Cost per Hire
What is Cost per Hire (CPH)?
This metrics calculates how much it costs your company to hire new workers.
How to calculate Cost per Hire (CPH):
In order to track CPH, you also need to track internal and external recruiting costs, as well as total number of hires for a particular period e.g. monthly or yearly. To calculate CPH, use the following formula.
( Internal Recruiting Costs + External Recruiting Costs ) / total # of hires = Cost per Hire (CPH)
Internal Recruiting Costs refer to internal staff, capital and organizational costs spent in order to fill a certain position. These costs may include in-house talent acquisition team salaries, salary costs of time spent by hiring managers, referral program costs (e.g. employee bonus), etc.
External Recruiting Costs refer to any expenses for external vendors or individuals that may be incurred during the recruitment process. These costs may include external agency fees, job board posting, background checks, employer branding activities (e.g. career fairs), relocation expenses, etc.
Tracking CPH helps Human Resources Managers create budgets and adhere to them. It’s easier to allocate the right budget to the right activities, if you consistently quantify your recruiting expenses.
Sticking too much to optimizing cost per hire can affect quality of hire. The best people might be expensive or take longer to acquire, but they’re a guarantee for long-term success. For example, if you notice that cost per hire has tripled since the beginning of the year, it wouldn’t necessarily be a bad thing. You might have hired better (and more highly paid) recruiters, or advertised in paid (instead of free) job boards, which can result in better hires, despite their cost.
How should you visualize Cost Per Hire?