Published: April 2025
Hiring talent is vital for Australian small and medium-sized enterprises (SMEs), but recruitment costs vary by channel. LinkedIn, employee referrals, recruitment agencies, and outbound sourcing each carry distinct financial and non-financial implications. This article analyses the true cost of these channels, providing percentage-based estimates, Australian-specific examples with cost as a percentage of salary, and key costs and benefits, based on recent recruitment trends.
Hiring Costs in Australia
The average cost per hire in Australia is $20,000–$26,000, covering direct costs (e.g., ads, agency fees), indirect costs (e.g., HR time, onboarding), and soft costs (e.g., morale, turnover). Costs depend on the channel, role, and industry. For an SME with a $100,000 annual recruitment budget (4–5 hires), costs are distributed as:
- LinkedIn: ~30%
- Referrals: ~15%
- Recruitment Agencies: ~40%
- Outbound Sourcing: ~15%
Cost Breakdown by Channel
1. LinkedIn (30% of Costs)
Overview: LinkedIn is a key platform for SMEs, offering job postings and targeted ads to reach Australia’s 12 million+ users.
Costs:
- Job Ads: $500–$2,000 per posting.
- Recruiter Lite: ~$125–$167/month ($1,500–$2,000/year).
- HR Time: 10–15 hours ($500–$750 at $50/hour).
- Total per Hire: ~$2,000–$3,500.
Cost as % of Salary:
- For a $60,000 role: $2,000–$3,500 = 3–6%.
- For a $120,000 role: $2,000–$3,500 = 2–3%.
Additional Costs:
- High application volume (50–100), with only 5–7% quality, increases screening time.
- Company page branding adds minor costs (~$100–$300).
Benefits:
- Broad reach across industries and regions.
- Targeted ads by skills and location.
- Boosts employer branding.
Example: A Brisbane marketing agency hires a digital strategist ($80,000 salary). A $1,200 PPC ad, Recruiter Lite ($167), and 12 HR hours ($600) cost $1,967 (~2.5% of salary). The hire takes 35 days, but many applicants are unqualified, requiring extra screening.
2. Employee Referrals (15% of Costs)
Overview: Staff recommend candidates, incentivised by bonuses, offering high-quality, low-cost hires.
Costs:
- Bonuses: $500–$2,000 (average: $1,000).
- Program Setup: $500–$1,000/year.
- HR Time: 5–8 hours ($250–$400).
- Total per Hire: ~$1,750–$3,400.
Cost as % of Salary:
- For a $60,000 role: $1,750–$3,400 = 3–6%.
- For a $120,000 role: $1,750–$3,400 = 2–3%.
Additional Costs:
- Limited by staff networks, potentially reducing diversity.
- Minor admin for tracking bonuses.
Benefits:
- Saves ~$7,000 vs. agencies; 82% of firms report better ROI.
- Fast hires (15–25 days) with 46% retention after three years.
- Pre-screened candidates; engages staff.
Example: A Perth law firm hires a paralegal ($60,000 salary) via referral ($1,000 bonus). HR spends 6 hours ($300); program costs $500. Total: $1,800 (~3% of salary). Hire made in 20 days with strong cultural fit.
3. Recruitment Agencies (40% of Costs)
Overview: Agencies manage sourcing and placement for niche or senior roles, charging a salary percentage.
Costs:
- Fees: 15–25% of salary ($15,000–$25,000 for $100,000 role; average: $20,000).
- HR Time: 8–12 hours ($400–$600).
- Total per Hire: ~$15,400–$25,600.
Cost as % of Salary:
- For a $60,000 role: $9,400–$15,600 = 16–26%.
- For a $120,000 role: $18,400–$31,600 = 15–26%.
Additional Costs:
- Mis-hires (15–20%) cost 75–150% of salary to replace.
- Contract negotiation adds admin effort.
Benefits:
- Access to passive candidates.
- Saves 20–30 HR hours.
- 3–6 month guarantees reduce risk.
Example: A Sydney tech startup hires a developer ($120,000 salary) via an agency (18% fee: $21,600). HR spends 10 hours ($500). Total: $22,100 (~18% of salary). Hire made in 45 days, but one candidate is unsuitable.
4. Outbound Sourcing (15% of Costs)
Overview: Proactively contacting candidates via LinkedIn or events, targeting passive talent.
Costs:
- Tools: LinkedIn Recruiter ($667–$833/hire) or SEEK Talent Search ($167).
- HR Time: 20–30 hours ($1,000–$1,500).
- Events: $500–$2,000.
- Total per Hire: ~$2,000–$4,500.
Cost as % of Salary:
- For a $60,000 role: $2,000–$4,500 = 33–7%.
- For a $120,000 role: $2,000–$4,500 = 1–4%.
Additional Costs:
- Labour-intensive; 10–20% response rate extends time-to-hire (45–60 days).
- Requires recruitment expertise.
Benefits:
- Targets passive candidates for niche roles.
- Offers process control.
- Builds talent pipelines.
Example: An Adelaide manufacturer hires a production manager ($110,000 salary) using LinkedIn Recruiter ($833), 25 HR hours ($1,250), and an event ($1,000). Total: $3,083 (~3% of salary). Hire made in 50 days, with low response rates.
So What Channel Should You Choose?
Channel Comparison:
- LinkedIn: Cost-effective but screening-heavy; best for professional roles (2–6% of salary).
- Referrals: Cheapest, fastest, high retention; limited scope (1–6% of salary).
- Agencies: Expensive but efficient for niche hires; higher risk (15–26% of salary).
- Outbound: Targeted but labour-intensive; suits strategic roles (2–8% of salary).
Hidden Costs:
- Turnover: Mis-hires cost 75–150% of salary ($45,000–$90,000 for $60,000 role).
- Productivity Loss: Vacancies cost $2,000–$5,000/month.
- Onboarding: $1,000–$2,000 per hire.
Example Budget ($100,000, 5 hires):
- LinkedIn: 2 × $3,000 = $6,000 (30%)
- Referrals: 1 × $2,000 = $2,000 (15%)
- Agencies: 1 × $22,000 = $22,000 (40%)
- Outbound: 1 × $3,500 = $3,500 (15%)
- Total: $33,500.
Tips:
- Mix channels: referrals for entry-level, LinkedIn for mid-level, agencies for senior, outbound for niche.
- Boost referrals with $1,000 bonuses for 30% of hires.
- Negotiate agency fees to 12–15%.
- Use applicant tracking systems ($500–$1,000/year) for LinkedIn efficiency.
SME Example
A Melbourne accounting firm with a $75,000 budget hires three roles:
- Junior Accountant ($60,000, Referral): $1,000 bonus + $300 HR + $500 program = $1,800 (3% of salary). Hire in 20 days.
- Senior Accountant ($100,000, Agency): 17% fee ($17,000) + $600 HR = $17,600 (18% of salary). Hire in 45 days.
- Office Manager ($80,000, LinkedIn): $1,500 ad + $750 HR = $2,250 (3% of salary). Hire in 35 days.
- Total: $21,650 (~11–30% of combined salaries).
Referrals saved ~$2,000 vs. LinkedIn, while the agency ensured a senior hire. Outbound was too time-intensive for their small HR team.
Conclusion
Australian SMEs must balance cost, speed, and quality in hiring. Agencies (40%, 15–26% of salary) and LinkedIn (30%, 2–6% of salary) dominate budgets, while referrals (15%, 2–6% of salary) and outbound sourcing (15%, 2–8% of salary) are cost-effective. By mixing channels and managing hidden costs like turnover, SMEs can optimise recruitment.
Need help calculating your total hiring costs? Scale Suite can also provide this service.
FAQ: Recruitment Costs for Australian SMEs
- What is the average cost per hire for Australian small and medium-sized enterprises?
The average cost per hire in Australia ranges between $20,000 and $26,000, including direct, indirect, and soft costs. - Which recruitment channels are commonly used by Australian SMEs and what are their typical cost shares?
Common channels and approximate budget shares are: LinkedIn (30%), Employee Referrals (15%), Recruitment Agencies (40%), and Outbound Sourcing (15%). - How much does hiring via LinkedIn typically cost?
Hiring through LinkedIn costs around $2,000 to $3,500 per hire, which is approximately 2–6% of the salary depending on the role. - What are the advantages and disadvantages of employee referrals?
Employee referrals tend to be low-cost and fast with better retention rates but may limit diversity and rely on existing staff networks. - How expensive are recruitment agencies and what value do they provide?
Recruitment agencies charge 15–25% of the salary, making them the most expensive channel but efficient for niche or senior roles with candidate guarantees. - What is outbound sourcing and when should businesses use it?
Outbound sourcing involves proactively contacting passive candidates using tools like LinkedIn Recruiter and events. It suits specialised or strategic hires but requires significant HR time. - What hidden costs should businesses consider in recruitment?
Hidden costs include turnover from mis-hires (which can cost 75–150% of salary), productivity loss due to vacancies, and onboarding expenses. - How can Australian SMEs optimise recruitment budgets?
By mixing channels—using referrals for entry-level roles, LinkedIn for mid-level, agencies for senior roles, and outbound sourcing for niche positions—and negotiating agency fees. - What is a practical example of recruitment budget allocation for an SME?
A $100,000 recruitment budget might be split as: LinkedIn $6,000 (30%), Referrals $2,000 (15%), Agencies $22,000 (40%), Outbound $3,500 (15%), totalling $33,500 for five hires. - Can Scale Suite assist with calculating and managing recruitment costs?
Yes, Scale Suite offers services to help Australian SMEs calculate total hiring costs and optimise recruitment strategies.
Scale Suite Services: Recruitment Cost Analysis and Support
Scale Suite provides tailored recruitment consulting services for Australian SMEs aimed at reducing hiring costs and improving recruitment outcomes. Our offerings include:
- Detailed recruitment cost analysis across multiple channels (LinkedIn, referrals, agencies, outbound sourcing).
- Budget optimisation advice based on your industry, role, and business size.
- Support in negotiating agency fees and utilising applicant tracking systems.
- Strategic planning to balance recruitment cost, speed, and quality.
- Guidance on boosting employee referral programs and managing hiring timelines.
Visit www.scalesuite.com.au/services/human-resources for more details.
We review and update our articles periodically. This content was accurate as of the time of writing.
