Hiring new employees is a fundamental part of growing any business. However, the hiring process isn’t free—it comes with a variety of costs, both internal and external. Understanding the cost per hire helps businesses evaluate their recruitment strategy’s efficiency and financial impact. That’s where the Cost Per Hire Calculator comes in.
This article will explore what the cost per hire is, how to use the calculator tool on your website, the formula involved, practical examples, helpful insights, and 20 frequently asked questions to help you understand this essential HR metric better.
📘 What is Cost Per Hire?
Cost per hire (CPH) is a metric used by HR departments to determine the average cost of hiring a new employee. It includes all costs associated with the recruitment process—internal costs (such as recruiter salaries and time) and external costs (such as job board fees, agency costs, and advertising).
By measuring cost per hire, businesses can:
- Evaluate the cost-effectiveness of their recruiting strategies.
- Identify areas where expenses can be reduced.
- Benchmark recruitment costs against industry standards.
🛠️ How to Use the Cost Per Hire Calculator
Our Cost Per Hire Calculator makes it simple to compute this important HR metric. Here’s how to use it:
- Enter Total Internal Recruiting Costs ($):
This includes recruiter salaries, internal tools, staff time, employee referral bonuses, etc. - Enter Total External Recruiting Costs ($):
This includes costs like job postings, recruitment agency fees, background checks, and advertisements. - Enter Number of New Hires:
Input the number of employees hired during the period you’re measuring. - Click “Calculate”:
The calculator will instantly show your average cost per hire.
💡 Note: All values must be positive numbers. If you miss any field or enter invalid data, the calculator will prompt you to correct it.
🧮 Formula for Cost Per Hire
The formula used in this calculator is straightforward:
Cost Per Hire = (Total Internal Recruiting Costs + Total External Recruiting Costs) ÷ Number of New Hires
This gives you the average cost of bringing one new employee onboard.
✅ Example Calculation
Let’s say your company spent:
- $8,000 on internal recruiting (recruiter salaries, time, tools, etc.)
- $12,000 on external recruiting (ads, agencies, job boards)
- You hired 5 new employees during this time
Now plug the values into the formula:
Cost Per Hire = ($8,000 + $12,000) ÷ 5 = $20,000 ÷ 5 = $4,000
So, your average cost per hire is $4,000.
📊 Why Is Cost Per Hire Important?
Understanding your cost per hire gives you insights into:
- Recruitment budget planning
- Return on investment (ROI) in recruitment
- Cost-saving opportunities
- Comparison with industry benchmarks
- Optimization of internal vs. external hiring efforts
Organizations with high turnover or rapid growth can especially benefit by analyzing and optimizing their hiring costs.
💡 Tips to Reduce Cost Per Hire
- Use Internal Referrals:
Encouraging employee referrals can reduce external costs significantly. - Leverage Social Media Recruiting:
Platforms like LinkedIn can help source candidates with minimal expenses. - Automate HR Processes:
Using applicant tracking systems (ATS) can streamline hiring and save time. - Create a Talent Pool:
Maintain a database of previous applicants to reduce search time and cost. - Measure Regularly:
Continuously track your CPH to monitor improvements and detect inefficiencies.
📚 Additional Information
- Internal Costs Include: Recruiter salaries, time spent interviewing, internal software tools, and referral bonuses.
- External Costs Include: Advertising fees, job board listings, agency fees, assessment tools, travel expenses for candidates, etc.
- Average Industry CPH: According to the Society for Human Resource Management (SHRM), the average cost per hire is over $4,000.
❓ 20 Frequently Asked Questions (FAQs)
1. What is a good cost per hire?
A good CPH depends on industry, company size, and role complexity. Generally, $3,000–$5,000 is standard for many industries.
2. How often should I calculate CPH?
Ideally, you should calculate it quarterly or annually to monitor changes in your recruitment process.
3. Is onboarding included in CPH?
Typically, no. Onboarding is considered a post-hire activity and not included in cost per hire.
4. Can I calculate CPH for a specific role?
Yes, you can narrow it down to a job title or department to analyze cost trends more specifically.
5. Are software licenses part of internal recruiting costs?
Yes, recruitment-specific tools used by internal staff count toward internal costs.
6. How does CPH help HR strategy?
It helps HR teams plan budgets, justify recruitment spending, and benchmark performance.
7. What if my number of hires is zero?
The formula requires at least one new hire. Otherwise, division by zero will be undefined.
8. Should contractor costs be included?
Only if you’re measuring cost per hire for contractors. Typically, it’s used for permanent hires.
9. How can I lower external recruiting costs?
Use in-house talent acquisition, referral programs, or social media channels.
10. Can I include training costs?
Training costs are part of employee development, not hiring, so they’re excluded.
11. How does time-to-hire relate to cost per hire?
Longer time-to-hire can increase internal costs, raising your overall CPH.
12. Do recruitment events count toward external costs?
Yes, costs for attending or hosting career fairs are considered external recruiting costs.
13. Should I include interview expenses?
Yes, costs for interview logistics, travel reimbursements, or accommodations count.
14. Are relocation costs part of CPH?
Yes, if the relocation is directly tied to the hiring process.
15. Can I compare CPH across departments?
Yes, and it’s often useful to see where recruitment is more expensive.
16. What is the difference between CPH and cost per applicant?
CPH measures cost per successful hire, while CPA measures cost per candidate who applies.
17. Does employer branding affect CPH?
Yes, a strong employer brand can reduce reliance on costly recruitment channels.
18. Is background check cost internal or external?
Usually, background checks are outsourced, making them an external cost.
19. Do referral bonuses count as internal or external?
They are considered internal costs since they’re paid within the company.
20. Can I automate this calculation?
Yes! With a tool like this Cost Per Hire Calculator, you can automate calculations in seconds.
🎯 Conclusion
The Cost Per Hire Calculator is a powerful tool that simplifies the way businesses track and understand their hiring expenses. By providing just three inputs—internal costs, external costs, and the number of hires—you gain a clear picture of your recruitment efficiency.
Whether you’re a small business owner, HR manager, or recruiter, tracking cost per hire helps ensure that your hiring process is both effective and financially sustainable. By monitoring this metric regularly, you can optimize recruitment strategies, reduce unnecessary expenses, and make informed hiring decisions.