1 2 3 A B E Setting Up Recruiting Department - Cost/Benefit Analysis F G H ASSUMPTIONS 4 Company description 5 Average salaries 6 Number of open positions per year 8 Current state 9 Recommendation 10 11 PERIOD 12 YEAR 13 TOTAL ANNUAL COMPANY SALARIES 14 15 RECRUITMENT CENTER 16 COSTS New Brunswick, NJ - Based Insurance Company with 1,000 $50,000 per year increasing approximately 3% per year 100 positions based on 10% annual turnover Paying $10,000 per open requisition to outside agencies amounting to approximately $1,000,000 per Set up internal recruitment department to save on recuiting costs. 2021 3 5 2022 5,463,635 2023 5,627,544 0 2018 1 2019 5,000,000 2 2020 5,150,000 5,304,500 17 Recruiting Office Equipment and Furniture -200,000 18 Applicant tracking system development -200,000 19 Hiring costs to hire three recruiters and assistant -200,000 20 Information Security and Testing -250,000 21 Total direct costs -850,000 0 0 22 Total salvage value 0 00 0 0 0 0 23 24 BENEFITS 25 Reduced recruiting costs ($1,000,000 minus direct expenses) 635,000 619,450 602,733 584,840 571,173 26 Reduced legal costs for employment agency contracts 50,000 55,000 60,000 65,000 70,000 27 Total direct benefits 20 29 EXPENSES 685,000 674,450 662,733 649,840 641,173 30 Recruiting assistant salary with 3% annual increase -35,000 -36,050 -37,132 -38,250 -39,400 31 Three recruiter salaries with 3% annual increases -150,000 -154,500 -159,135 -163,910 -168,827 32 IT support and other allocated expenses -100,000 -110,000 -121,000 -133,000 -140,600 33 Depreciation on furniture and equipment (no salvage) -80,000 -80,000 -80,000 -80,000 -80,000 34 Total direct expenses -365,000 -380,550 -397,267 -415,160 -428,827 35 Additional inc before tax 320,000 293,900 265,466 234,680 212,346 36 Tax at 21% -67,200 -61,719 -55,748 -49,283 -44,593 37 Additional inc after tax 252,800 232,181 209,718 185,397 167,753 38 Add back depreciation 80,000 80,000 80,000 80,000 80,000 39 After-tax cash flow 332,800 312,181 289,718 265,397 247,753 40 41 FREE CASH FLOW 42 -850,000 332,800 312,181 289,718 265,397 247,753 43 Discount Rate 15% 44 45 Indirect benefits - recruiters helping to build employer brand and company culture 46 Indirect costs - recruiters may not know the labor market as well as employment agencies 47 48 49 50 51 52 a What is the investment's net present value at a discount rate of 10 percent? b What is the investment's internal rate of return? c. What is the investment's Benefit Cost Ratio