Cost-per-hire refers to the overall costs incurred by a company when hiring a new employee.
How to Calculate Cost-Per-Hire?
To calculate the cost-per-hire, all the expenses associated with hiring must be added up, including:
- The cost of posting a job offer
- Cost of recruitment agency, if applicable
- The salary of the recruitment manager throughout the entire process, from creating the job offer to welcoming and integrating the new employee
- The cost of the bonus associated with a referral program
- The cost of background checks
- The cost of training new employees
- The cost of new equipment or materials
To calculate the average cost-per-hire for a company, the following formula can be used:
Total recruitment costs ÷ Number of hires over a given period = Cost-per-hire
Why Is It Important to Track a Company’s Costs-Per-Hire?
Calculating and monitoring the cost-per-hire is an important indicator that contributes directly to the sound management of a company’s human resources. It is a key indicator in budget management. The cost-per-hire allows to establish whether the return on investment is relevant, so that managers can make informed decisions and better plan future hires.
Calculating the cost-per-hire also enables managers to determine whether the hiring was carried out efficiently, and whether the cost corresponds to the objectives set by the company. In this way, it becomes quicker to assess the performance of recruitment processes.
How to Reduce a Company’s Costs-Per-Hire?
Several strategies can be used to reduce cost-per-hire, such as:
- Encouraging internal mobility within an organization
- Setting up a referral program
- Publishing on social media to ease recruitment
- Using recruitment tests
- Using specialized software
- Focusing on corporate culture
What Is the Average Cost-Per-Hire?
The average cost-per-hire can vary enormously, depending on the position to be filled, the industry in which the company operates and the location of the organization.
According to a North American study, the average recruitment cost is close to $4,129.
Does the Cost-Per-Hire Include Salary?
Typically, an employee’s salary is not included in the cost-per-hire.
Costs related to the recruitment process, such as posting the job on specialized sites or using a recruitment agency, and costs associated with integrating the employee into the company are nevertheless taken into account.
