The Society of Human Resource Management (SHRM) found that it costs an average of $4,000 to hire a new candidate. But what happens when that early-career candidate rescinds on their offer?
Many recruiting teams are all-too-familiar with the frustrations associated with a candidate reneging on their offer. However, few have put an actual real cost associated with having to source, recruit, and onboard a new applicant.
While logic states that a candidate reneging on their offer could double your recruiting costs (bringing that $4,000 line item to $8,000 on your expense report), the actual figure might be far higher. When you factor in lost time and production, a dip in team morale, and a hard hit to your employer brand on college campuses, the cost of a candidate renege could be a bit north of your previous estimate.
Below, we offer a framework on how to calculate the cost of a student reneging on their offer. Plus, we’ll highlight a few tips on how to recover from a lost candidate.
First Things First: Why Is There So Little Data on the Cost of Reneges?
Research shows that nearly one-third of candidates will back out of a previously-accepted job offer. And yet, there is little-to-no research done on the fiscal consequences done to companies.
In fact, if you type “Cost of reneging” into Google, you’ll find few results aimed at employers. Most articles target students themselves, swaying applicants to stick to their first acceptance. The first page of search results points out the potential damage to a student’s reputation and credibility, using fear as a means to force candidates to stick to their first offer.
Which frankly, poses a missed opportunity for employers.
Rather than using fear as a tool to retain top talent, develop a keep-warm strategy to ensure candidates stay engaged through their first day. Using Abode, you can create personalized journeys for each candidate. That way, they’ll look forward to — rather than back out — of a job opportunity at your company.
The Internal Cost of a Candidate Reneging On Their Offer
When a candidate reneges on their offer, there are two types of costs: internal and external. Internally, your company will likely face a dip in production, morale, and resources. Externally, you may need to do some damage control in terms of your employer brand.
When calculating your internal costs, consider the following:
1. Decline in Recruiting Team Morale
If you work in recruiting, you know the rush associated with placing a candidate. Hiring a top applicant and acquiring a talented new team member is certainly cause for celebration.
…And if said applicant backs out on their offer, it’s certainly understandable if your team experiences a dip in morale.
Low-team morale can lead to frustration and disengagement, which can come at a high price. According to Gallup, the lost productivity caused by a disengaged worker is equal to 18% of their annual salary. Therefore, to keep team morale up and momentum strong, ensure top candidates stick with you through their first day.
2. Lost Productivity Across Departments
Allow us to tell you something you already know: Recruiting takes time.
Research shows that, in some industries, it takes an average of 49 days to get hired. During that time, your recruiting team isn’t the only ones dedicating precious time to hiring a new candidate. Colleagues within the candidates’ department will conduct second or third-round interviews, admins will schedule meetings, and HR and compliance teams will help draft an offer.
Translation: Recruiting is a team effort — and we don’t just mean your recruiting team.
If a candidate backs out of their offer, this causes a bottleneck effect on your employees’ schedules. Not only will team members have to carve out additional time for meetings and interviews, but work you expected to hand off to your new hire won’t get done, forcing existing team members to pick up the slack.
3. Decreased Value Placed on Early-Career Recruiting
By 2025, Gen Z will make up roughly 27% of the global workforce. And yet, many companies aren’t investing enough time, attention, and resources to attract early-career talent.
At Abode, this is a frequent conversion we notice amongst top recruiters. It takes time to gain cross-department buy-in for early-career recruiting and employer branding initiatives. If your rate of renege increases, the value placed on recruiting talented students and interns could diminish. This can slow the rate of internal adoption for putting resources toward hiring interns across the company.
4. Lost Time, Money, and Resources
Finally, think of other lost capital, time, and employee resources that occur when a candidate reneges.
From job board fees, recruiter costs, virtual recruiting software, and interviewing, the cost of recruiting quickly adds up. In fact, when factoring in personnel costs, the National Association of Colleges and Employers (NACE) estimates the average cost per hire is $6,110.
If you’re forced to restart your early-career recruiting efforts, these costs could easily double, thereby causing a drain on your budget. A tight budget, in turn, could prevent you from making an offer that’s too good to pass up, thereby exacerbating the potential of reneges.
The External Cost of a Candidate Renege: The Toll on Your Employer Brand
Finally, let’s talk about the most impactful external cost of candidates reneging on their offer: the potential damage to your employer brand reputation. Research shows that 19% of candidates who reneged on an offer did so because they heard bad things about the company. In other words, one student backing out of an offer could lead to others doing the exact same thing.
Here’s what we know: Students talk. If an early-career candidate backs out of their offer, their fellow classmates are going to ask why. Whether they took another offer based on a better salary, benefits package, or work-life balance, their reason could quickly become another student’s reason to follow suit.
To help control the external costs of candidates reneging on their offer, build a strong on-campus presence for your employer brand. Recruit brand champions or campus ambassadors to speak about your company culture, hiring practices, and work-life balance, thereby helping to speak to your positive traits as a company.
So, What Does It Cost a Company if a Candidate Reneges on Their Offer?
The answer: It depends.
While research shows that hiring a new candidate can cost $4,000-$6,000, the cost of an applicant reneging on their offer is far higher. When it comes to calculating costs, you need to look at both internal and external factors. Internally, low-team morale, lost productivity, and decreased emphasis placed on early-career recruiting can negatively impact your bottom line. Externally, a hit to your employer brand could prevent you from attracting the early-career talent necessary to grow your company.
To spare your team time, money, and resources, it’s important to build a post-offer journey that keeps candidates engaged through their first day. By sending high-quality content, offering mentorship opportunities, and creating networking opportunities across department lines, you can make candidates look forward to a full-time role at your company.