Cost per hire

Cost per hire is a recruitment metric that captures the total expense of bringing a new employee on board, divided by the number of hires made over the same period. It is one of the most common benchmarks in talent acquisition and workforce planning.

Formula

Cost Per Hire = (Internal Recruiting Costs + External Recruiting Costs) ÷ Number of Hires

What internal costs include

• Time spent by recruiters, hiring managers, and interview panels
• Internal tools (applicant tracking systems, assessment platforms)
• Onboarding administration
• Internal referral bonuses

What external costs include

• Job board postings and sponsored listings
• Recruitment agency fees (typically 15–25% of first-year salary)
• Background checks, skills assessments, and pre-employment screening
• Travel and relocation expenses
• Branding and recruitment marketing

Example

A company spends $120,000 on recruitment activity over a year — $50,000 internal staff time and $70,000 in agency and advertising fees — to make 12 hires. Cost per hire = $10,000.

Why cost per hire matters

• Budget planning — projects future hiring costs based on planned headcount growth
• Channel comparison — reveals whether agency, direct sourcing, or internal referral programs deliver better economics
• Process efficiency — rising cost per hire often signals process bloat or talent market tightening
• Tied to retention — high cost per hire amplifies the financial impact of early attrition; replacing an employee within their first year effectively doubles the recruitment cost
• Component of total employee cost — cost per hire is one input into broader workforce TCO analysis (see total cost of ownership (equipment) for the same lifecycle thinking applied to assets)

Track cost per hire alongside time-to-hire and quality-of-hire to get a complete view of recruitment performance.