, both the panelists and candidates require refreshments during breaks. Some interviews have several candidates and the role may be complex. The panelists may prolong these sessions to ensure the best candidate is identified. With extended schedules comes the need for more breaks and refreshments to remain alert in all the sessions and give proper judgment.


International and regional candidates who succeed in the interview session will need assistance when first reporting to work. For instance, moving their families from their previous location, identifying suitable housing, and enrolling their children in new schools. These are additional costs to the company especially if it’s not part of the recruitment policies.

Payroll Costs

This refers to the salaries of the existing employees supporting the hiring process and the anticipated remuneration packs for the new employees. The company’s payroll may increase due to two reasons. First, the number of new recruits is higher than the number that exited the company. Secondly, the new replacement may receive a higher salary compared to their predecessors due to higher qualifications or experience. The company will accommodate these new changes on the payroll since they want to secure the candidates and remain competitive in the industry. They will try to match the candidates’ requests in order to secure their expertise.

Training Costs

New employees require onboarding and induction in order to adjust to their new working environment. Some technical or complex jobs require that the employee is taken through additional training. This is necessary to ensure that they have an appropriate grasp of the work procedures and routines. This is regardless of whether or not they were previously qualified. The training packages are catered for by the employer and must be included in the budget. 

Technology Costs

This refers to the information, communication, and technology (ICT) requirements in the hiring process. Internet is needed to facilitate communication with online candidates such as video interviews. It is also needed to access information sent via the network such as resumes sent on email. It also supports HR tools and software such as applicant tracking systems and human resources information systems. As a result. ICT costs must be identified and included in the recruitment budget.

Outsourcing Costs

In some cases, companies prefer the use of recruitment consultants in the hiring process. These consultants or agencies charge a certain fee to accomplish the assignment. The fees may be paid in installments or one-off depending on the terms of engagement. These costs form part of the budget.

Advertising Costs

Advertising is part of the hiring process. The HR department has to identify sourcing methods and how to reach the labor market. Various advertising methods are used such as electronic and print media. In some cases, the first interview efforts prove futile and the HR department has to go back to the drawing board. This will lead to re-advertisements of the vacant post and change of the recruitment strategy. This is aimed at getting a better pool of candidates than the previous attempt. The advertising and re-advertising costs are included in the recruitment budget.

Background Checks

The HR department conducts background checks on their successful candidates before giving them the job offer. There is a cost attached to this because external service providers are needed. In addition, making communication and physical contact with the sources of information requires resources such as phone calls, emails, and visits. These background checks include reference checks, medical exams, drug screening, and police clearance. The costs associated with making these checks are added to the recruitment budget.

Developing a Recruitment Budget

Number of Recruits 

This refers to the population of new employees in the organization over a certain duration. Establish the intake using a time schedule such as monthly, quarterly, or annual basis. It is advisable to also have these numbers broken down per department or section. This forms part of the recruitment budget.

Basic Cost

This refers to flexible expenses that are generated when the hiring process is ongoing. They cease once the process is concluded and the successful candidate is secured. These basic costs include outsourcing fees, interview expenses, advertising costs, and assessment costs, among others. List and compute these costs for inclusion in the recruitment budget. 

Fixed Cost

This refers to costs that do not change over time. They are recurrent payments and accrue whether or not there is a hiring exercise in the company. For instance, payroll expenditure such as salaries and wages, benefits, and taxes. A company always has to deal with these expenses on a routine basis. These costs need to be compiled and calculated for inclusion in the recruitment budget.

Technology Cost

This refers to the expenditure related to the acquisition of ICT systems and equipment. These costs include internet connections, networks, computers, HR software, and applicant tracking system. Basically, any technology is used in the hiring process. List all the items with their corresponding purchase costs and compute the total for the budget.

Cost Per Hire

This is a hiring metric meant to determine the expenditure used in the process of acquiring a recruit or recruits. In order to come up with the cost per hire (CPH), add both the internal costs (IC) and external costs (EC). Divide the resulting figures with the total number of recruits (TNR) in that period. That is, CPH = (IC + EC) / TNR. The resulting amount should be included in the recruitment budget.

Miscellaneous Cost

This refers to resources allocated for recruitment emergencies or unforeseen challenges. This cost will fund the contingency plan as a risk management effort should any problem arise. For instance, a candidate may fall sick during the company-sponsored travel to participate in the interview. Out of courtesy, the company will incur the medical bills until the candidate returns safely home.

Importance of a Recruitment Budget


The recruitment budget facilitates the planning process. This involves the future and current needs of the company. The HR department and relevant stakeholders are able to pre-determine relevant actions in workforce management. For instance, by listing requirements and costs, you can identify timelines and methods to use in realizing company objectives such as strategic recruitment. 


The recruitment budget facilitates the prediction of activities and operations in the company. The ability to predict outcomes will always give an organization a competitive advantage in its industry. For instance, it helps in the development of a recruitment strategy which is aimed at having the best employees among their competitors.


The recruitment budget helps in decision-making since the costs are clearly documented and all possible scenarios are highlighted. The HR department is able to identify appropriate courses of action to take in order to fill the vacant position. 


The sourcing methods are broadly categorized into internal and external sources of labor. Internal sourcing or advertising refers to the use of existing employees to obtain candidates such as referral programs. External sourcing or advertising refers to announcing vacancies using public media. The budget will determine which of them is affordable and appropriate at that particular time.

Risk Management 

This is the process of identifying and mitigating risks in the hiring process. While developing the budget you will establish gaps in the hiring process, department, and company as a whole. By doing this, you will easily establish relevant solutions or preventive measures. For instance, you may realize duplication of roles or lack of critical resources. This will help in planning and acquisition processes.


The recruitment budget helps the company stay within its means. Upon calculating all the expenditures, it is easy to figure out whether or not the company can handle an inflated payroll as a result of new additions to the team. If not, the affordable number of recruits is determined before engaging them. The same applies to equipment and technology. If they are too costly, the acquisitions are deferred. This protects the company from a financial crisis.


The recruitment budget assists the HR department and company in establishing which needs are more urgent than others in the hiring process. After listing the costs and computing the amounts, you are able to know which ones can be replaced or deferred. After all, the budget is a wish list and it is not cast on stone. There must be some level of flexibility. For instance, you can opt for job boards instead of consultants merely because their charges are lower. You can also reduce the number of hires. Focus on departments that are in urgent need of additions due to operational risks rather than additions due to strategic positioning. The latter reason for additional employees can be deferred to a later date. 


In order to avoid misappropriation of resources budgets are developed. Their approval is based on the breakdown given by the person preparing it. The company expects this breakdown to be followed and submission of supporting evidence for its utilization. In case a discrepancy is noted, the budget is retrieved for confirmation and correction. 


Resources are properly allocated and utilized since they are thought out. In addition, they are clearly documented for reference. This ensures that they are not used on impulse and are directed to profitable ventures. This enhances the financial stability of the organization.


The recruitment budget facilitates financial and HR reviews. It is used as a reference point by the various departments. It helps establish whether or not the resources were utilized appropriately. 

Challenges of a Recruitment Budget

Limited Time

Compiling a recruitment budget requires adequate time due to the tedious nature of the data. All computations need to be done with care; this can only be possible with ample time. Sometimes, employee populations are huge, and going through the records to collect the required information takes a long period. Unfortunately, decision-makers are always in a hurry since they have tight schedules and want to move to the next agenda. This implies that most budgets are prepared rapidly to meet deadlines.

Inaccurate Data

Due to lack of time, the budget will definitely have errors. The HR department often works with tight schedules and deadlines due to the nature of work. In many cases, they are faced with unpredictable situations. Balancing time between all their duties may be a challenge and this will reflect in reports such as the budget.

Rigid Standards

This is especially true when it comes to company policies and procedures. The directors and other stakeholders in the company may not see the relevance of the HR efforts. As a result, getting the stakeholders to support and approve the budget becomes an uphill battle. This normally leads to reduction or even cancellation of the recruitment budget.

Complex Processes

A high volume of data is required to develop the recruitment budget as discussed under “costings” in the previous subtitles in this article. Coming up with accurate numbers in a department characterized by qualitative data is a challenge. It’s always easier to compute quantitative data than qualitative data. This is because one is numerical while the other is descriptive yet one must somehow develop amounts to be included in the recruitment budget.

Communication Barrier

This refers to neglecting necessary reporting or inadequate reporting. The errors in computation may also arise due to missing information in the required section. Stakeholders may also reject proposals because it is conveyed to them poorly. When preparations are not adequately done, a myriad of issues develops, these work against the budget. Therefore, proper communication channels need to be used. This communication also needs to be timely in order to remain relevant.

Technological Advancements

The cost of equipment and software is not cheap. Not all companies can afford their acquisition. Therefore, this may be one of the items on the budget that will be deferred many times. This will hinder the performance of the HR department, especially in the hiring process.

Company Revenue

The company resources may be limited or inconsistent. This influences their purchasing power. As a result budget allocation will also be limited or inconsistent. This means that the recruitment plan will not be implemented as desired. 

Company Debts

The recruitment budget will not be implemented if the company resources are stretched in paying debtors. This means the revenue will always be directed to meeting these payments as a matter of priority. As a result, there isn’t any surplus left for other activities or operations.

Contingency Plan

If HR departments or companies do not prepare for unforeseen expenses they risk running into problems that can easily deteriorate into large-scale crises. Budgets should always include miscellaneous provisions for this purpose. A budget with no such provisions is vulnerable to challenges in the business environment.

Compliance Issues

Ensuring that the budget is within approved standards is a challenge. On one hand, you want to be cost-effective and on the other hand, you want to be competitive. Striking a balance between the two and still maintain integrity may not be as easy as it looks. 


All departments in an organization have to develop and implement budgets. This is a compliance and risk management requirement. The HR department develops several budgets periodically and one of them is the recruitment budget. This is essentially used in the hiring process. It contains the costings necessary to support the hiring process. In order to prepare it, several steps have to be taken. The recruitment budget is an important document not only to the HR department but also to other internal stakeholders who constantly require information for planning and decision making. These stakeholders may include finance, procurement, ICT, and executive departments. They are often involved in the acquisition and installation of company assets or systems. Like all processes, the preparation of the recruitment budget will experience challenges that need to be addressed by relevant personnel in the company.

Frequently Asked Questions 

  1. How is “cost per hire” calculated?

It is calculated by adding the internal costs (IC) with external costs (EC) and then dividing the answer by the total number of recruits (TNR). That is, CPH = (IC + EC) / TNR

  1. What is the difference between “basic costs” and “fixed costs” when developing a recruitment budget?

Basic costs refer to one-off expenses that arise once the hiring process is initiated while fixed costs refer to the company’s recurrent expenses that affect all its processes.

Recruitment Budget- A Complete Guide

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