Cost per hire

Cost per hire is what it costs you, all in, to get one person to say yes and start. It's the number that finance cares about, and the one that puts your ad metrics in perspective.

Most people undercount it. They add up the job board and ad spend and stop there. But the real cost also includes external costs, like agency fees, tools, background checks and referral bonuses, and internal costs, like the hours your recruiters and hiring managers spend screening, interviewing and following up. A campaign with cheap applicants that floods your team with bad fits can easily end up with a higher cost per hire than one with expensive applicants who are all on target.

There's no single official formula everyone uses, so be consistent. Decide what you include, write it down, and keep it the same every time, otherwise you're comparing apples to something else. For a standardized version, look at the ANSI/SHRM cost per hire standard.

How to calculate it

Add up all external and internal recruiting costs for a period, and divide that by the number of hires in the same period.

Example

A company thought their cost per hire was mostly their ad budget. When they added the agency fee for one role, the assessment tool and the hours their team spent on interviews, it turned out the internal time was a big part of it. They shortened their interview process, and that cut the cost more than any change in ad spend would have.