Armand Patella|May 11, 2023

Understanding Your Current Cost Per Hire - A Quick Guide

Understanding your current cost per hire is a critical component of effective recruitment. It helps organizations evaluate the efficiency of their hiring process, set benchmarks, and identify areas for improvement. This guide will walk you through the steps to calculate and understand your current cost per hire.

What is Cost Per Hire?

Cost per hire is a recruitment metric that measures the total costs associated with bringing a new employee onboard. It includes costs related to advertising, recruitment agency fees, internal hiring team time, administrative expenses, and any other costs directly tied to the hiring process.

How to Calculate Cost Per Hire

The formula for calculating cost per hire is straightforward:

  • Cost Per Hire = (Total Internal Costs + Total External Costs) / Total Number of Hires in a given period

  • Total Internal Costs: These are costs incurred within your organization. It includes the salaries and benefits of your hiring team, costs of internal recruitment tools and software, referral bonuses, and other related costs.

  • Total External Costs: These are costs paid to external entities. It includes advertising costs, agency fees, background check fees, job fair costs, and any other costs paid to third parties for the recruitment process.

  • Total Number of Hires: The total number of successful hires in the period you are measuring.

Benchmarking Your Cost Per Hire

Benchmarks give you a point of reference to compare your cost per hire against industry standards. For instance, according to the Society for Human Resource Management (SHRM), the average cost per hire in the U.S. is approximately $4,425 (data). However, this cost can vary significantly depending on the size of the company.

Understanding your current cost per hire is the first step towards optimizing your recruitment process. It provides a measure of the effectiveness of your hiring strategy, allowing you to make data-driven decisions and improve the efficiency of your recruitment process.

Stay tuned for more in-depth guides on each aspect of cost per hire and strategies to optimize them.

Please note that the blog post is incomplete and requires additional information such as cost components, industry-specific benchmarks, and strategies to reduce cost per hire. A deep dive into how to calculate each cost component, discussions about variances by industry or company size, and an exploration of strategies to optimize cost per hire would provide a more comprehensive guide. The information provided is also based on the limited data I was able to access, and the actual figures may vary.

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