Employee turnover is a problem for any company, and the issue becomes exacerbated with long on-boarding times and equally long interactions with recruiters. A new study shows the real cost of hiring a developer, and the results might surprise you.
The study was conducted by Devskiller, a firm that allows companies to create bespoke technical interviews to help distill a candidate pool. Devskiller considered all the factors that lead to actually getting a new hire in the door, all the way from cold calls and emails through an actual job offer.
And there’s a lot to unpack here. In addition to the nickel-and-dime ‘external’ cost of attracting candidates (i.e., advertising, travel expenses for remote applicants), ‘internal’ expenses such as temporary staffing and in-house recruitment are factored in. The end formula is pretty simple: all costs associated with recruiting and interviewing new candidates, divided by the number of hires made.
The data came from a wide variety of sources, such as Quarsh and PayScale, because there’s no formulaic cost-of-hiring. As Devskiller noted: “The average sunk-cost of a new hire is somewhere between $4,325 (Deloitte 2015) and $41,111 (£31,808 Oxford Economics 2014).” Salaries can range anywhere from roughly $50,000 to comfortable six-figures.
The average developer salary totals $94,083, so if Devskiller suggests the average cost of bringing in new hires via a recruiter is $20,698, that’s 22 percent of a new hire’s salary. And that’s before the employee ever starts working, too. Factor in residual costs such as time spent (i.e., interviewing, reviewing CVs, etc.), and new employees can cost upwards of $31,970 when recruiters are involved.
Partaking in in-house recruiting drops the cost nearly in half, to 12 percent of average salary ($11,290). Throw in those pesky residual costs again, and the total cost of in-house recruitment hits $22,562.
If those figures sound a touch wonky to you, they’re not. A separate study from the Center for American Progress notes that turnover can cost a company between 10 and 30 percent of an employee’s salary on average. That study doesn’t specifically track the technology sector, but it shows that tech industry figures are in-line with other professions.
As the Center for American Progress suggested: “The cost of employee turnover for businesses is high, regardless of the level of wages being paid to the departing or incoming employees. Companies typically pay about one-fifth of an employee’s salary to replace that employee.” So the higher the compensation, the more it costs the company to replace the employee.
Devskiller’s research found that it takes an average of 43 days to get a developer hired and working, which can lead to productivity losses totaling as much as $33,251. Tack on the cost of recruiting, and turnover is something your company may want to proactively avoid, rather than react to.