Glossary: HR & Recruiting Definitions
Cost Per Hire
Learn what cost per hire means, how to calculate it, industry benchmarks, and how companies can reduce recruitment costs without sacrificing quality.
What Is Cost Per Hire?
Cost Per Hire (CPH) is a recruitment metric that measures the average amount an organization spends to hire a new employee.
It is one of the most widely used talent acquisition metrics because it helps organizations understand hiring efficiency, recruitment ROI, and workforce planning costs.
Cost per hire includes both internal recruiting expenses and external hiring costs incurred throughout the hiring process.
By tracking cost per hire, employers can identify inefficiencies, optimize recruitment spending, and benchmark hiring performance over time.
Why Cost Per Hire Matters
Recruitment is a significant investment for most organizations.
Understanding cost per hire helps businesses:
- Measure recruiting efficiency.
- Improve budget forecasting.
- Compare sourcing channels.
- Optimize hiring processes.
- Evaluate recruiting technology investments.
- Track return on investment.
Cost per hire becomes particularly important for companies experiencing rapid growth or high hiring volumes.
How Is Cost Per Hire Calculated?
The standard formula is: Cost Per Hire = Total Recruitment Costs ÷ Number of Hires
For example:
If a company spends £100,000 on recruitment activities and hires 25 employees:
£100,000 ÷ 25 = £4,000 Cost Per Hire
This means the average hiring cost was £4,000 per employee.
What Costs Are Included?
Recruitment costs are typically divided into internal and external expenses.
Internal Costs
- Recruiter salaries
- Hiring manager time
- Recruitment software
- Referral bonuses
- Internal recruiting events
- Employer branding activities
External Costs
- Job board advertising
- Recruitment agencies
- Background checks
- Assessment tools
- Career fairs
- Recruitment marketing campaigns
Organizations should use consistent calculations to ensure benchmarking accuracy.
Average Cost Per Hire Benchmarks
Cost per hire varies significantly depending on role type, geography, and hiring complexity.
Typical ranges include:
- Entry-level roles: £1,000–£3,000
- Professional roles: £3,000–£6,000
- Technical hiring: £5,000–£10,000+
- Executive hiring: £15,000–£50,000+
Highly specialized or executive positions often require larger sourcing investments.
Factors That Influence Cost Per Hire
Several factors can increase or reduce hiring costs:
- Hiring volume
- Recruitment channel mix
- Employer brand strength
- Time-to-hire
- Agency usage
- Candidate scarcity
- Geographic location
- Screening complexity
Companies with strong employer brands often enjoy lower acquisition costs due to increased inbound applications.
How to Reduce Cost Per Hire
Reducing hiring costs does not necessarily mean spending less. Organizations often improve efficiency by:
- Building talent pipelines.
- Investing in employer branding.
- Improving career sites.
- Automating repetitive tasks.
- Reducing agency dependency.
- Using employee referrals.
- Optimizing sourcing channels.
The goal is to reduce unnecessary costs while maintaining hiring quality.
Cost Per Hire in the Age of AI Recruiting
AI-powered recruiting platforms are helping organizations lower cost per hire by automating:
- Candidate sourcing
- Resume screening
- Interview scheduling
- Candidate communication
- Interview analysis
By reducing manual work and shortening hiring cycles, many organizations are seeing measurable improvements in recruitment efficiency.
FAQs
What is a good cost per hire?
There is no universal benchmark, but many organizations target lower costs without compromising hiring quality.
Does cost per hire include recruiter salaries?
Yes. Internal recruiting costs are generally included in the calculation.
Is a lower cost per hire always better?
Not necessarily. Hiring quality and retention are equally important metrics.
How often should companies measure cost per hire?
Most organizations review cost per hire quarterly or annually.
