The Internal Hiring 2025 Guide: 5 Biggest Advantages

Guide to Internal Hiring

Hiring is simultaneously one of the most difficult and most important processes of any business. Employees are the life of any major company, as they produce value and carry the brand of an organization. As a result, finding the right candidate for an open position can pose a major task for any HR team.

A bad hire can cost an organization up to $240,000 in expenses related to training, retention, and compensation. Depending on the size of your business and your company’s margins, a few bad hires could be the difference between making a profit any given year. A bad hire could set your company back months or even years, plus — in situations like these — you have to start the hiring process all over again.

Companies are competing for talent at a higher rate than ever before, and an internal candidate hiring system can help combat talent shortages. There are a number of advantages of choosing an internal candidate over an external candidate. Let’s take a look.

What Is Internal Recruitment?

Internal recruitment, also known as hiring internally, involves filling job openings within an organization by selecting internal candidates—employees who are already working at the company. Instead of looking externally for talent, companies promote or laterally move existing employees into new roles.

How Does Internal Hiring Work?

Internal recruitment can take many forms, including:

• Promotions – Advancing employees to higher positions with greater responsibility.
• Transfers – Moving employees to different roles, departments, or locations.
• Temporary Assignments – Assigning employees to interim roles that may lead to permanent placement.
• Rehiring Former Employees – Bringing back past employees with a proven track record.

Companies use job boards, internal communications, succession planning, and talent management platforms to identify and match employees to open positions.

The 5 Biggest Advantages of Internal Recruitment – Do internal candidates have an advantage?

1. You Already Know Internal Candidates

Are internal candidates preferred? One of the biggest reasons companies prefer internal candidates is their proven track record. Managers are already familiar with their work ethic, skills, and cultural fit, reducing the risk of a bad hire. The onboarding process will be much smoother for an internal candidate because they won’t need to learn the fundamentals of your organization. They are familiar with your organization’s software, hardware, and employees. This puts internal candidates at a considerable advantage compared to external candidates.

New external hires will have to learn the lay of the land. They will not know who to ask to accomplish a specific task and who has the specific knowledge they need to learn from. Niche company knowledge could take months to learn. On the other hand, depending on the size of your organization, internal candidates may already know exactly what to do when they encounter a problem. Thus, they can hit the ground running when they start their new role and adapt more quickly than their external counterparts.

2. Internal Recruitment Reduces Hiring Costs

Hiring externally often requires significant spending on job advertisements, recruitment agencies, and interview processes. Hiring internal candidates minimizes these expenses, making it a cost-effective strategy. Trying to cut costs should never be the primary reason to hire internally, as a bad hire will cost far more than a recruiter. However, it should be a factor to consider when deciding to hire internally or externally. Budgets are being constrained more than ever, and HR teams are being forced to cut costs wherever possible.

Your HR team won’t have to fork over thousands of dollars for expensive recruiters or spend time and money posting jobs online. You can also save costs through compensation because you generally don’t have to pay internal candidates as much as external candidates. University of Pennsylvania Wharton School professor Matthew Bidwell’s research into investment bankers showed that external candidates earned between 18% and 20% more than internal candidates promoted to a similar position.

3. Onboarding Internal Candidates Is Much Easier

Internal hires already understand company policies, culture, and expectations. This means a shorter onboarding process and faster productivity compared to external hires. Another issue for external hires is that they have habits from their prior organization that may need to be broken. Additionally, external hires may have trouble adjusting to the way that your organization functions, which could decrease employee performance. Meanwhile, the internal candidate knows how your organization works and is already prepared to shine within your company.

4. Internal Hiring Saves Time

Recruiting externally can take weeks or even months. By hiring internally, companies speed up the hiring process, as internal candidates require fewer interviews and assessments. Having an open position can be detrimental to the long-term performance of any organization. HR teams need to ensure that they can hire the right candidate as quickly as possible while still taking all the necessary steps to ensure that the chosen candidate is the right fit. Working with an external candidate can be difficult as HR teams work around the potential employee’s schedule.

Finding time for interviews can take weeks, especially if the candidate has a full-time job. Internal candidates can reduce the overall time it takes to fill a vacant position, and scheduling interviews will be much easier since HR can coordinate with the internal candidate during working hours. Time can also be saved in other facets of the hiring process. For example, internal candidates may not need full interviews with every stakeholder. If an employee moves within their department, many key stakeholders may already be familiar with the candidate. Internal candidates will not need extensive background checks and can negotiate a transition plan to their new role that may be faster than giving 2 weeks’ notice.

5. Internal Recruitment Boosts Company Loyalty and Engagement

When employees see clear career growth opportunities, they are more likely to stay engaged and committed to the company. Promoting from within fosters a culture of loyalty and motivation. Hiring external candidates will always present a risk because unexpected issues could arise during or after the hiring process. Issues—such as failed drug tests or lying about their performance or skills—can completely derail the hiring process. When all is said and done, employers may find themselves with a new hire who does not meet their needs.

Internal candidates will not present the same risks. Organizations can accurately assess the employee’s career performance, interview managers and teammates, and distribute skills tests to get a clear picture of their internal candidates. This will help employers ensure that they have the right person for the job.

These are the reasons why companies hire internal candidates. Keep reading to explore some other benefits of looking within your company.

Improve Employee Morale and Retention

So, why is it better to hire internally? Some employees will see the bright side of watching their co-workers ascend to a different or higher position within a company. The effect of this ascension may lead other employees to be more motivated; they will want to improve their careers and move up in the organization as well. Employees will be more likely to stay with your organization throughout their careers if they know they can continually move to higher positions, and internal hiring helps embody this ethos.
Employee retention can also benefit when internal hiring is part of your culture. Employees will be able to see themselves at your organization for their entire career instead of jumping from company to company. Keeping all-star employees is more complex than ever, but seeing a deserving colleague move up the career ladder could convince them to stay.

Encourage Succession Planning

One of the benefits that is often not considered when forming an internal hiring strategy is that it helps organizations start to form a succession plan. Only about 35% of companies have a formal succession plan in place, and hiring an internal candidate may help your company take succession planning seriously.

Your company will be more likely to properly train and upskill employees to ensure that they are ready to move into the higher position when succession plans are in place. Internal candidates will be ready to excel in the position that has been set for them in the succession plan, and your company will have a much shorter job gap if a succession plan for internal candidates is properly developed and adhered to.

Adopting an internal hiring strategy is a no-brainer for HR teams. The best talent is already known and trusted by your organization and is ready for their next opportunity. The benefits of internal candidates are clear and plentiful, from cost savings to employee morale. Here’s your chance to embrace talent that you’ve already began investing in.

Internal Hiring Next Steps

To successfully leverage internal hiring, companies should:

• Develop clear career paths to encourage employee growth.
• Implement skills-based talent management to match employees to opportunities.
• Use succession planning to prepare employees for leadership roles proactively.
• Encourage internal job postings to ensure employees are aware of open roles.

By investing in internal recruitment, companies strengthen their workforce, retain top talent, and reduce hiring risks—all while building a culture of growth and opportunity.

Guide to Internal Hiring – Please heck out our white paper to learn more:

Winning in the Skills Economy: The Strategic Guide to People Development

To learn more about internal hiring and how to guide your company in the future of work, request a demo.

FAQs
What is an example of internal hiring?

An example of internal recruiting is when a company promotes an existing employee to a managerial role instead of hiring externally. For instance, an organization might elevate a senior software engineer to an engineering manager position because they already understand the company’s processes and culture.

What is the difference between internal and external vacancies?

• Internal vacancies are job openings available only to current employees. These roles are filled through promotions, transfers, or internal job postings.
• External vacancies are open to candidates outside the company. These positions are advertised publicly on job boards, company websites, or through recruitment agencies.

What is an internal hiring policy?

An internal hiring policy is a set of guidelines that define how a company recruits and promotes employees from within. It typically includes:

• Eligibility criteria for applying to internal roles.
• How job openings are communicated to employees.
• The selection and interview process for internal candidates.
• Any restrictions on how soon an employee can apply after being hired.

How do you beat an internal candidate?

Competing against an internal candidate can be challenging, but here are some strategies:

• Highlight unique skills and experiences that an internal employee may not have.
• Demonstrate cultural alignment by researching the company’s values and mission.
• Showcase fresh perspectives that can bring innovation or improvements.
• Network internally before applying to build relationships with key decision-makers.

Why should we hire you for an internal position?

When applying for an internal position, your answer should emphasize:

• Your contributions to the company and how they align with the new role.
• Your understanding of the company’s goals, challenges, and culture.
• Your ability to transition quickly since you already know internal processes.
• The additional skills or leadership qualities that make you the best candidate.

Why do companies its hire internally?

Companies hire internally to retain talent, reduce hiring costs, and accelerate onboarding. Internal hires already understand the company’s culture and processes, leading to faster productivity and higher employee engagement. Promoting from within also boosts morale, demonstrates career growth opportunities, and helps retain institutional knowledge.