New data from Omni RMS and the CIPD, the professional body for HR and people development, reveals that organisations are losing substantial amounts of money on ineffective hiring and retention strategies.
The latest Resourcing and Talent Planning report shows that less than a quarter (24 percent) of organisations measure the return on investment (ROI) of their recruitment efforts. Additionally, less than a third (31 percent) of those who track turnover data calculate the actual cost of labour turnover.
According to Omni RMS, this lack of analysis could be costing companies hundreds of thousands of pounds each year. Omni’s Recruitment Cost Calculator highlights that a business hiring 100 people annually could lose upwards of £500,000 per year due to hiring and replacement costs. This is based on an average turnover rate of 34 percent and average salaries of £35,500 for permanent employees.
The report further indicates that 32 percent of private sector businesses plan to increase recruitment budgets in response to ongoing skills shortages, potentially compounding the financial inefficiencies in the hiring process.
The Cost of Inefficient Hiring
Louise Shaw, Managing Director at Omni RMS, commented on the findings, saying, “It’s astounding that, so few companies are tracking the return on investment in their recruitment activity. People are the largest expense for most organisations and failing to track and monitor where inefficiencies are having a detrimental impact on budgets will have a huge impact.
“The cost of a wrong hire goes beyond recruitment cost, though. It also disrupts business performance as well as existing team morale which has the potential to increase attrition rates further. That does, in turn, put further pressure on budgets to replace lost talent. It is critical that organisations track the effectiveness of their hiring activity. If they are seeing high levels of turnover they need to understand where the inefficiencies along the hiring process are – be it with how they attract, select or onboard.”
The research reveals that many organisations lack the necessary skills and technology to measure data beyond traditional metrics, such as time to hire. Shaw argues that this focus is insufficient in addressing long-term issues, particularly when companies face high turnover. She added that many businesses are throwing money at skills shortages without addressing the underlying problems in their hiring processes, leading to wasted resources.
The report also highlights that 32 percent of private sector organisations are expecting to increase recruitment budgets this year or next, in response to ongoing skills shortages. However, without addressing the inefficiencies in their current hiring processes, these companies may find themselves spending more money without improving outcomes.
Alessandra Pacelli is a journalist and author covering human resources and employment topics. She contributes regularly to HRreview, where she reports on labour market trends, employment costs, flexible working policies, HR wellbeing, and AI adoption in HR. Her work focuses on analysing industry research and policy insights relevant to HR professionals and organisational leaders.
- Alessandra Pacelli
- Alessandra Pacelli
- Alessandra Pacelli
- Alessandra Pacelli
