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Cost-per-hire

What is Cost-per-hire?

Cost-Per-Hire refers to the total cost incurred in hiring a new employee to the company. It includes expenses of the recruitment process, equipment, travel costs, administrative costs, and benefits. Cost-Per-Hire is an efficiency metric, and measures the total cost a company spends to hire a new employee. The formula to calculate it is:

Cost-Per-Hire = (cost of internal recruiting + cost of external recruiting) / total no of hires in the given time

Frequently Asked Questions about Cost-Per-Hire

What is the importance of cost-per-hire?

Cost-per-hire lets you make strategic decisions about recruiting new candidates and aids in the company's overall costs. Forecasting a budget will help the organization have clarity and a better idea about the spending on the recruitment process. In addition, the metrics will allow organizations to have a comparative view.

How is cost-per-hire calculated?

Cost-per-hire is a strategic tool to calculate the recruitment budget of the firm. It is estimated as the addition of the internal and external hiring of the employees divided by the number of hires in a given time period.

What are the factors that affect the cost-per-hire?

Two major factors that affect the cost per hire are:

Internal cost

All the expenditures occurred and driven by the company themselves, like salary to recruiters, training, and development.

External cost

All the expenditures made by involving 3 parties for the recruitment, including recruiting agencies and job post advertising expenses.

Is the salary included in cost-per-hire?

The salary is included in the cost-per-hire. Also, sourcing employees, performance bonuses, and additional benefits are included.

How to reduce cost-per-hire?

To reduce the cost-per-hire of your firm, you can implement the following tactics;

  • Build your talent pools beforehand
  • Move towards social media recruiting
  • Use the right assessment tools
  • Bulk screening of candidates applying for similar job roles

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