What is the cost per hire?

Cost per hire (CPH) is a key human resource management metric used to determine the average cost associated with filling a vacant position within an organization. It encompasses all expenses related to the recruitment process, both internal and external, and is calculated by dividing the total recruitment costs by the total number of hires within a specific time period.

Recruiters track cost per hire for various reasons, including measuring the effectiveness of recruitment efforts, controlling recruitment expenses, improving hiring process efficiency, and demonstrating value to the organization. By understanding the cost per hire, recruiters and organizations can make informed decisions about their recruitment strategy, manage expenses, and align recruitment efforts with business goals.

To calculate the cost per hire, the following steps are typically followed:

Add up all internal and external recruitment costs incurred within a specific time period. Divide the total recruitment costs by the total number of hires within the same period. The resulting figure represents the average cost per hire, encompassing expenses from identifying candidates to hiring, onboarding, and training them. Internal recruitment costs may include salaries for in-house talent acquisition teams, employee referral bonuses, hiring manager salaries, and learning and development costs for the recruitment team. External recruitment costs encompass expenses such as advertising, recruiting agency fees, job board fees, recruiter salaries, relocation expenses, travel expenses, recruitment technology, and background checks.

Factors that can affect the cost per hire include recruitment sources, time required to fill a position, company size, industry, competition for talent, and turnover rate. Strategies to optimize cost per hire include utilizing social media for job postings, implementing employee referral programs, leveraging AI for candidate screening, and automating recruitment processes through Applicant Tracking Systems (ATS).

By employing these optimization strategies, organizations can reduce recruitment costs, streamline the hiring process, and ultimately improve the efficiency and effectiveness of their recruitment efforts.