What is Cost per Hire (CPH)?

Put simply, Cost per Hire represents the total amount of money spent to fill an open position. It consolidates various recruitment-related expenses—from job ad placements to recruiter salaries—into one clear number.

Why It’s Crucial

CPH plays an integral role in strategic recruitment because it:

• Drives efficiency by highlighting areas where time and resources may be wasted.
• Enables better budgeting by providing a clear understanding of hiring expenses.
• Standardizes evaluation, allowing organizations to compare hiring strategies across departments or time periods.

By calculating CPH, HR professionals can strike the right balance between cost efficiency and the quality of hires.

Why Does Cost per Hire Matter?

Accurately tracking and understanding CPH offers multiple advantages:

1. Measuring Recruitment Efficiency

CPH gives visibility into the success and cost-effectiveness of your recruitment efforts.

• Are you overspending on advertising?
• Could your team benefits from faster, more optimized processes?

2. Optimizing Hiring Budgets

By identifying which strategies yield the best hires for the least expense, you can allocate budgets more effectively.

3. Benchmarking Performance

CPH enables comparisons:

• Across departments.
• Between specific roles.
• Over different timeframes.

This ensures every recruitment dollar works as hard as possible.

4. Supporting Strategic Decision Making

When combined with other metrics (like Quality of Hire), CPH guides data-driven decisions that align with organizational goals.

How is Cost per Hire Calculated?

The formula is simple:

Cost per Hire = (Internal Recruitment Costs + External Recruitment Costs) / Total Number of Hires

Here’s an in-depth look at what goes into those costs:

Internal Costs

• Salaries and benefits for HR staff.
• Interview time taken by team members or managers.
• Investments in recruitment technology (e.g., ATS platforms).

External Costs

• Job advertisement fees (LinkedIn, Indeed, etc.).
• Recruitment agency or consultancy charges.
• Travel expenses and venue costs for hiring fairs or events.

Factors That Influence Variations

CPH is rarely static. Variables like a role’s specialization, company location, and industry demand can significantly affect your costs. For example:

• Hiring for an executive leadership role? Expect higher CPH due to specialized search efforts.
• Based in a competitive metro area? Local benchmarks may require extra spending to stand out.
  

Key Components of Cost per Hire

Breaking it down further, here’s what typically contributes to internal and external CPH:

Internal Costs

• HR Staff Salaries - Includes hiring managers and recruiters who actively work on filling the seat.
• Employee Time - Time employees spend on sourcing, interviews, or onboarding.
• Recruitment Technology - Subscription fees for tools like applicant tracking systems (ATS) or recruitment CRMs.

External Costs

• Job Board Advertising - Costs for platforms where roles are posted.
• Recruiters/Agencies - Retainer fees or commission payouts for third-party hiring support.
• Events - Career fair participation fees, booth setup, and promotional collateral.

Industry Benchmarks for Cost Per Hire

While benchmarks vary by sector, you’ll typically see CPH ranges from $4,000 to $10,000 depending on:

• Industry Type:
• • Technology or healthcare positions may skew higher.
  • Retail roles are often lower due to simpler, high-volume recruiting.
  • Job Complexity:
  • Entry-level roles generally cost less than highly specialized or leadership positions.
  • Company Size:
  • Larger organizations often benefit from economies of scale, leading to a lower CPH.
  To benchmark effectively, compare your metrics with similar competitors or industries.
  

What Are the Benefits of Monitoring CPH?

Tracking CPH provides a competitive edge in several key ways:

1. Pinpoint Inefficiencies

Identifying which processes or platforms yield minimal ROI helps refine recruitment strategies.

2. Guide Cost-Effective Recruitment

Data allows HR teams to double down on high-performing, low-cost strategies (e.g., employee referrals).

3. Measure Recruitment ROI

CPH offers tangible insights into the return on investment for recruitment spending—providing key metrics for stakeholders.

4. Balance Hiring Costs & Quality

While saving money is important, CPH ensures hiring costs align with the value received from your new hires.

Common Challenges in Measuring CPH

Despite its benefits, accurately calculating Cost per Hire comes with challenges:

• Expense Tracking:
• • Record keeping can be time-consuming or inconsistent across departments.
  • Cost Interpretations:
  • What qualifies as a recruitment “cost” may vary between organizations.
  • Balancing Metrics:
  • Low CPH is meaningless if it results in poor-quality hires.
  Mitigating these challenges requires clear definition and consistent application of cost categories within your organization.
  

Strategies to Optimize Cost Per Hire

Here’s how to keep CPH low while maintaining hire quality:

1. Leverage Technology

Invest in tools like applicant tracking systems or AI-powered platforms to streamline processes.

2. Encourage Employee Referrals

Referral hiring is typically faster and cheaper, with referred candidates often staying longer.

3. Build a Talent Pipeline

Proactively create connections with highly qualified candidates, saving time and cost during high-priority hiring pushes.

4. Target Effective Job Ads

Use data analytics to place listings where top candidates are most likely to engage, minimizing sub-par applications.

5. Focus on Retention

When employees thrive, recruitment demands (and overall CPH!) drop.

Cost Per Hire vs. Other Key Metrics

CPH is powerful but works best alongside complementary metrics, such as:

• Time to Hire:
• • Helps measure recruitment speed and efficiency.
  • Quality of Hire:
  • Balances cost implications with employee performance and retention.
  • Cost Per Applicant (CPA):
  • Offers perspective on individual sourcing channels.
  Together, these metrics form a complete picture of recruitment effectiveness.
  

Future Trends in Measuring Cost Per Hire

AI and remote work are disrupting traditional recruitment cost models. Here’s what’s on the horizon:

• Automation:
• • Predictive AI tools drastically reduce sourcing time and costs.
  • Hybrid Roles:
  • Geographically diverse hiring shifts the focus away from traditional metrics.
  • Data-Driven Recruiting:
  • Advanced insights offer greater clarity on cost-effective strategies.
  By staying adaptable, HR leaders will be poised to leverage these trends for competitive gains.
  

Strike the Perfect Balance with Cost Per Hire

Cost per Hire isn’t just a number—it’s a blueprint for smarter, more efficient hiring practices. By understanding and optimizing your CPH, you secure high-quality talent while maximizing your resources.

Take charge today by evaluating your CPH and recruiting strategy. Remember, optimizing cost-efficiency doesn’t mean sacrificing the quality of hire!