How to Measure the ROI of Your ATS

Picture this: Camille, the HR Director at a mid-sized tech firm, had always believed that they were doing pretty well with their hiring goals. However, after implementing an Application Tracking System (ATS), the team was stunned. 

Time taken for processes like filtering through applications, scheduling interviews, and tracking candidate progress decreased exponentially from three weeks to three days. The precious time saved was further redirected to strategic initiatives such as employer branding and skill-building workshops. 

The kicker? The company reported a whopping 25% drop in its cost-per-hire and a noticeable improvement in employee retention.

Stories like Camille’s are on the rise. Many companies are gaining an edge over their competition by adopting ATS solutions. But here’s the catch: going for an AI-based hiring solution is easy but convincing the finance department for approvals can be tricky. To fully make them understand the impact of an ATS, you need to calculate its ROI (Return on Investment). 

In this blog, we’ll provide you with a step-by-step guide to measuring ROI and how it can help you uncover the true value of this transformative tool. We’ve got five simple calculations to help you calculate the ROI of an ATS.

Calculation 1: Cost Saving by avoiding bad hires

What is a bad hire? 

A bad hire is a candidate who leaves the company before completing one year or 12 months.

The U.S. Department of Labor estimates that the cost of a bad hire can be as high as 30% of the employee’s first-year earnings. This figure includes direct costs such as recruiting and training, and indirect impacts such as loss of productivity, potential damage to company culture​ , and reduced team morale.

CareerBuilder further suggests that companies lose an average of $14,900 whenever they land a bad hire. 

Can an ATS help decrease the cost of a bad hire?

An Applicant Tracking System (ATS) can significantly reduce the cost of a bad hire by 

• Pre-Screening Candidates and reducing unconscious bias: ATS tools or AI recruiting software use AI algorithms to match candidate qualifications to job requirements, ensuring only the most suitable applicants move forward.
• Speeding up the recruitment process: By automating mundane tasks like candidate communication, interview scheduling, and so on, an ATS speeds up the hiring process.
• Enhancing Candidate Fit: Many ATS platforms match candidates in terms of skill and cultural values ensuring only the right candidates move forward in the hiring process.

So now that we have established the bad hire cost is an important cost that is worth considering while calculating the ROI of an ATS. How should we do that? 

Step 1: Estimate the following numbers:

• Number of candidates you are planning to hire in the next 12 months. Let’s assume it to be 30.
• The current company average of bad hires is 12%.
• The average annual salary of an employee say $50000

Step 2: Calculate the cost of a bad hire for one year

Cost of one bad hire =  $50,000 (Avg. employee salary) * (30%) = $15,000

The annual cost of a bad hire =  $15,000 (Cost of one bad hire) * 30 (estimated number of hires in the next 12 months) * 12% ( average % of hires that leave w/in 12 months) 

That brings your total annual cost of bad hires to your business to $67,500.

Step 3: Total Annual Savings

Now, supposing you are a mid-sized tech firm that can decrease the percentage of bad hires by 25% after deploying the ATS. 

So your total annual savings or one part of your ROI can simply be calculated as = $67,500 (Annual cost of bad hires) * 25% (% decrease in bad hires) 

That totals $16,875 in bad hires.

Calculation 2: Calculating the value of a quality hire

This is one of the most important metrics that need to be considered while presenting your case to the finance team. Hiring a candidate that is right for the role and the company can provide a massive ROI in the long run. 

But how to break that down into hard numbers?

First, check your company’s SEC report and find out the revenue per employee. Once you get that number, you need to calculate the profit margin per hire. Let’s take it to be 40% for an average hire. 

So if your revenue per employee is $200000, the average profit contribution each employee brings in would be approximately $80,000. 

Now with an ATS, you will be able to hire the top talent who will be a perfect fit for the role in terms of skills as well as company values. Such a candidate will bring the best to the table and would easily be able to bring an extra 25% profit margin which is a minimum of $130,000.

And that’s an ROI of $50,000 per quality hire. A number that is impossible to ignore. 

Calculation 3: Reduction of External Costs

Even when you are hiring in-house, there are a lot of external costs that need to be taken into consideration. These costs can be easily saved when you use an Application Tracking System and can help you build a strong case with the finance team too. 

Some of the external costs are:

1. Job Advertising Costs – The average cost on popular platforms like LinkedIn, Indeed, or Glassdoor per job posting is $300–$500. So annually, you spend approximately $1,000–$5,000 for multiple postings.
2. Recruitment Agency Fees – Even with the in-house hiring team, the nature of roles sometimes demands professional help from external agencies. These agencies cost on average 15%–25% of the hired candidate’s first-year salary which is $9000-$15000 depending upon the role. 
3. Background Checks and Assessments – Background Checks and Skills or Psychometric Tests cost approximately $500–$3,000 per hiring cycle.
4. Employer Branding and Marketing – It costs a mid-size company an average of $6,000–$15,000 annually.

With An Application Tracking System ATS –

• Saving on job advertising costs – ATS offers bulk deals saving you an average of $200 on every job posting. Also, ATS could offer free job postings to multiple platforms such as LinkedIn, Indeed, Glassdoor, etc. This helps improve the job visibility and your chances of reaching the right candidates.
• Recruitment Agency Fees – In-house ATS streamlines a lot of your hiring efforts reducing the need for hiring a recruitment agency by 50%. 
• Background Checks and Assessments – ATS’s integrated assessment tools and partner discounts can lower costs to $30–$100 per check/assessment saving you an average of $65 per candidate. 
• Employer Branding and Marketing – Built-in career pages, email campaigns, and database-building features reduce costs saving you between $2,000–$4,000 per year. 

Putting these numbers in our ROI calculation assuming the total hire this year would be 30 (same as we took in the calculation of bad hire cost) 

The total saving will be upto = ($200 + (20% of $12000)*50% +$65)*30 + $3000 = $47,000 (Rounded off figure)

Calculation 4: Saving in terms of Recruiter’s Productivity 

If you are a growing company with a big hiring number in mind, your talent team must be overworking to fulfill the hiring goals. Increasing the productivity of your hiring team with an ATS can be a major contributor to your ROI calculation. 

So, what’s the best way to calculate this? 

• Let’s suppose you have 5 recruiters on your team with an
• Average recruiter salary + benefits = $70,000
• Estimated increase in productivity of the team with an ATS = 20% 

Added Recruiter Productivity Calculation

Increased Recruiter Productivity Calculation = (Number of recruiters on your team) X (Average Recruiter salary including benefits) X (% increase in productivity) = 5 X $70000 X 20% 

So, the average savings or the ROI of ATS in terms of recruiter productivity can be as high as $70000. 

Using an ATS (Application Tracking System) can help your team eliminate tedious, time-consuming administrative tasks and reduce human error. 

With features like interview scheduling and constant candidate engagement, an ATS can help keep the entire team connected to the candidates and with each other at all times eliminating unnecessary delays. 

Calculation 5: Faster Hiring Process

“Remember that time is money. He that can earn ten shillings a day by his labor, and sits idle one half of that day, has really spent or thrown away five shillings besides.” – Benjamin Franklin

This can be an amazing opening quote while you are presenting your case in favor of investing in an Application Tracking System (ATS). But how to calculate the ROI of time saved in the hiring process? 

Here are a few key steps to follow:

Let’s first calculate the cost of your hiring team’s effort per week: 

1. We start by identifying how many recruiters (people who are involved in the hiring process) you have in the company. Let’s assume that number to be 5.
2. Next, we need to estimate the effort (that is the number of hours spent on hiring-related tasks) of each member. Let’s take an average of 30 hours of hiring effort per member.

Pre-ATS the total cost would be roughly = 30 hours per week x $20 per hour X 5 = $3000 per week

A smart ATS offers a ton of features like interview scheduling, personalized job descriptions, integrated job posting, smoother internal and external communication, an up-to-date database, and so on. This could easily reduce the HR employee’s workload by at least 30%.

So the hours spent on hiring with an ATS can be roughly 20 hrs per week.

So the total cost would now be roughly = 20 hours per week X $20 per hour X 5 = $2000

That’s a weekly savings of $1000 and a yearly savings of roughly $52,000. 

Calculating the ROI of an Application Tracking System (ATS) allows businesses to see the real value it brings to the table. An ATS is way more than a tool to speed up the hiring process. It can completely overhaul the way a company looks at its hiring process in the long run. 

Given sufficient time to evolve and learn your company’s needs, an ATS can become a true asset in your hiring process bringing in quality employees with minimal effort and time. To extract the true ROI of an ATS, it needs to be seen as a long-term investment that can yield significant returns when implemented effectively. 

By analyzing important metrics such as cost per hire, time to fill, and the system’s impact on employee retention, companies can further optimize their hiring process by making data-driven decisions devoid of unconscious bias and personal sentiments. Ultimately, an ATS doesn’t just save money—it empowers your hiring team to focus on strategic goals and secure top talent, driving long-term business success.

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