Cost per hire (CPH) is a recruiting metric that tracks how much budget you spend on making a hire. While this number can vary substantially depending on the company, the role and many other factors, the average cost per hire is nearly $4,700 according to benchmarking data from the Society for Human Resource Management (SHRM).

The importance of calculating cost per hire

There are several reasons why it’s important to understand your cost per hire. First, knowing what it costs you to source new talent can help you figure out where you might be able to cut spending or invest more. For example, you can determine whether you’d like to allocate budget to hiring more recruiters or investing in tech such as an applicant tracking system (ATS) that can help you bring your recruiting to the next level. Plus, you can use cost per hire as a planning tool. If you’re setting recruiting budgets for next year, seeing what you spent on hiring last year can be a helpful benchmark.

How to calculate average cost per hire

To calculate your cost per hire, add up all the external and internal costs during a recruiting cycle and divide it by the number of hires made in that time period.

“External” costs involve any money paid out to third parties. This can include job boards, technology such as sourcing or assessment tools, agency fees, candidate travel and lodging, and recruiting events such as career fairs.

“Internal” costs are money you spend within your company, which includes recruiting team salaries and employee referral bonuses. You may even want to consider if there’s a way to quantify and account for the time that employees outside of recruiting spend during a hiring cycle. Learn more about how you can account for engineering time when calculating cost per hire here.

As with many recruiting KPIs, you’ll want to track cost per hire regularly so you can monitor fluctuations. You may also find it valuable to compare cost per hire data across several departments to see if there are any opportunities to lower costs without harming your overall process. And you may also want to measure cost per hire against other metrics – such as quality of hire, quality of candidate source or employee referrals – to gain a more holistic view of your recruiting success.