What is Cost per Hire? Measuring and Reducing Your Recruitment Expenses

In today’s competitive labor market, every dollar counts. Cost per Hire provides a clear metric for organizations to assess and optimize their recruitment investments, ensuring budget efficiency and strategic allocation of resources.

What is Cost per Hire

Cost per Hire is the average total cost incurred by an organization to recruit, hire, and onboard a new employee. It encompasses both direct expenses (like advertising fees and agency commissions) and indirect costs (such as recruiter salaries and technology subscriptions).

Why It Matters

• Financial Control: Enables HR leaders to understand and manage recruitment spending.

• Budget Optimization: Identifies high-cost areas, allowing reallocation to more cost-effective channels.

• Strategic Planning: Supports data-driven workforce planning and forecasting.

• ROI Measurement: Demonstrates the value of recruitment initiatives to stakeholders.

Industry Benchmarks and Trends

• Average Benchmarks: According to the Society for Human Resource Management (SHRM), the average Cost per Hire ranges between $4,000 and $7,000 across industries.

• Technology Impact: Organizations leveraging AI-driven sourcing and automation report up to 25% lower recruitment costs.

• Remote Hiring: The rise of virtual recruitment has shifted budgets from travel and in-person events to digital advertising and video interviewing tools.

Case Study: How Company Y Reduced Cost per Hire by 30%

1. Challenge: Company Y’s Cost per Hire exceeded $8,000, straining HR budgets.

2. Solution: Implemented Moka’s integrated ATS and referral automation, focusing on internal talent pools and employee referrals.

3. Outcome: Cost per Hire dropped from $8,200 to $5,800 within six months, saving over $150,000 annually.

Use Cases in HR

• Budget Tracking: Monitor recruitment spend by department and role type.

• Vendor Comparison: Evaluate agency vs. in-house recruiting ROI.

• Leadership Reporting: Provide CFOs and executives with clear cost analytics and forecasts.

Best Practices for Lowering Cost per Hire

1. Comprehensive Cost Tracking: Capture both direct (ads, agencies) and indirect (internal salaries, technology) expenses.

2. Employee Referral Programs: Leverage existing talent networks to reduce sourcing fees.

3. Automate Where Possible: Use ATS and CRM tools to automate scheduling, screening, and communication.

4. Optimize Sourcing Channels: Continuously assess channel performance to allocate budget effectively.

Related HR Glossary Terms

• Job Description (JD)

• Applicant Tracking System (ATS)

• Candidate Experience

• Job Requisition

• Talent Pipeline

• Time to Hire

• Cost per Hire

• Sourcing Strategy

• Offer Acceptance Rate

• Employer Branding

FAQs

Q: What expenses are included in Cost per Hire?
A: Typically includes advertising costs, agency fees, recruiter salaries, technology subscriptions, background checks, and onboarding expenses.

Q: How often should Cost per Hire be calculated?
A: At least quarterly, or after major hiring campaigns to ensure accurate budget allocation.

Q: Can Cost per Hire vary by role type?
A: Yes, specialized or executive roles often incur higher costs due to niche skill requirements and extended sourcing efforts.

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