true cost per hire

True Cost of Hiring IT Talent

Vik Bogdanov
Vik Bogdanov on EmailVik Bogdanov on Linkedin

As you may already know, salary isn't the only factor that affects the total cost of your IT resource. In IT industry, competition for skilled human resources is truly tough everywhere in the world, so if you're able to find a specialist for your in-house project team using your internal recruiters, feel free to consider yourself to be born with a silver spoon in the mouth. IT staffing agencies keep an eye on every single new resume popping up and attack candidates like vultures to cash in on their skills. You need a very strong in-house team of recruiters to have your IT positions filled. If you're looking for mainstream skills like JavaScript, Java, PHP or Python, brace yourself to spend from 4 weeks to 3-4 months getting the right people for your project team. Are you looking to hire hard-to-find skills like data science, Laravel or MEAN Stack? Then prepare yourself for a lengthy and cumbersome process, as it may take you 6 months plus to sign a contract with the best matching candidate.

So factors that inflate the cost of your IT specialist are:

  • employee turnover (in Canada, the average employee tenure is 6 years, 30% of employees change job every 1 - 3 years, about 20% of all new hires quit in 12 months!)
  • IT recruitment agencies that charge 15%-30% off each employee's annual pay as a service fee
  • Your time to hire (TTH)

Now let's delve into some details. According to the 2015 Recruiter Survey by Social Talent, the average time to hire a developer resource is 43 days. An unfilled position can cost you upwards of $500 a day. During this period, your team productivity loss (if you have an in-house team up and running and are looking to add new skills / roles to it) can cost you over $21,500, while the cost of recruiting a new resource can amount to $32,000.

In order to calculate your cost per hire (CPH), you need to consider the following parameters:

  • Internal costs
    • Workstation setup
    • On-job / off-job training
    • Induction and orientation
    • Temporary staffing (if applicable)
    • Managerial time (e.g. interviewing candidates, etc)
    • Salary, benefits, and career development of the recruiting team
  • External costs
    • Third party fees
    • Technology fees
    • Consulting services
    • Travel expenses (if you want to invite a candidate from another country/city to visit your office)
    • Job / project advertising / promotion
    • Governmental compliance
    • Relocation fees
    • Immigration expenses

The two latter points should be considered if you're looking to bring in skilled employees from abroad.

As such, your CPH = internal costs + external costs / number of hires.

Now let's crunch some numbers to determine how much it actually costs you to hire a software developer. Let's assume you want to hire a senior Full Stack developer in Vancouver. The annual salary of this resource is $80,000. Your time to hire is 43 days (see above). In best case scenario, your agency fee will amount to $16,000 (20% off $80,000). If you manage to fill in position internally, your in-house recruitment efforts will cost you 12% of your developer's annual salary (on average), i.e. $9,600. In case of a hybrid solution (agency + in-house recruiters), get ready to pay 17% on top of your developer's salary, i.e. $13,600.

Further, let's make the following assumptions:

External costs

  • Your job / project advertising costs: $500
  • Employer branding (branded clothes, stationary, etc): $100
  • Agency fee: $16,000
  • Selection procedures: $100
  • IT infrastructure: $1,500
  • Total: $18,150

Internal costs (relocation excluded)

  • Recruiting staff: $3,000
  • Gov compliance: $500
  • Learning and development: $500
  • Managerial expenses: $3,000
  • Total: $7,000

You total cost per hire will be:

$18,150 + $7,000 / 1 = $25,150

Also don't forget about your contractor cover. If your vacancy requires constant coverage, you have to find and pay for temporary staff and these costs will include workstation, legal issues, etc. So, this isn't the exact cost of your hire, that's just an example of how to do the calculation. Your talent acquisition leaders will need to collect accurate spending data for every activity related to filling an open position. Only then you'll be able to calculate the exact cost per hire in your case.

At the end of the day, it's all about your time to hire: the faster you're able to fill in the vacancy, the lower your cost per hire! At Digi117, we source from an exclusive database of local and international IT talent readily available for onsite placement in Canada, and not seen by any other local agency!

We can shorten your time to hire to less than 30 days and can reduce your total cost of resource by 20%-30%. Do you want to learn how we do it? Just shoot us a message or call at 778-772-4770 to start a conversation!