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Cost Per Hire: What it Is & How to Calculate it Accurately

Why is cost per hire important?

The first step to better recruiting is to understand what it is costing you. And that new team member you hire costs far more than you might think. Both internal and external resources affect your cost-per-hire. This ratio, calculated as the total dollars spent for sourcing, recruiting and staffing for the total number of hires during a specific time period, is one of your most important metrics. Calculating cost per hire should be very important to every HR and TA leader at a company. Here you will learn more about what it is and how to calculate it properly.

How to Calculate it Accurately

To calculate your true cost-per-hire, you need to consider all of the metrics.

Internal Costs

- Salary, benefits, bonuses and career development of your internal recruiting team- Software and hardware costs: applicant tracking system, interviewing software, reference check platform, etc.
- Other fixed costs such as employee referrals, government compliance, etc.

External Costs

- Third-party fees such as contract recruiters and staffing agencies- Job marketing costs such as job posting fees, job boards, pay for performance job advertising, and social media resources
- Career fairs and college campus recruiting
- Travel expenses for recruiting
- External assessments such as background checks and drug tests

Average Cost Per Hire Formula

Once you have this info, add up all of your internal and external recruiting costs, and then divide by the total number of hires:

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

Free Recruiting Cost-Per-Hire Calculator

Tracking your cost-per-hire by hand can be a cumbersome process, however. With this in mind, we have developed a simple resource for you to use to help you calculate your cost-per-hire and better understand your recruiting budget needs. Our cost-per-hire spreadsheet saves you time and shows all of the inputs you need to use to quickly calculate your cost per hire. You can download it now.

Download your free Cost-Per-Hire Calculator spreadsheet to get started calculating your total cost to hire.

What is an average cost per hire? 

According to SHRM, an industry average would be $4129. But, whatever your final number turns out to be, calculating it is an important exercise that will help to improve the cost-effectiveness of your recruiting process. The process of using our spreadsheet to calculate cost per hire is a great way for a company to control costs, find areas to be addressed, and track expenses. Armed with your average cost per hire, a company can continue hiring top talent with an eye for costs.

We hope that you find our free Cost-Per-Hire Calculator spreadsheet to be an effective recruitment planning tool. And, if you are interested in learning more about how outsourced recruiting solutions through Orion Talent can help control your cost per hire, check out our infographic, Reduce Your Recruiting Costs With RPO, here.

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