While hiring top talent may be easy for large, established enterprises with deep pockets and access to recruiting pipelines, it’s sometimes challenging for small businesses to carve out enough money to hire their next employee. If you’re currently operating within the constraints of a small budget, you’ll have to get creative and maximize your resources to make the right hiring moves for your company.
How to hire the best employees on a limited budget
Although very skilled, high-performing employees often expect big compensation, don’t assume your company can’t afford them. Follow these steps for hiring staff members on a limited budget.
1. Determine a realistic hiring budget (and stick to it).
Look at your company’s finances to see how much of your overall budget can go toward hiring. If you don’t have any money for recruitment, you may need to reconsider your budget planning and evaluate other areas of your business where you can cut costs – or make money. Research the average recruitment costs and salaries for the positions you’re looking to fill. You’ll still need to offer competitive (or at least the minimum) wages if you expect someone to want to work for you.
2. Create a recruitment plan.
With a realistic budget in place, establish a recruitment plan that can fit within that financial framework. For example, consider which positions you’re hiring for, how many open roles you have, what your average employee turnover is and how quickly you need new hires to begin. Establish who needs to be involved in the process – for instance a recruiter, hiring manager or HR representative – and how much time will be required of them.
Determine which methods of candidate outreach you’ll use, such as job boards, industry websites, a career page on the company website, social media, word of mouth and community forums. Many of these resources are free; you’ll just need to take the time to update them. [Create a business profile on LinkedIn to help attract top talent in your industry.]
3. Focus on quality over quantity.
Look at the work you need done, and assess how many employees you really need to accomplish it. If you can reasonably pay an experienced job seeker a slightly higher salary to achieve the same amount of work that two inexperienced, unskilled workers would, then hiring one high-quality worker may be the better route. It can be especially helpful for very small startups with extremely limited budgets to hire an employee who can wear many hats.
If you’re looking to hire a quality candidate to be a jack-of-all-trades, it’s imperative to be upfront with these candidates during the hiring process. Clearly explain the role and wide-ranging responsibilities they’ll be taking on so they aren’t overwhelmed, surprised or underprepared when they come onboard.
4. Consider internal candidates.
One of the first places you should look when hiring new employees is your current staff. The recruitment process can be costly, but you may be able to save time and money by considering promoting internal candidates as an affordable solution to your staffing needs. Jobvite’s Recruiter Nation survey found that internal hires are the best source for great candidates.
Even if no current employees are a good fit for an open role, they might know someone who is; the Jobvite survey found employee referrals to be the second-best source for quality hires. If your employees are satisfied and proud of where they work, they’ll give you some pretty good referrals. Additionally, they’ll likely provide a favorable view of what it’s like to work for your business. It’s reasonable to expect your employees will refer people they get along with, so hiring these individuals could benefit your office environment.
5. Use technology to streamline the hiring process.
Although there needs to be some human element to your hiring process, there is a ton of affordable technology that can help you recruit and hire new employees. For example, you can use applicant tracking software to automatically filter candidate applications to save team members’ time. The best HR software can streamline the human resources process, from recruitment and hiring to employee offboarding. Although some HR technology is expensive, there are plenty of free or low-budget recruitment software options, especially if you’re looking to hire only a few employees. [Read our Zenefits review for a budget-friendly platform that’s ideal for startups and small businesses.]
6. Consider the pros and cons of outsourcing.
While there are definite benefits to having staffers on your payroll, it’s not always necessary to have someone work for you in house. Certain tasks can be outsourced much more efficiently. This not only saves you money, but also mitigates the risks associated with making the wrong hire. After all, if an independent contractor isn’t doing a good job, you can simply cut ties with few, if any, consequences. Contractors also come with advantages, such as advanced or niche skill sets, minimal required supervision, short-term commitments and lower overall costs.
There are specific guidelines you must follow when classifying a worker as an employee or an independent contractor, so be sure to brush up on the legalities and the pros and cons of hiring a full-time employee versus a contractor.
Low-cost tips for attracting the right hire
The key to hiring a quality candidate on a budget is to avoid focusing on the need for a “cheap” hire. This negative thought can work its way into your recruitment process and come across poorly to job seekers. As a result, high-quality candidates won’t want to work for you, and you’ll likely wind up with the wrong hire – and frankly, that is the one thing you can’t afford to do. In the long run, it’s better to spend a little more for the right person than to save a few bucks on someone who really isn’t the right fit for the job. [Read related article: Avoiding the Panic Hire: How to Hire Swiftly and Effectively]
With that said, how can you maximize the resources you have and attract the best hire for a reasonable cost? Here are some winning strategies:
Use “small” to your advantage.
People enjoy working for small businesses. In fact, many workers leave jobs at big companies for similar positions at small organizations; when they do so, it’s less about the money and more about the culture.
Brand your business in a way that clearly states your goals and values. This can be an easy and affordable method to help you attract qualified candidates who share your views and want to make a difference with their work. This can be a key way to attract talent because each team member can have a significant impact on shaping the future of a small business.
Offer competitive nonsalary benefits.
While shared values can be great motivators, most employees aren’t going to accept a lower-paying job simply for aligning their goals. You’ll need to use other types of compensation to make up for the lower salary. In other words, your nonsalary employee benefits must be highly competitive. There are several low-cost perks you can offer to beef up your benefits offerings and make the job more desirable.
For example, flexible benefits that focus on health and wellness have become a popular demand these days, including remote work opportunities, flexible scheduling, mental health resources, employee assistance programs, unlimited sick days, and financial planning services.
You can also offer low-cost fringe benefits that prioritize employee learning and development, such as mentor programs, career coaching, skill development services, clear career paths and online learning opportunities. These perks show potential employees that you’re invested in them and their growth within the company. Another affordable way to show you value your employees is by creating a culture of diversity, equity and inclusion. Employee resource groups can help here as well.
Spend some time working through these possibilities. What can you do to enhance the allure of working for your company? If you’re trying to accomplish this in a cost-effective manner, think about work-life balance. Many employees are willing to sacrifice a bigger paycheck if they have the opportunity to stay home with a sick child, take off early on Friday afternoon for a weekend trip, or work remotely when they’re feeling under the weather. Consider feedback from your current staff on ways to create a better work-life balance.
Set clear expectations.
Whenever you embark on the hiring process, it’s important to set clear expectations with candidates at the beginning. Talk salary at the start of the interview process, not at the end. By getting the salary issue out of the way, you give yourself time to make your case as to why pay is only part of what you have to offer. If you wait until the end of the interview process to mention the salary, you may blindside your applicants.
It’s also smart to clearly describe the job duties, office culture and employee benefits. By explaining these details early on, you can ensure your time and money are well spent on people who are in line with your vision.
The cost of a bad hire
When you’re seeking budget-friendly hires, keep in mind that making the wrong hire is costly on many fronts. Make sure you ask yourself if you’re hiring an employee simply because they meet your financial limitations or because they are actually a good fit for your business and the role.
According to research from the U.S. Department of Labor, the cost of a bad hire can equate to at least 30% of that employee’s salary. Other sources, including HR agencies, claim that it can be $240,000 or higher. If you break it down, this cost includes the expenses associated with hiring, total compensation, training, fixing mistakes, severance pay and missed opportunities.
There are also the costs that stem from lost productivity and reduced employee morale. Then, there’s your business’s reputation: If you continually make the wrong hire, your talent pool will quickly shrivel up. If you follow the strategies outlined above, however, you’ll have a better chance of successfully hiring employees on a limited budget.
Larry Alton contributed to the writing and reporting in this article.