Senior Financial Analyst specializing in Human Resources Metrics.
Use this Cost Per Hire (CPH) Calculator to accurately determine the average cost your company incurs to recruit, hire, and onboard new employees. This essential HR metric helps evaluate recruiting efficiency and resource allocation.
Cost Per Hire Calculator
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Cost Per Hire Formula:
The standard formula for calculating Cost Per Hire (CPH) is:
CPH = (Total Internal Costs + Total External Costs) / Number of Hires
Source Formula: CPH = (I + E) / N
Formula Sources: SHRM, Harvard Business Review
Variables Explained:
- Total Internal Recruiting Costs (I): The sum of all in-house expenses related to recruitment. This includes salaries and benefits for the recruiting team, training, software subscriptions, and general administrative overhead.
- Total External Recruiting Costs (E): The sum of all third-party expenses. This includes recruitment agency fees, job board postings, employment advertising, background check fees, and relocation costs.
- Number of Hires (N): The total number of new employees hired within the defined period.
Related HR & Financial Calculators:
- Employee Turnover Rate Calculator
- Time-to-Hire Metric Calculator
- Recruitment ROI Calculator
- Annual Payroll Cost Estimator
What is Cost Per Hire?
Cost Per Hire (CPH) is a key metric in human resources and finance, representing the total expenditure required by an organization to fill an open position. It encompasses all internal and external costs incurred from the start of the sourcing process up until the new hire begins working. This metric is crucial for benchmarking recruiting efficiency and managing talent acquisition budgets.
Understanding your CPH allows you to compare the efficiency of different recruiting channels (e.g., job boards vs. internal referrals vs. agencies). A rising CPH can indicate inefficiencies or increasing market competition for talent, while a decreasing CPH might signal optimized processes or better utilization of low-cost sources like internal mobility.
How to Calculate Cost Per Hire (Example):
Imagine a company, Acme Corp., wants to calculate its CPH for the last quarter:
- Determine Internal Costs (I): Acme Corp. spent $70,000 on recruiter salaries, software, and administrative overhead. (I = $70,000)
- Determine External Costs (E): They spent $30,000 on external agency fees, job advertisements, and background checks. (E = $30,000)
- Calculate Total Costs: Total Costs = I + E = $70,000 + $30,000 = $100,000.
- Determine Number of Hires (N): In the last quarter, Acme Corp. successfully hired 25 new employees. (N = 25)
- Apply the Formula: CPH = Total Costs / N = $100,000 / 25.
- Final Result: The Cost Per Hire is $4,000.
Frequently Asked Questions (FAQ):
Generally, a lower CPH is considered better, as it indicates higher efficiency in the talent acquisition process. However, CPH should be balanced with quality of hire. Spending slightly more for a better candidate might be more beneficial in the long run.
What’s the difference between Internal and External Costs?Internal costs are recurring, in-house expenses like the salaries of the HR and recruiting staff, internal training, and infrastructure. External costs are variable, third-party expenses paid outside the organization, such as headhunter fees, job board subscriptions, and travel expenses for candidates.
How often should I calculate CPH?Most organizations calculate CPH quarterly or annually to align with budgeting cycles and business planning. Regular calculation allows for trend analysis, helping identify when recruiting processes are becoming more or less efficient over time.
Is relocation expense included in CPH?Yes. Any costs directly attributable to securing and integrating a new hire, including relocation packages, sign-on bonuses, and background checks, are typically classified as External Costs and included in the CPH calculation.