How important is your cost per hire?

Last updated:
September 30, 2021
March 30, 2023
min read
Olivia Gracey
cost per hire
Table of contents

In today’s fast-moving recruitment world, it may seem like there’s no time to take a step back and evaluate where you are spending money to attract the best candidates.

However, with a data-driven approach, knowing the best sources and your internal and external recruitment costs mean you can use your budgets wisely, while still bringing in top talent.

But is that all that’s important? Let's dive into these costs and find out where the value truly lies in these numbers.

What is cost per hire?

Cost per hire is one of the most important metrics for talent analytics. It equals the sum of your internal and external recruiting costs, divided by the total number of hires within a given time period (typically one year). Below is the cost per hire formula:

Cost per hire calculation

Although hiring the right people may be expensive and time-consuming, it is always better to take your time and inspect the data rather than hire the wrong people. Look at how much money you could be wasting on a bad hire.

Calculating cost per hire at your company

Understanding how cost per hire is calculated can help clarify the value of this metric for your company.

Internal recruiting costs

All staff and organizational costs related to recruitment make up your internal recruiting costs. These could consist of, but are not limited to:

  • Talent acquisition and recruiter salaries, benefits, travel expenses - this is often the highest cost when calculating CPH
  • Employee referral program bonuses
  • Interview costs (# of hours X hourly salary of the interviewer or hiring manager)
  • Applicant tracking system (ATS)
  • Learning and development budgets for the hiring team
  • Fixed costs (e.g., office locations, co-working spaces, utilities)

External recruiting costs

All external, or outside of the office fees, is also a piece of the CPH puzzle. While they may be less expensive than internal salaries, they still make up a large chunk of your recruiting costs. Below are a few examples:

  • Agency fees or external recruiter fees
  • Marketing & advertising costs (eg. job boards, paid ads)
  • Aptitude tests & assessments
  • Background checks
  • Employer branding activities (e.g. events, swag)
  • Relocation expenses

Total number of hires

This is the easiest number to identify when calculating your CPH. If you are utilizing an ATS, this data is always tracked and is a must-have when it comes to reporting. Otherwise, this is a standard metric that can be easily tracked in an Excel spreadsheet, depending on the size of your organization and the scale of your hiring.

Cost per hire benchmarks

Now you have all of the information you need to calculate your cost per hire, but without a benchmark, this data is basically useless.

As of 2017, SHRM estimates the average cost per hire for a non-executive is $4,425 and $14,936 for an executive. Keep these figures top of mind when calculating your CPH to see how you stack up.

A simple cost per hire calculator

Use this simple calculator below to find out your own CPH value. Send the results to yourself to share with your team, upper management, or other key decision-makers. (This calculator may not include all of the costs at your company, but it can give you a baseline to understand where you stand in terms of cost per hire.)

What can you learn from your cost per hire?

Just how important is the cost per hire for your company? While it can give you insights into your hiring costs, budgets, and where you may be able to pick up the pace or invest more in a certain area, it is only a single metric and it does not cover all aspects of acquiring a new hire. You also need to take into account scarcity, existing talent pools, and seniority when sourcing for open positions.

All in all, if you are making hiring decisions based on data, you can easily identify where you can potentially save money or reduce recruitment costs (and even your cost per hire).

“It’s important to review data on a regular basis to ensure what you expected to happen is happening and if not it allows you to review, reset your targets and go at it again.”

Richard Brown, Lead Talent & DE&I Business Partner at McLaren Racing

Valuable metrics from Recruitee

Recruitee can help you calculate and identify other valuable metrics that can be used alongside cost per hire.

These include time to hire, time spent in stage, and proceed rate which can be used to benchmark your recruiting efforts. Easily track and view the data visually in Recruitee’s reporting dashboards.

cost per hire dashboard
Recruitee's reporting dashboard
“We've been really impressed with Recruitee's intuitive design and user-friendliness. The new data reporting and analytics features have set a new standard within the industry.”

Marco Garbrecht, Director of Talent Acquisition at Trusted Shops

That’s not all! There are many other metrics that can add value and help shape your recruitment and sourcing decision-making processes.

Four additional important metrics to consider

1. Increase in the number of hires year over year

Take a look at the % increase in the number of hires year over year (YOY) to identify if your hiring costs are increasing or decreasing.

For instance, if you hire 10 new employees last year (and based on the benchmark mentioned above), we can assume your cost per hire is $44,350 (for non-execs).

If your hiring growth rate is 20%, then next year you may hire 12 new employees. If your cost per hire is higher or lower than expected, then you can start making changes to ensure your outgoing costs are still manageable.

cost per hire hires per job dashboard

2. Number of candidates per job

In addition, take a look at the number of candidates per job. This can give you insights into which roles are getting a lot of buzz and attention, while others may be lagging behind. Then you can determine the best course of action to remedy the situation and shift your focus to bring in more candidates.

cost per hire candidates per job dashboard

3. Time and money spent interviewing

Check out how much time and money you and your hiring team are spending on interviews.

You can simply calculate the (# of hours spent interviewing) X (the hourly salary of the interviewer or hiring manager). Or find the ‘Events by duration’ report in your Recruitee Dashboard to quickly break down the number of interviews over time. It can also be broken down by a certain interviewer with the ‘Events by team member’ report.

Then you can have a better idea of where the most time and money are being spent during the hiring journey.

cost per hire events by duration dashboard

4. Candidate sources

With Recruitee, you can also track where your candidates (and hired employees) are coming from with reports like ‘Candidate origins’ or ‘Top sources’. It’s also easy to identify which source is the most successful with ‘Top candidate sources’, as well as analyze ‘Disqualifications by candidate origin’.

This will help to ensure the best hiring results, that you are bringing in top talent from the best places, and that your budget is going further.

cost per hire top candidate sources dashboard

What does it all mean?

To sum it up, cost per hire should not be the only number that you take into account when looking into the efficiency of your recruitment processes. It is a fact that your cost per hire will decrease the more you hire because some costs can be spread out more over time. If you use a referral program, it could help you to reduce your recruitment costs even more, since your employees are helping you source.

Check in on your other key metrics to keep your hiring healthy and to make sure you are spending your budget in the right places. Tracking your company’s recruitment benchmarks and processes, in general, will help you to scale your team faster and maximize your ROI.

If you are in the market for an applicant tracking system, give Recruitee a test drive with a free 18-day trial or a quick 30-minute demo.

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