Cost Per Hire: How to Calculate It, How to Control It

Cost Per Hire: How to Calculate It, How to Control It

by | Feb 3, 2017 | Business Toolkit, Management

Cost per hire is one metric that is especially easy to lose sight of and underestimate, as these costs tend to overlap with existing business functions — paying HR staff, advertising, administrative work and so on. When you actually sit down and run the numbers, however, your total hiring costs for any given year can be eye-popping.

As of 2012, the standard definition of cost per hire is the sum of all recruiting costs (both internal and external) divided by the total number of hires. According to the Society for Human Resource Management’s most recent Human Capital Benchmarking Report, the average cost per hire for any type of business is $4,129. However, if you’re part of a large chain (“large” in this case being over 10,000 total employees), then you can expect that cost to be roughly halved.

In the leisure and hospitality industry, which includes restaurants and hotels, this individual cost is likely to be lower than average as the majority of positions are nonsupervisory and don’t have large expenses associated with them like relocation costs or lengthy training. However, because the turnover rate is nearly 50% higher than the average of the private sector, the total cost over the course of a year can definitely add up.

Calculating cost per hire

As with your basal metabolic rate, cost per hire is one of those things that’s almost impossible to get an exact number for, but doing a quick-and-dirty calculation that is close enough to be functional is actually pretty easy.

Here’s the simplest formula:

calculating cost per hire

Keep in mind that costs and number of hires refer should both be calculated for the same period (e.g. month or year).

Internal costs

Internal recruiting costs are expenses “related to the internal staff, capital and organizational costs of the recruitment/staffing function.” These include, but are not limited to:

  • Salary for any related HR and hiring personnel
  • Salary costs of time spent hiring by other staff members (conducting interviews, screening applications, and so on — if this is too complicated, leave out)
  • Any referral bonuses you might be offering to existing employees

External costs

External recruiting costs refer to expenses “incurred to external vendors or individuals during the course of recruiting.” These include, but are not limited to:

  • Fees paid to outside employment agencies
  • Fees paid to post job listings in newspapers or on websites
  • Cost of drug screening and background check
  • Fees paid and materials cost to attend any job fairs or similar events
  • Cost of any required aptitude tests
  • Cost of relocation
  • Cost of any training period in which the new employee is not doing any productive work

Any costs after an employee is hired, such as training, is not included in the cost per hire calculation.

Total hires

The total number of hires could be measured differently across companies. However, these usually include all internal and external hires, both full and part-time, who:

  • Went through a hiring process
  • Temporary staff on payroll and promoted to a full-time position

Divide the total of all the recruiting costs by your number of new hires for that particular time period, and you now have a pretty good idea of your cost per hire, for that time period at least. If you do this on a monthly or quarterly basis, average your totals for a more accurate picture.

Controlling your cost per hire

OK, so you have a better bead on your cost per hire. Now, what can you do to bring it down?

Let’s start by addressing the elephant in the room that we touched on earlier: turnover. After all, if employees don’t leave, you’re not faced with the cost of replacing them. Annual employee turnover in the hospitality industry typically hovers between 70-75%, well above the average of about 45% for all other types of private sector jobs.

Combatting turnover starts with optimizing the hiring process. Many job seekers are now looking for jobs online via job boards and social networks. So why not leverage that to your advantage? Consider using niche job boards, like Sirvo, that not only make it easy for job seekers to apply for jobs but also provide business tools so that better hiring decisions can be made.

Another factor that contributes to turnover is that, for many people, a restaurant job is just something to pay the bills while they pursue their dream, and that isn’t going to change. However, employees don’t always leave because this is just a McJob to them; when they feel that management doesn’t listen or care, then there’s almost nothing to keep them from looking for greener pastures elsewhere. Little things that don’t cost much, like better communication and small incentives such as shift meals and performance bonuses, can go a long way. Likewise, the employee may no longer regard the job as disposable if a clear and realistic path to advancement is presented to them.

At the end of the day, knowing where your business stands in terms of hiring costs is crucial, especially in the hospitality and restaurant industry where employees at the heart of the business. So, get your expenses together and your calculator out!

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If you own or manage a restaurant, according to the laws of averages, you should expect to replace almost three-quarters of your workers each year! However, you can cushion yourself against losses in productivity and profitability and reduce turnover by developing solutions based on the reasons restaurant turnover occurs.

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How Growing Restaurants Provide Increased Job Opportunities

How Growing Restaurants Provide Increased Job Opportunities

by | Jan 6, 2017 | Career

When a restaurant is first starting out, it runs on a relatively tight budget. That means that there’s not room for a number of opportunities that come along later in the game. As restaurants grow, however, the number of positions available grows along with them. These job opportunities provide openings for savvy workers to leave their current positions and find new ways to influence the company, making more money for themselves and helping to advance the restaurant at the same time.

Human Resources

A human resources department is an obvious choice for a big business, but it’s not necessarily one that you find in a small restaurant. As a restaurant grows, however, that human resources department serves several basic functions.

  • HR takes over the hiring process, selecting new employees that they believe will be a good fit for the growing restaurant.
  • HR is responsible for creating orientation programs that will make it easy for new members of staff to learn their responsibilities and become productive members of the team.
  • HR ensures that the restaurant is in compliance with rules and regulations across the industry, from the hours employees under the age of eighteen can work to the pumping rights of nursing mothers.
  • HR provides training for managers who may have to deal with sensitive issues.

Marketing

A new restaurant often does its marketing based on word of mouth, an ad in the local newspaper, and a few simple ads. As the restaurant expands, however, marketing takes on a whole new level. The marketing team is responsible for:

  • Creating and managing ad campaigns across a variety of channels.
  • Managing a social media presence for the restaurant.
  • Keeping the restaurant high in local search engine rankings.
  • Deciding what marketing opportunities are appropriate for the restaurant and which ones can be passed up.
  • Taking care of local sponsorship of teams, organizations, and charities that are important to individuals in the area.

Accounting

The bigger a restaurant grows, the more involved the finances become. What could be handled by the owner at the end of the night now requires help from a professional. That means someone who is able to:

  • Record sales and receipts at the end of each day.
  • Keeping up with profit and loss statements.
  • Understanding the weekly cost of food and labor.
  • Counting and computing inventory and controlling ordering practices in order to maximize profit without running out of critical items.

Accounting professionals help keep up with all the essential details of running the restaurant. It’s not just about keeping tallies of critical inventory and expenses; it’s also about managing resources effectively in order to get the results the restaurant needs to continue growing.

Payroll

Growing restaurants automatically have growing staff–and that means more employees to manage. Payroll helps cut down on the stress experienced by managers and other members of the team as they:

  • File time sheets and track the hours each member of staff has put in at the restaurant, from servers and hosts to chefs and managers.
  • Ensure that tax is being withheld accurately for every member of staff.
  • Take steps to ensure that every member of the staff is paid on time.

If you’re hoping to make a move within your current restaurant job as these positions begin to open up, having experience with the area you’re hoping to move to is helpful. Having experience in your restaurant, however, can be a serious bonus that will help you attain your employment goals. You already know how the restaurant works: its employees, its patterns, its habits. When you’re able to work with your existing managers or owners in order to fill a new position, you’ll find that your job opportunities soar. And, if you do want to move to a new establishment, check out the great jobs now live on Sirvo!

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5 Reasons the Hospitality Industry is a Viable Career Path for Millennials

5 Reasons the Hospitality Industry is a Viable Career Path for Millennials

by | Nov 30, 2016 | Career

It used to be that men and women in their twenties would work in the hospitality industry only as a temporary job, something to get them through college or to help them transition from part-time work to their “real job”. But things are changing. 

Many millennials are discovering that the hospitality industry is actually a great place to launch their careers. If you’re trying to figure out your career path, or are a manager working on a hiring plan, here are 5 reasons why the hospitality industry is a viable career option for millennials.

1. Social engagement

Contrary to the seemingly obsessive nature with all things technological, members of the millennial generation actually thrive when they are in social situations. The hospitality industry suits this desire for making personal connections and allows for networking opportunities that lead to possible new employment opportunities or social functions.

Many millennials do not want to be tied down to a computer all day long–they would rather spend their day having meaningful interactions. Which is exactly what you would encounter when working in hospitality.

2. We are motivated by our passions, not money

Millennials are unique in many ways, including the desire to have a fulfilling career instead of just working for a paycheck. Millennials are more likely than any other generation to turn down a higher paying job if it isn’t going to fulfill them on a personal level.

The hospitality industry isn’t exactly known for paying out maximum incomes, but it is known for providing a place where workers can grow and thrive. As an industry that provides a work/life balance, a livable wage and an opportunity to continue learning, this could be the right place for you!

The hospitality industry suits our desire for making personal connections and allows for networking opportunities that lead to possible new employment opportunities

3. We want to grow in our careers

Millennials don’t expect to work for one company for 45 years and then retire, like previous generations did. In fact 91% stated they plan on staying at their current employment less than three years. The key here is that they don’t necessarily want to switch companies. They want to grow in their careers, and in many industries, they just can’t do that at one company.

The hospitality industry, though, can be different. There are a wide range of professional opportunities within the hospitality industry that foster professional growth (i.e. Management, Marketing, HR, etc.)

4. We are engaged with what’s happening online

Millennials are very comfortable with technology and interact with it on a daily basis. This can be a huge gain for the hospitality industry, which is starting to catch up to other industries when it comes to being tech-savvy. Millennials can help the hospitality industry move forward technologically by being tuned into how people are using social media, reviews and apps to find restaurants and hotels.

Being tech-savvy can work to your advantage. Especially if you are seeking opportunities in marketing or social media management within the hospitality industry.

Forget everything you read about millennials being a “me” generation. When it comes down to it, we genuinely care about the world and they want to help people.

5. We want to help people

Forget everything you read about millennials being a “me” generation. When it comes down to it, we genuinely care about the world and have a need to help people. We want a rewarding career that allows us to give back to our community. Millennials are not clock-watchers — we don’t want to punch in at 8 and out at 5 just in the name of getting a paycheck.

Motivated millennial employees can take your restaurant, bar or hotel to the next level with their social understanding and tech skills, so don’t underestimate them. And if you’re a millennial employee, don’t underestimate the career opportunities that await you in the hospitality industry. This is a great industry that supports the quality of life that most of us want to have outside of work due to the non-traditional work schedule and the opportunities to make a livable wage. 

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Hotels: A Great Place to Start or Advance Your Career

Hotels: A Great Place to Start or Advance Your Career

by | Nov 25, 2016 | Career

If you’re interested in a career in the hospitality industry, a hotel is an excellent place to start. There is a very wide range of entry-level positions that can lead to mid/upper level professional positions. Let’s take a look at the general entry-level jobs available and the possible paths of advancement that each one offers.

Desk Clerk

A hotel desk clerk works a basic, fairly low-impact customer service position that isn’t difficult to get into. Some hotels may ask for prior related hospitality experience or a high school diploma. Very rarely do hotels require any higher education or formal training.

This is a very good position to advance into management as you’ll rapidly learn the hotel’s day-to-day operations. If you’re considering pursuing a career in accounting, another interesting branch is to work as a night auditor. This overnight job retains the functions of the front desk clerk, but with less incoming traffic during the shift, the rest of the time is spent preparing the daily revenue and room occupancy reports.

Hotels have a wide variety of departments…

Administrative Assistant

Hotels have a wide variety of departments in which they require administrative assistants; accounting, development, human resources, legal, marketing, etc. This is yet another area that enables you to quickly learn about day-to-day operations and has room for advancement to a variety of other departments.

Depending on the complexity of the job, the educational requirement for an administrative assistant may be anything from a high school diploma to a related bachelor’s degree. It is a job that can potentially be obtained without prior experience.

Accounting

Accounting work doesn’t differ much in a hotel from what is done pretty much everywhere else; hotel accountants will process financial data, prepare regular reports, manage payroll and conduct audits among other duties. Opportunities exist not just at individual hotels, but at the corporate offices of chains as well. Duties can expand to working with investments, strategic initiatives and business case recommendations.

Opportunities exist not just at individual hotels, but at the corporate offices of chains as well…

Areas to potentially move up include real estate, the supply chain and management of individual hotel locations or regions. These positions will usually require a degree, but there are plenty of entry-level opportunities for new graduates.

Marketing

Marketing is another area in which jobs are available both at the independent and corporate level. Opportunities are particularly rich for those who speak another language and have a deep understanding of cultures that a hotel brand is expanding into.

This position requires a degree, but a wide range of communications, psychology or social studies bachelor’s degrees are often sufficient to secure an entry-level position.

There are plenty of opportunities to advance in a hotel.

Food Service

Most of the world’s top chefs pass through a hotel or resort at one point or another in their careers. This is a great breeding ground for chefs looking to learn traditional cooking techniques.

There are plenty of opportunities to advance in a hotel kitchen and often all it takes is a little luck and timing. Craft your trade, learn from those around you, play your cards right and you may become the next executive chef.

A lot of people do not always look to hotels as having a plethora of professional opportunities. Hopefully, this blog has opened your eyes to some of the paths forward as you look to develop professionally. Regardless of what career path calls out to you, a series of hotel positions always looks great on a resume.

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Why Giving Thanks is Good for Your Career

Why Giving Thanks is Good for Your Career

by | Nov 18, 2016 | Career

Soon, we will gather to celebrate Thanksgiving, acknowledging our blessings and giving thanks for our good fortune. It’s a lovely tradition. But this year, why not try to extend the practice of gratitude beyond the Thanksgiving table to the workplace? Most of us rarely give or receive thanks at work, but why’s this the case? In part, there’s the belief that we shouldn’t have to thank people for doing things they’re paid to do. But it’s also because we often feel uneasy about the correct way to say thanks in the workplace. So, in the holiday spirit, here are a few suggestions to help ease the way.

Just say it

Skip the email or text and go tell that awesome co-worker or manager how much you appreciate him or her. But tailor your delivery to the recipient; some people prefer to be acknowledged in private, others bask in public praise. Exactly what you say is up to you, but for the greatest impact, make sure it’s specific, heartfelt and genuine. It’s remarkable how even a few words of praise will help improve your work relationships.

It’s remarkable how even a few words of praise will help improve your work relationships.

Send an e-note

We all complain about getting too much e-mail. But have you ever complained about getting a personalized e-mail expressing genuine thanks? I doubt it.

In his book, The Happiness Advantage, positive psychology researcher Shawn Achor recommends starting your mornings by spending two minutes writing an e-mail of praise or thanks to a different friend or colleague each day. It doesn’t need to be long; just a few sentences will suffice.

Try to do it for at least 21 days (the time it takes to establish a habit). Sending these e-notes will not only increase your happiness, they’ll help broaden and cement your work relationships.

Write a thank-you card

Handwritten cards are an increasing rarity in the Internet age. So the next time you want to show your appreciation to a work colleague or someone in your professional network, consider doing it the old-fashioned way. A thank-you card is a heartfelt way to express your gratitude when a co-worker has gone above and beyond, or after the completion of a huge event or project.

If you’re in job search mode, you should always send a thank-you note soon after an interview, either by e-mail or card. But don’t forget to send a handwritten note of thanks to friends and colleagues who’ve actively helped you during the search, too.

Within every workplace, there are employees who put incredible effort into jobs that few ever notice.

Thank the people who never get thanked

Within every workplace, there are employees who put incredible effort into jobs that few ever notice: the janitor who mops the floors, the admin who perfects her manager’s PowerPoint, the cashier who always remember your lunch order, the temp who answers the phones…

If you’re in a position where you can thank these workers with a raise, bonus or promotion, I urge you to do so. But all of us, no matter what our rank, have the power to make other people feel appreciated. It may not offer a direct payoff, but it’s the right thing to do and good karma is never a bad thing.

So the next time you’re about to walk past one of these workers, stop, chat and express your gratitude. Doing so won’t take much time and will likely prove the highlight of their day — and yours.

Practice gratitude

Beyond expressing thanks to others, it’s equally important to focus on all that you are grateful for in your own life.

Positive psychology research shows that by regularly practicing gratitude you can significantly improve your happiness. This can ultimately pay off for you in your career, since happier people are more productive, engaged and resilient workers. It’s why Achor says, “The greatest competitive advantage you could have is a positive and engaged brain.”

Here are three simple practices to consider:

1. Keep a gratitude journal. Spend two minutes a day making note of at least three new things you’re grateful for and do it for at least 21 days. Positive psychology research has shown that keeping track of what you are thankful for trains your brain to scan for the positives in your life and stimulates production of serotonin and dopamine — the brain’s “feel-good” chemicals. That in turn, reduces feeling of anxiety, stress and helplessness, which is an invaluable aid for navigating an uncertain workplace.

2. Savor happy memories. Rekindling happy moments from the past is a proven way to boost your mood, which, in turn, can make you more productive and resilient at work.

Fortunately, the holidays offer a wonderful chance to share treasured family videos, photos and family stories with loved ones. But you can reap the benefits of savoring fond job-related memories, too. Surround yourself at your workplace with things like photos of conferences you attended or awards you received. Or get together with colleagues to swap humorous “war stories” and remind each other of important accomplishments.

3. Be grateful for what you’ve learned from career setbacks. Nobody enjoys when things don’t go well at work. But you can lessen the pain when you acknowledge their lessons and reframe the losses as potential gains.

A few questions to help you find the silver lining:

  • What lessons did this experience teach me?
  • Can I find a way to be thankful for what I learned or gained from this experience, even though I was initially disappointed by it?
  • What new abilities did the experience draw out of me?

This article was originally published on Forbes.

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Experience Sirvo for yourself

Sign up now to find hospitality jobs and hire top industry talent.
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