Jessica Roberts, Lead Analyst, Employment Technologies
Cost-per-hire is a crucial HR metric, measuring the financial investment needed to attract, recruit, hire, and onboard a new employee. This figure provides comprehensive insights into the efficiency and effectiveness of your company’s recruitment efforts. By tracking these costs, you can identify areas for improvement, streamline hiring practices, and allocate resources more strategically.
The cost-per-hire calculation represents the total expenses incurred during the recruitment process divided by the number of hires. This metric can help you evaluate the financial efficiency of your organization’s hiring strategies and compare costs across different roles and departments.
To calculate cost-per-hire, follow these three steps:
Sum all expenses related to hiring, including advertising, job fairs, recruiter salaries, and candidate travel expenses.
Count the total number of new hires within the same period.
Include both direct costs (e.g., job postings, recruitment agency fees) and indirect costs (e.g., time spent by HR staff, administrative overhead).
Differentiate between internal costs (salaries of in-house recruiters) and external costs (third-party recruitment services).
Define a specific period of time (e.g., monthly, quarterly) to maintain consistency in measurement.
Recognize that cost-per-hire can vary significantly depending on the job role, with specialized or senior-level positions typically incurring higher costs.
Consider regional variations, as recruitment costs can differ based on location.
To reduce cost-per-hire, consider these strategies to streamline and improve hiring practices.
Use applicant tracking systems (ATS) to automate administrative tasks and reduce manual effort.
Invest in employer branding to attract candidates organically, reducing reliance on paid advertisements.
Implement employee referral programs to tap into existing networks, often resulting in lower costs and higher-quality hires.
Enhance candidate screening processes with engaging, job-relevant assessments that attract candidates and increase candidate completion rates.
By closely monitoring and optimizing cost-per-hire, your organizations can enhance its recruitment efficiency, reduce costs, and maintain a competitive edge in the talent market.
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For more than 30 years, Employment Technologies has been helping organizations hire, develop, and retain the very best talent. A five-time national Top HR Product of the Year award winner, we offer job-relevant tools for each phase of the hiring and development process – proven to reduce time and cost to hire, boost performance and retention, and deliver game-changing results.
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