You have managed to get over the cost of ATS and bring it on board. But is it worth it?
Things have become much easier and faster but by how much?
Is the cost of ATS paying off?
For that, recruiters need to calculate hiring costs before and after ATS implementation. Have a look at some of the metrics which will help you calculate the ROI of an ATS for a small business.
To help you calculate the ROI of an Applicant Tracking System, we will talk about:
- What is the right cost of ATS?
- Determining your hiring costs.
- Time savings by using ATS.
- Cost of a bad hire.
- Value of a good hire.
- Tracking labor hours.
- Assessing recruitment agency costs.
- Market research.
- Estimating direct savings.
- Evaluating indirect or intangible benefits.
- Costs of marketing and advertising.
What is The Right Cost of ATS – Or “How Much Should You Pay for ATS?”
There isn’t the ideal number to pinpoint as a cost of ATS. However, there are certain factors you should take into account when determining whether or not you should pay as much as the software provider is asking for.
Those factors are:
- Basic Features – Does the ATS has all the basic and need features such as applicant tracking, sourcing, and bulk emailing?
- Advanced Features – Does the ATS have features such as blind hiring, AI, resume parsing, candidate screening, resume formating?
- Integrations – Can it integrate with other software you use internally?
- Customer and Technical Support – Is there 24/7 customer support? How responsive they are?
- Software Updates – How often do they update the ATS? When was the last update? You don’t want to be stuck with bugs forever.
All of these factors, plus many more, play a huge role in determining the cost of ATS.
The ecosystem is another important factor too – For example, does the company provide you only with the ATS, or can they offer HR management software, resume reformatting software, employee onboarding and much more like Recruiteze does?
It is always a good idea to have one company cover all of your recruitment needs.
With that being said, how much should you pay?
What is the reasonable cost of ATS for my use case?
Based on the type and size of your company, here is the reasonable cost of ATS:
- StartUp – Around $30-$60 monthly cost.
- SMB – $60-$120 monthly cost.
- Enterprise – Starting at $100 monthly cost.
Keep in mind that it is of incredible importance that the software provider offers a custom cost of ATS. That means that the cost can be calculated based on the current needs of your business or hiring department, hence it isn’t fixed.
To explain more in detail, with the custom cost of ATS, you aren’t paying for an Enterprise plan for example, because that way you might be paying for some features you never use. Instead, the software provider crafts a custom solution for you that has all the features you need and use.
Now that we have cleared up how the cost of ATS is determined, and how much you should be paying for one, let’s get into determining the ROI of ATS.
The first step for calculating hiring costs is to know the number of actual hires. This is done by taking a product of your number of employees currently working with you and your turnover rate.
This figure is essential in case the hiring managers are anticipating adding some new roles. To calculate the current hiring cost, you need to calculate the average cost per hire. Now, multiply these two figures to get the exact hiring cost.
The small companies that are hiring in-house have their own ATS comprising of messy spreadsheets and long email chains. As a result, a considerable time and energy of HR managers and recruiters get wasted.
Let’s calculate ROI with an example. Say, one technical manager, two HR members, and one CEO are involved in every hire. HR Team spends approximately 30 hours in recruiting per week.
Suppose the market rate is $20/hour. Per week rate pre-ATS is:
30 hours * $20 per hour= $600 per week
With ATS, we can say the cost per week is $37 but the time spent reduces to 20 hours. That equals
20 hours * $ 20 per hour +$37 (ATS)= $437 per week
The company can easily reduce at least 30% of the total amount and time to hire.
An ATS undoubtedly helps recruiters to customize job descriptions and enhance employer branding. Moreover, it helps them get acquainted with passive and active recruiting strategies that help bring in the top talent. But, even if we consider the worst-case scenario, the company still saves a lot of money by making better hires than following the archaic system.
The cost of a bad hire depends upon his seniority level, rank, and cost of the ATS, which a company is using to find the substitute. So it’s no big deal that a recruiter may have taken a bad call of hiring an employee under pressure. But with an efficient ATS, the HR team can review the candidates altogether and get an accurate grasp of the applicant’s true personality.
An ideal ATS allows the recruiters to cross-check with references that the person being hired is the same as depicted on the resume.
Good talent equals massive ROI.
And if you have an internal HR team, your profit will be even more significant.
Here’s how to calculate it:
First, you need to check your year-end financial report for the revenue per employee. Then, to estimate the profit margin per hire, multiply that number by 40%.
For example: If your revenue per employee is $300.000, each employee brings approximately $120.000. Keep in mind that the top-tier employees bring around 25% more!
Therefore, an average performer may bring you $120.000 in profit, but an amazing one can bring you $195.000.
To calculate the ROI, you just need to subtract the cost of ATS from the additional value of that high performer.
Value of top tier employee (QE) = $195.000
The annual cost of ATS = $1188 (if you are using Recruiteze’s Business plan)
QE – ATS = $195.000 – $1188 = $193.812
And the thing that makes this even more remarkable is that if you hire 15 new employees per year, the remaining 14 remain at full QE because the cost of ATS is set. That’s $3.117.961,5 a year on an investment of only $1,188!
Whether a third party or in-house does the recruitment, there are recruitment activities such as job postings, sifting through resumes, and other hiring activities bound to be done by employees. You can easily calculate ROI weekly, monthly, and annually on these monotonous activities, which could have been easily automated using ATS.
Most small businesses outsource their hiring activities to third-party professionals. Therefore, the recruitment agency cost can easily be calculated by multiplying the average placement fee (for each hired employee) and the total number of hires placed by that particular recruitment agency or staffing firm.
On average, after integrating ATS with the HR suite, the small businesses can save a lot more as their reliance on recruitment agencies is drastically reduced.
It is always better to conduct a market analysis to understand how much savings will be made on every recruitment aspect. The recruiters should look out for similar companies that have implemented ATS. Check out their profits, major turnovers, and other recruitment costs to get a fair analysis of ROI estimation.
To get a tentative ROI figure, add up the hiring cost, recruitment labor cost, recruitment agency cost. Now subtract the figure received by market research.
The result is not the profit but an estimated cost that can be used to determine ATS cost. Again, this is just an estimated ROI and may or may not be exactly the same as the actual one. These are all rough estimates just to get the ball rolling.
Apart from ROI, there are many indirect benefits of acquiring an ATS. For example, an applicant tracking system significantly improves employee retention figures, raises the company’s hiring standards, increases productivity by delivering great hires, etc.
Recruiting software eventually frees up labor hours which the recruiters can use for other productive tasks such as marketing and revenue generation.