Internal vs External Recruiting: Timeline, Costs & More
Charlette has over 10 years of experience in accounting and finance and 2 years of partnering with HR leaders on freelance projects. She uses this extensive experience to answer your questions about payroll.
This article is part of a larger series on Hiring.
Internal recruiting is when your company hires from within, while external recruiting is when you hire a new employee who does not currently work for you. These options are not mutually exclusive. For some positions, you may use internal recruiting and, for others, external recruiting.
To ensure that you use the right path for each open position, adhere to employment laws, and hire the right person, you need to understand the differences between internal vs external recruiting. Use this guide to consider the highlights and drawbacks of each type. Ultimately, one path may be better for your business, but it may vary on a case-by-case basis.
Internal Recruiting | External Recruiting | |
|---|---|---|
Time to hire | Two to three weeks | One to three months |
Hiring costs | About $1,000 | $4,000 to $6,000 |
Turnover | Nominal | About 20% within the first two months |
Recruitment methods | Promotions and transfers | Job boards, social media, employee referrals, job fairs, company websites, etc. |
Time to Hire: Internal vs External Recruiting
The average time to hire candidates varies based on the method chosen:
- Internal recruitment: Two to three weeks
- External recruitment: One to three months
These numbers are not guaranteed times but rather averages. Depending on the skills you need for a particular role, it may take you much longer to fill the position.
Hiring from within has several advantages. You already know the person fits in with your company culture and you know their work ethic. They know your company policies and will require less training on processes and fewer headaches for HR to onboard.
There are two key ways internal hires make a move within your company:
- Promotions
- Transfers
In consultation with HR, managers usually recommend promotions. Transfers, however, require an employee to apply for or be nominated for an open position. Nominations take less time than applications.
Hiring Costs: Internal vs External Recruiting
The costs to hire externally vastly outweigh the costs to hire from within. Internal recruitment costs are minimal and include the time it takes you to review applicants and conduct interviews. The average cost to hire from within is $1,000, accounting mostly for your time since the person already works for your company. External recruitment costs many times more on average and that cost will continue to rise alongside the complexity of the position.
External recruitment costs include:
- Job board fees
- Sorting through unqualified applicants
- Holding multiple rounds of interviews
- Conducting prior employment and background screening
- Training
- Additional benefits
Possibly the biggest reason companies choose to hire internally is the knowledge the position requires. If your company has proprietary concepts which require an extensive learning curve, hiring internal candidates could be a good option because you won’t have to train the new employees on insider knowledge. In some cases, that could eliminate months of training time and allow your employee to start strongly in their new position, while also reducing the total costs involved in hiring.
Turnover: Internal vs External Recruiting
Turnover is always a key concern when making a new hire and, while turnover is generally lower when you hire from within, it’s still something to keep in mind. In fact, one big downside of internal recruitment is that those employees passed over for the internal role may be more likely to leave.
Internal recruitment may also boost employee morale. When you hire from within, your employees see firsthand that you value them and their contribution to your organization, even if you select someone else for the role. If employees are better suited to a different role, putting them in a new position might reduce the likelihood of them leaving your company. Ultimately, if you have qualified candidates internally, there may be no reason for you to go through the extra headaches of hiring from outside your organization.
External recruitment is a much more labor-intensive process. On the one hand, you get access to a limitless pool of candidates. On the other hand, it can take an immense amount of time to sort through them all and you’re never completely sure you have made the right hiring decision. About 20% of all new hires leave their job in the first two months—but that doesn’t mean you’ll know in that short window if the new hire will work out.
In a study published in Administrative Science Quarterly, it took external hires about two years to fully integrate with their new company culture and get up to speed in their role. This doesn’t mean you should avoid external candidates, but you should be prepared to give external hires substantial time to get comfortable in their new job.
Where to Recruit: Internal vs External Recruiting
Where you recruit depends on which method you choose. Internal recruiting focuses more on the job skills and requirements, whereas external recruiting will need to have more emphasis on your company.
Internal and External Recruiting Pros & Cons
For each recruitment method, there are highlights and drawbacks. Remember that you don’t have to choose one method for your company forever. Your path will inevitably vary depending on the role you need to fill.
| Internal Recruitment | |
|---|---|
| PROS | CONS |
| Lower costs to hire | May miss out on highly qualified external candidates |
| Employee already has inside knowledge and experience with processes and procedures | Potential disappointment and disengagement from applicants not selected |
| Increases employee engagement | Still have to replace the selected employee’s previous role |
| External Recruitment | |
|---|---|
| PROS | CONS |
| Nearly limitless pool of candidates | You don’t know the employee’s work ethic |
| New hires can bring a refreshing change to companies | Existing employees may feel passed over and become resentful |
| May attract high-quality talent from competitors | New hire may have a larger learning curve than internal hire |
Legal Considerations
As with anything having to do with employees, job postings, interviewing, and hiring decisions are subject to employment laws. Specifically, you cannot create a job posting or make an interview or hiring decision based on an applicant’s:
- Age
- Citizenship
- Race
- Disability
- National origin
- Religion
- Sex
- Military service
Federal law prohibits discrimination based on the above classes. Some state laws go even further and prohibit discrimination based on a candidate’s appearance (e.g., tattoos and piercings) and marital status. Make sure you are adhering to federal law and any local employment laws applicable to your organization.
If you need tools to help with external recruiting, check out our top recruitment software picks.
Bottom Line
There are many similarities between internal and external recruiting. But they may render different outcomes, depending on the position you’re looking to fill. Ultimately, you may find that for some positions, internal candidates offer what you need, creating a faster, smoother, and more cost-effective hiring process. For other positions, you may need to look outside your company. Don’t pigeonhole yourself to always using the same method—different roles require different recruiting methods.
