Cost Per Hire

What Does it Mean?

Cost per hire measures how much money is spent hiring a single employee to a company. This is usually measured over longer periods of time rather daily considering recruitment is not typically an ongoing process.

Why Does It Matter?

This KPI is a vital internal metric designed to help you understand your hiring processes more clearly while reducing costs and improving recruitment efficiency.

In many cases, high cost per hire numbers indicate that your HR and acquisition teams are not operating at peak performance for any number of reasons. Cost per hire can help you find areas where operations can be smoothed, brought in-house, or altogether eliminated.

However, it’s important to keep in mind that in certain cases, a higher cost-per-hire number isn’t necessarily a bad thing, but instead a cost of doing business. Even so, cost per hire analysis can help you explore avenues to streamline your recruitment operations.

See it in action:

Time to Hire - Human Resources Dashboard

How Do You Measure the KPI?

A cost per hire analysis begins with tabulating the total costs you incur during the hiring process. This includes measuring internal costs (salaries, development and training costs, and more) as well as any external costs.

The cost per hire formula takes the aggregate of these expenditures and divides it by the total number of hires.

What Sources Would You Use to Measure the KPI?

The most relevant sources for your cost per hire KPIs include data regarding pricing, costs related to external services (hiring agencies, aptitude test providers, job board postings) and internal costs, as well as hiring data.

Give Me an Example…

Let’s say you’ve completed a recent round of hires, but you noticed that your cost for the process was too high. Now you’ve put your staff at a disadvantage when it comes to investing in your new team’s training and integration into the workforce.

Before your next round of hiring, you can determine why your costs were so high, and determine if the methods you’ve been using are providing you with commensurate results. Maybe hiring a headhunter didn’t pay dividends, or the job board you posted on didn’t deliver the candidates you hoped. In both cases, understanding your cost per hire can help you make better decisions about how to proceed with future hiring.

What Benchmark/Indicators Should I Use?

Some useful indicators include

  • External hiring costs
  • HR salaries
  • Value per hire