All I can think of is the scene in Austin Powers with Dr. Evil when he wants to blackmail the government for “One million dollars!” and his cronies laugh because that’s a lot of money in 1965, not 1995.
Do you feel like a recruiting budget is the same laughable problem? You start with a number that never seems like enough once you get into the process. The solution is rarely more money. If you set the budget correctly at the beginning of your hiring plan, it will stretch for all shapes and sizes of hiring needs.
What Time of Year Is Best To Set A Recruiting Budget?
#1- Beginning of the Year: Toward the beginning of the year, and definitely before the end of the first quarter, is ideal given most company’s fiscal cycle runs from 1/1-12/31. We recommend this for all insurance agencies because producer validation (a huge hiring expense) is best judged on a 12-month calendar.
#2- Mid-Year: Right before the summer months. If you have been planning a hire and haven’t made it yet, it is popular to make a move right before summer when hiring tends to slow down a little. Plus, in terms of the insurance industry, this is an ideal time with the second most active renewal cycle (7/1s).
#3- Start of Q4: October is when most insurance companies start plotting out the next year’s budget. It also coincides with college fairs, internships, and seasonal hires. For permanent, full-time positions, companies are trying to wrap up openings that have been lingering for a while. They feel the pinch to get an extra pair of hands on deck ahead of closing out business for the year.
#4- Never: That’s right. Some firms fly by the seat of their pants and never make a plan. Not having a plan is their plan. Typically, smaller agencies that don’t think they will have hiring needs forgo a budget to allocate money elsewhere, but plenty of big firms underestimate the process & short-change their budget.
Where Should I Allocate Money in Our Recruiting Budget?
External Search Firms
Your Goal: Decide how much to outsource to external firms.
80% of your hires should be accomplished through internal resources. Search firms serve an important purpose in two situations:
- Unique, Set Apart Roles. This is any position outside the norm from executive searches to highly technical insurance roles or ones in a completely different location where you don’t have any connections.
- Think of the analogy like this: you might be able to fix the screen door, but when it comes to building a new deck you probably want to hire a contractor. The same thinking applies for when to call a recruiter.
- Opportunity Hires. Treat a relationship with a recruiter as an open partnership, because when they know your business more intimately, they can bring opportunity hires to you. More than likely you will be first to see this referral of a passive candidate. That’s a huge competitive advantage in the race for experienced insurance talent.
Contract & Administration
Your Goal: Fix your costs over a 12-month period.
Rather than a flurry of one-off invoices & costs that are hard to forecast and laborious for your accounting department, do your best to spread recruiting costs out over a 6 or 12-month period. Here are some ways that can work:
- Internal Recruiter: Salary + benefits is a fixed cost you can allocate over 24-26 pay periods. An internal recruiter/HR specialist’s salary can range from $45k-$85k depending on the scope of their role. With benefits, payroll taxes, and insurance, you’re looking at a $75k-$100k total investment annually.
- Contract Employees: Shift as many new hires as possible to 1099 status. You will pay a 50% mark up over their salary to the third-party administrator (to cover insurance, taxes, & benefits), but it gives you tons of flexibility with hiring to add & delete costs as much as possible.
- Recruitment Outsourcing: In this model you select a certain type of hiring project (say all life insurance underwriters or staff in the newly opened Phoenix branch) to be handled by an external firm. This way your internal HR team has some capacity freed up and you can negotiate a per project rate for all hires versus contingency (with a lot of invoices & fee variance based on salaries). RPO fees are calculated like this:
Total Payroll x Outsourced Rate (average 18%) = RPO cost / 12 invoices (each month)
Your Goal: Find a way to manage the rising cost of job boards.
We are in this same boat with you. Capstone utilizes job boards to help with our job advertisement strategy. The problem is that those sites (Indeed, Careerbuilder, ZipRecruiter, & LinkedIn) charge more every year for job slots and boosted postings.
Having been down this road many, many times in our company, here is advice for managing advertising costs:
- Job Boards: Gather data on utilization of job postings. I think you will be surprised to find that you are not using 100% of your posting slots all the time. Don’t pay for empty parking spots which can run $500-$1,200/each on an annual basis. Reduce the number of paid postings to save money.
- Careers Page: When is the last time you spent money to update functionality and style in the jobs portion of your website? LinkedIn monitors a job seeker’s behavior, and according to studies they’ve published a sizable portion of candidates visit your website BEFORE applying for a job.
- $2,500-$9,000: A worthwhile investment in brand videos about Working Here….to post on your careers page and social media.
- $5,000-$10,000: Bright and shiny marketing pieces designed by a graphic artist to share with candidates during the recruiting process. This can include social media placards to advertise jobs and fact sheets/About Us PDFs containing important information on benefits, career progression, and culture.
- $15,000-$20,000: A fully functional job search feature on your careers page to mimic job boards.
Your Goal: Create a discretionary fund for opportunity hires and catastrophic situations.
Focusing on hiring early in the year and then completely turning off the faucet isn’t really a good return on investment most years. What if a producer candidate comes along that is perfect, but you claim the budget is all dried up? Or a relocation candidate that is a “coming home” story and you need to create a role for someone that you can’t afford to NOT hire.
The amount of money to put into a discretionary fund can be determined 1 of 2 ways:
- How many unexpected hires did you make the previous 12 months? Take at least half if not all of that cost and set it aside.
- What fees did we pay to recruiters for opportunity hires last year? Take at least half of those recruiters’ costs and set it aside in the discretionary fund.
The bottom line is that option #4 from the introduction of this blog is not an effective strategy, yet it is the route many insurance organizations embrace. If you did that with any other aspect of your life, it would not turn out well, and you would change quickly. So why wait on your philosophy for your current recruitment budget? Call or email us to tap into some additional ideas on how to maximize that budget in the coming days!
Fill 10-20% of your openings through direct outreach
- Passive Candidate Recruiting
- This should occur consistently throughout the year with a spike when openings arise. Most often Human Resources and company executives are reaching out on LinkedIn to build connections and have exploratory conversations.
- Database Management
- That wonderful Excel sheet or HRIS system you’ve invested in will produce dividends by creating a candidate database for future hires
- Candidate databases are nurtured through quarterly touch points and requests to follow the company on social media
- Third-Party Recruiters
- You need a strong partnership with an outside search firm. Earmark money for external placement fees during your annual budget planning session. While paying the cost is never fun, it will be far easier with money already set aside.
- Partner on ‘set apart’ roles; select openings with special characteristics (ex.- hard-to-fill, long tail recruiting cycles, or executive openings) that don’t distract internal HR/Talent Acquisition teams from the majority of typical, ongoing postings.