Recruitment Metrics: Measurement of the Hiring Costs

Mandalay Limited, a leading private sector pharmaceutical company headquartered in

Malaysia, is planning to recruit suitable employees for its recently operational subsidiary in

Gujarat, India, for which it needs to hire 200 new employees for various lower level blue

collar positions. The Human Resource (HR) head of the firm, along with her team is in a

process of evaluating different sources of job posting such as LinkedIn, Monster,

CareerBuilder, Ladders, career fairs, and online ads in addition to the print ads to source the

potential candidates. Naukri, being the most popular tool for e-recruitment in India, is

charging as much as Rs. 80000/- for monthly job posting and a one-time license charge of Rs.

70,000/- for resume access followed by Monster India, which is quoting Rs. 50000/- for

monthly job posting and 40,000/- license fee for resume access. CareerBuilder and

Timesjobs, two slightly less popular job portals, are charging Rs. 20000/- each for the

monthly job posting and Rs. 15000/- and Rs. 12,000 respectively for annual subscription to

access the resumes. The management was also pondering whether to invest in a job fair to

increase its visibility as a potential employer preferably in Ahmedabad, the state capital of

Gujarat. Hosting a moderately grand Career Fair will cost Rs. 10,00,000/- as per the quote

received from a leading event management company and if the firm decided to give a

employment ad, then advertisement cost will lead to a further cumulative expenditure of Rs.

1,00,000/- as per a leading newspaper agency’s quotation. The company finally decided to go

with Naukri due to its huge resume database and popularity in India and also decided to give

print ad in the leading newspaper’s employment section. After two months, 50 resumes could

be shortlisted through Naukri and another 50 could be shortlisted through the newspaper ad.

After receiving lukewarm response to the initial sourcing strategies, the HR head approached

one of the leading employment agencies to generate further application. The agency

personnel have given estimation of Rs. 50000/- in exchange for ensuring at least 100 suitable
applications for different job positions specified by the HR head. The agency was able to

provide 200 potential resumes in one-month time. The HR head reached out to her team and

suggested that they also start using all their resources to generate as many applications as

they can. To further motivate the sourcing process, the HR head also shared that for any

candidate referral from existing employees, the company has announced a referral bonus of

Rs. 10,000/- per internal reference in case the candidates were selected and if they joined.

After this announcement, 50 more resumes could be obtained through internal referral.

In addition to the above recruitment expenditure, the HR team of Mandalay Ltd. has a policy

of rewarding the staff for HR recruitment drives to acknowledge the effort of involved

stakeholders. The HR Team prepared a list of other estimated cost such as salary, benefits,

and overhead cost for the HR staff and support staff who have spent their time on several

non-profitable tasks such as - meeting the top management and discuss about the sourcing

objectives; liaise with the agency and media, screening the applicants, calling the applicants

for interviews, interviewing the candidates and checking the bio-data; scheduling the

interview with the manager after reviewing the candidates; confirming the offers etc.

Similarly, salary and benefits must be paid to the senior officials (line managers) for devoting

time to a task which is not directly related to their job description such as interviewing the

candidates and making a hiring decision. The salary and benefits of HR staff is Rs. 300 per

hour for 8 working hours a day and the same for the managers is Rs. 800/- per hour for 8

working hours a day. The salary and benefit for the support staff is Rs. 80 per hour for 8

working hours a day. I

Although it was clearly stated by the HR manager that disqualified candidates would spend

only 1 day for their interview and declaration of results and the selected candidates would

spent 2 days for interview and other related documentation and formalities, the staffing team

consisting of 10 members (5 HR managers, 2 Line managers, and 3 support staff) eventually

required 5 days’ time to screen and interview the 350 potential applicants all of whom turned

up for the interview. Finally, at the end of the recruitment drive, 100 candidates were found

to be suitable and offers letters were extended to these. All the selected candidates accepted

the offer, and as per company policy the new hires needed to undergo a medical examination

and get their professional records verified. In this regard, Mandalay Ltd. had outsourced such

activities to various third-party agencies and had to incur a cost of Rs. 600/- per candidate on

medical examination and Rs. 500/-per candidate on employment and record verification.

Additionally, the company has a policy to reimburse the travel cost per candidate for the

successful candidates selected for the job in lieu of appearing for the interview. On an

average, a cost of Rs. 3000 was incurred by the selected candidates on travel to appear for the

interview. In the end, it was observed that 25 candidates got recruited through Naukri, 15

through the news-paper ad, 30 through the employment agency and another 30 through

referral. The HR team now wants to calculate the entire cost of recruiting the 100 candidates

to help the finance department to settle the accounts and compare the various source costs per

hire to understand which source of recruitment is the most cost effective.

Qs. 1: Calculate the total cost of the recruitment process.

Qs. 2. Calculate the cost per hire during the recruitment process.

Qs 3. Which recruitment source has the best resume to offer ratio? Compare the cost per hire
from the respective sources of recruitment and suggest which source is the most cost
effective.

Qs. 4. What HR implications can you draw from this analysis?

Note: You may use MS Excel to address the questions. To calculate source cost per hire, you
can assume that the internal staff and manager salary for each of these cases is same.