The short answer
Cost per hire is the total amount spent on recruiting in a period divided by the number of hires made in that period. The formula is: cost per hire = (external costs + internal costs) / number of hires. SHRM describes it as the metric for the costs of sourcing, recruiting and staffing open positions. It matters because it shows what each hire costs, so you can spot where recruiting money goes and whether changes to your process save anything.
Cost per hire explained
SHRM splits costs into two groups. External costs are paid to outside vendors or individuals, such as advertising, agency fees, background checks, candidate and recruiter travel, campus recruiting, relocation, sign-on bonuses and technology. Internal costs are the cost of your own recruiting and sourcing staff, hiring managers' time spent on recruiting, recruiter training, and office and compliance overhead.
SHRM also notes that which costs you include depends on the purpose. A number for your own trend can include whatever is meaningful to you. A number you want to compare with other employers should follow a shared definition. Either way, use the same cost categories and the same period every time.
Example: a cost per hire calculation
A hypothetical team made 8 hires in one quarter, with no agency placements. The figures are illustrative, not benchmarks.
Internal costs are three quarters of the total here, which is common when a team hires mostly through its own recruiters. Add a single agency placement and the picture changes fast. Our step-by-step guide on how to calculate cost per hire works through a fuller example, including one agency hire.
Benchmarks
SHRM's Human Capital Benchmarking Report, covering fiscal year 2015 and published in August 2016, reported an average cost per hire of $4,129, based on 864 respondents. It is a decade-old, all-roles average. Your own trend by role type is more useful than any outside number.
Common mistakes
- Counting only invoices. Leaving out recruiter and interviewer time makes cost per hire look far lower than it is.
- One blended number. Report agency and direct hires, and senior and entry-level roles, separately.
- Cutting cost at the expense of quality. Watch quality of hire next to cost per hire.
For what first-round interviews cost across vendors, see our AI interview pricing guide.
Related terms
- Quality of hire: whether the hires you paid for perform and stay.
- Time to fill: days a job stays open before an offer is accepted.
- Time to hire: days from a candidate entering the pipeline to accepting.
- Offer acceptance rate: declined offers raise cost per hire.
- High-volume hiring: where small savings per hire add up quickly.
Questions
What is the cost per hire formula?
Cost per hire equals external recruiting costs plus internal recruiting costs for a period, divided by the number of hires made in that same period.
What costs are included in cost per hire?
External costs paid to outside parties, such as job ads, agency fees, background checks, travel, relocation, sign-on bonuses and recruiting technology, plus internal costs such as recruiting staff pay and hiring managers' time spent on recruiting. Use the same categories every time you measure.
What is the average cost per hire?
SHRM's benchmarking report for fiscal 2015 put the average at $4,129, based on 864 respondents. The figure is old and mixes all role types, so compare yourself mostly with your own past quarters.
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