Cost Per Hire Calculator
Calculate your total recruitment investment and optimize your HR budget.
Understanding Cost Per Hire (CPH)
Cost Per Hire is a critical human resources metric that measures the average amount of money a company spends to recruit a new employee. For business owners and HR managers, understanding this number is essential for effective budget planning and identifying inefficiencies in the recruitment pipeline.
How to Calculate Cost Per Hire
The standard formula for Cost Per Hire is the sum of all Internal and External costs divided by the total number of hires in a specific period.
CPH = (External Costs + Internal Costs) / Total Number of Hires
External vs. Internal Recruitment Costs
- External Costs: These include third-party expenses such as recruitment agency fees, advertising costs on job boards (LinkedIn, Indeed), career fair registrations, travel expenses for candidates, and background screening services.
- Internal Costs: These represent the internal resources consumed during the process. This includes the pro-rated salary of internal recruiters, employee referral bonuses, and the cost of the Applicant Tracking System (ATS) or other HR software.
Example Calculation
Imagine your company spent $10,000 on an external agency, $2,000 on LinkedIn ads, and $3,000 on internal recruiter hours. You also paid out $1,000 in referral bonuses to existing staff. During this period, you hired 4 new employees.
- Total Costs: $10,000 + $2,000 + $3,000 + $1,000 = $16,000
- Total Hires: 4
- Cost Per Hire: $16,000 / 4 = $4,000 per employee.
Why Monitoring This Metric Matters
If your Cost Per Hire is significantly higher than the industry average (which often hovers around $4,000 – $5,000 according to SHRM), it may indicate that your recruitment process is inefficient. By tracking this data, you can decide whether to shift budget from expensive agencies to internal referral programs or optimize your job board spending for better ROI.