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How much does it cost to hire, raise and fire an employee. Ejchar Redmadrobot Calculator



Hi, my name is Julia Stepashkina, I am an HR analyst at Redmadrobot. Last time, I described how we put together a life-cycle monitor for employees to visualize staff movements and begin to predict them. Now I’ll tell you about our personnel costs calculator - a tool for calculating the cost of selection, development and dismissal.

Why is it necessary


Our company is 11 years old, 6 of them we conduct internships for mobile developers. In recent years, these internships have helped us close the positions of June specialists in Moscow. It seemed that teaching young people everything that we can do is simply more convenient than retraining established specialists. But they never tried to evaluate the profitability of these internships. And before launching another one they decided to find out what is actually more profitable: to hire June or grow them from interns?

The second reason is complex vacancies. They have more stringent requirements for applicants, managers are interested in the reputation of a specialist in the market and especially listen to the recommendations of colleagues. The funnel of candidates is much narrower, and interviews are less common. You relax a little and the vacancy threatens to become eternal. We suggested that a long shutdown costs us a lot. But a little expensive - how much?

And a few more questions that I wanted answers to:

  • Running a referral program - is it profitable or not?
  • If mass hiring of line specialists is needed, how cost-effective is it to contact the agency?
  • An employee wants a pay raise. What is more profitable to do?

How do we think ...


The cost of hiring and onboarding


To begin with, we have decomposed what is included in the “price structure” of specialist selection. Here we determined three types of expenses - direct, indirect and adaptation. The direct ones include:

  • Salary of the candidate, including taxes and insurance premiums.
  • Compensation of tickets - we help interesting specialists to move to our city.
  • Compensation of the apartment - the first month we pay the employee housing near the office.

What is included in indirect costs:

  • Recruiter labor costs - the cost of an hour of work multiplied by the hours spent. On average, it turns out from 30 to 60 hours per month to work with one vacancy.
  • Tools for finding a candidate - the cost of subscribing to resume databases and all recruiting tools per month are divided by the number of recruiters.
  • Labor costs of the department head - for resumes, interviews, test task verification. The hourly rate is multiplied by the average number of hours that fall on the vacancy, we have it 17 hours.
  • Labor costs of a senior specialist of the department for an interview. The rate per hour, multiplied by 12 hours on average - during this time he participates in the interview of 8-12 people.
  • The cost of a set of welcome branded merch and a party (divide the amount of expenses per month by the number of newcomers).

What is included in the adaptation:

  • The cost of non-production hours - for which the employee gets acquainted with the team, studies the production processes and principles of the company, but does not deal with its direct tasks. We have this rate multiplied by 44 hours.
  • Meetings with a mentor - which every newcomer to the company has and helps him go smoothly onboarding. The post of the specialist mentor is multiplied by 40 hours.
  • Meetings with the leader - also on the adaptation of the employee. The rate multiplied by 4 hours.


How much will it cost to hire

The cost of dismissal


Similarly, we collect the “price structure” for dismissal. These include:

  • Payments for days worked, including taxes and insurance premiums.
  • Compensation to the employee for unused vacation days.
  • Compensation for dismissal by agreement of the parties - each case is individual, but by default we lay up to 2 employee salaries.
  • Transfer of affairs to a colleague - 2 hours of a colleague’s working time multiplied by his rate.


Price of parting with an employee

What is a hiring mistake


A hiring mistake is our cant, wasted time and money. For example, an inexperienced recruiter and a busy leader created false expectations for an employee for future work. Or they missed that the employee is insufficient or too qualified for a particular position, or toxic and will not join the team. The first sign that a hiring error occurred is that the employee quits in the first months of work.

In 2019 and 2018, 95% and 90% of employees, respectively, successfully passed the probationary period. Hiring mistakes are reckoned, and we work through each case to avoid repetition in the future.

How is it assembled


A calculator is 3 sheets in Google spreadsheets. The first is an “interface” with cells for entering numbers (salaries, dates of admission and dismissal) and selecting pre-configured values ​​(employee grade, manager position). It also displays the result - the total cost of hiring or dismissal, broken down by cost structure.

The second sheet is “Help”, a data table with the rates of managers, recruiters, a calendar of working days, etc.

The third - formulas for calculations based on the "Help". There is no magic here, the usual operations with cell values: addition, subtraction, multiplication, division, and the “SUM ()” function - adding up values ​​in a selected range of cells. Some cells contain the “VLOOKUP” function, which transfers data from one sheet of the table to another and links all 3 sheets.


Sheet 3 with formulas

Summary


We managed to verify all the hypotheses for which we started the assembly. Here are the results:

Internships are cheaper than mass hiring juniors. For us, hiring and adapting a June developer from the market would cost about 15 times more than 2 months to learn an intern and then invite it to the staff. In the first case, we spend money on a “complete set” with search, selection and interviews. In the second, we invest the hours of several production employees in conducting classes and checking homework, plus we bear small indirect costs, such as food and company merchandise.

Cooperation with a recruitment agency is not profitable for us.Firstly, hiring one employee on our own costs one third less. Secondly, in most cases we are looking for specialists with growth mindset - growth thinking. Such vacancies do not close in the first week, and we want to avoid hiring mistakes due to the fact that recruiters from agencies will not be able to plunge sufficiently into the specifics of our work. Finally, if we need a massive recruitment of June specialists, it will be more profitable and more convenient (see above) to recruit them after the internship.

Long vacancies - continuous losses.We found out how many hours and days it takes to close one position on average for a company and for departments. Now it’s clear that vacancies are “longer” than 28 days and 230 hours of collaboration are unprofitable. We identified the easiest to close positions (testing engineer) and the most complex (sales manager and art director). And we can calculate how much money we lose literally every day, that we did not manage to hire a specialist of interest.

The referral program is justified even for a limited number of vacancies. When employees recommend their friends for a progressive reward in relation to grades (X rubles for junior, Y for middle, Z for senior), we significantly save the time of recruiters and managers. The more difficult the vacancy, the more profitable the referral.

The calculator helps to calculate possible options for the development of events - when the investment in increasing the employee pays off and the costs of hiring or leaving are justified. Obviously, in such decisions there are many factors that must be taken into account. I will explain with an abstract example what exactly the calculator helps in.

Let's say designer Natasha comes to the head with a proposal to increase the salary by 20 thousand, or else she is forced to leave. Now we know that it would cost 300 to 500 thousand to fire Natasha. And to hire a specialist in her place - back in 300. If by the totality of indicatorsover the past six months, Natasha’s progress is not very good, then in the next six months we are likely to leave - on her own initiative or the initiative of the head. Therefore, it’s more profitable to say goodbye now. If Natasha’s offer is justified: her team appreciates her and Natasha has good growth potential, then raising the salary is beneficial both for us and her.

Where to go


About 8 months have passed since the first assembly. At first, the calculator was almost desktop. Now we know the average figures for typical cases, it remains only to timely update the base for salaries. The plans are to make the entry into the unit economy more serious. Let's try to calculate the Employee Lifetime Value, or the average profit that an employee (department, office) brings to the company.

During the assembly process, we calculated the average employee rates by department and grade. Knowing them, we can find out how much teams and departments cost specific parts of the production process, for example, meetings - especially not the most productive ones. And work on optimizing production.



Julia Stepashkina, HR analyst, upgraded from a HR manager for six months.

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