Reducing Your Recruitment Spend: Realistic Strategies for Tangible Savings

Recruitment and contingent worker spend are often an important but overlooked cost. Since people form the core investment of a company, labour spend can quickly be justifiable but with wage inflation and operating costs it can rapidly rise.With careful planning and strategic approaches, organisations can reduce these expenses whilst typically improving talent quality. We explore practical methods to lower recruitment spend and set realistic expectations for savings.

Contingent Worker Recruitment Spend

Preferred Supplier List (PSL)

Establishing a well-negotiated PSL with standardised rate cards is key to managing contingent worker costs. A fixed margin approach helps control agency fees and prevents unexpected costs. This level of consistency ensures you get the best value from your preferred suppliers without the risk of fluctuating rates.

Agency Audits & Transparency

Existing contingent workers may be supplied at a variety of rates, many that may be unknown and have varying margins. Conducting an agency audit will allow you to uncover what you are being charged, and potentially open a window to negotiate rates on existing workers. This could be immediately or after a certain number of weeks or hours have been worked.

Managed Service Providers (MSP)

Utilising an MSP can simplify the management of contingent workers, reducing administrative effort and improving compliance. MSPs help harmonise supplier margins, offering predictable costs and reducing the risk of non-compliance penalties. Additionally, MSPs often streamline processes, leading to further cost savings.

Permanent Recruitment Spend

Rate Card

Introducing a rate card (typically along with a PSL) is an effective way to manage permanent recruitment costs. It ensures transparency and consistency across agencies, preventing unpredictable fees. By negotiating fixed rates with your suppliers, you can better control and forecast recruitment spend.

Internal Talent Function

Developing an internal recruitment team can yield long-term savings by reducing reliance on external agencies. Your internal team’s understanding of company culture and specific talent needs can make the hiring process more efficient and cost-effective. However, this often comes increased initial costs and delayed savings due to the time to develop a successful function.

Outsourced Recruitment (RPO)

An outsourced provider can offer cost savings through economies of scale, streamlining your recruitment process. Outsourcing may reduce agency dependence and bring access to wider talent pools. However, the cost-effectiveness of RPO depends on your hiring volume and specific needs, so it's important to assess if this model aligns with your long-term strategy.

What Savings Can You Expect?

Savings will vary based on your current recruitment model, but organisations often see a 10-20% reduction in permanent recruitment spend through simple steps or outsourced solutions. For contingent worker recruitment, combining a PSL with an MSP can result in similar or even higher savings. Additionally, process efficiencies and reduced administration contribute to these savings, creating a more streamlined and cost-effective recruitment strategy.

By adopting these strategies, procurement professionals can cut recruitment costs while maintaining a robust talent pipeline in the engineering and manufacturing sectors.

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