Cost per Hire Metric

What is Cost per Hire?

Hiring new talent is essential for growth, but how much does it actually cost your business? If you can't answer that question precisely, you're not alone. The Cost per Hire is a key performance indicator (KPI) that measures the total expense invested to find and hire a new employee.

Tracking this metric is fundamental for building a scalable and efficient recruitment process. It allows you to budget more accurately, justify your team's spending, and make data-driven decisions to optimize your hiring strategies. For small and mid-sized companies, where every dollar counts, managing this cost effectively can be the key to sustainable growth.

How to Calculate Cost per Hire

To get a clear picture, you need to account for all expenses associated with filling a position. The formula breaks down all your recruitment spending against the number of new hires in a specific period.

So, what should you include in those cost categories?

Internal Costs:

• Salaries: The portion of salaries for your in-house recruiters and hiring managers dedicated to recruitment activities.
• Time: The hours spent by interviewers and other staff involved in the hiring process.
• Referral Bonuses: Any incentives paid to current employees for referring successful candidates.
• Administrative Costs: The overhead associated with your HR department's hiring functions.

External Costs:

• Advertising: Fees for posting on job boards like LinkedIn, Indeed, or other niche sites.
• Agency Fees: Costs paid to external recruitment agencies or headhunters.
• Recruitment Events: Expenses for attending or hosting career fairs.
• Software & Tools: Subscriptions for an Applicant Tracking System (ATS) or other recruitment software.
• Candidate Expenses: Costs related to travel, background checks, and skills assessments.

What is a Good Cost per Hire?

There is no single "good" number for Cost per Hire, as it varies significantly based on several factors:

• Industry: Hiring a specialized software engineer will naturally cost more than hiring a retail associate.
• Role Level: Executive and senior-level positions require a more extensive—and expensive—search than entry-level roles.
• Location: Recruitment costs are higher in competitive urban markets compared to rural areas.

Instead of aiming for a universal number, benchmark your CPH against your own historical data and industry averages. For many small-to-medium businesses, a realistic CPH can range from a few thousand dollars to upwards of $15,000 for specialized roles in fields like professional services, finance, or software.

How to Monitor Your Cost per Hire

You should track your Cost per Hire on a monthly or quarterly basis to identify trends and measure the impact of your initiatives.

While it’s possible to track this in a spreadsheet, the process can quickly become a major headache. Manually pulling data from different sources is time-consuming, prone to errors, and makes it difficult to share up-to-date information with department heads or executives.

A more effective approach is to monitor your recruitment KPIs on a dashboard. This allows you to connect your data sources—like your accounting software and ATS—to automate data retrieval. You get a real-time view of your spending, helping you and your team stay aligned and make smarter, faster decisions.

Who monitors this KPI?

Typically, the HR Manager and Department Heads are the primary audience for this metric. They use it to manage their budgets and refine their hiring processes. However, in many small and mid-sized companies, the CEO and CFO also watch this KPI closely to ensure the company's financial health and resource allocation are on track.

Ready to get a clear, real-time view of your hiring expenses? With Klipfolio Klips, you can build a dashboard to track your Cost per Hire and other essential HR metrics. Connect your data, create beautiful visualizations, and get everyone on the same page.