A finance director asks HR a simple question during budget season: how much does it cost us to hire someone? HR adds up job board invoices and comes back with a number that seems low. The director suspects it is missing something, and they are right. The recruiter's time, the hiring managers' interview hours, background checks and the referral bonus paid last quarter never made it into the total.
Cost per hire is one of the most useful recruiting metrics, but only when it is measured consistently. This guide explains how to calculate it, what to include, what pushes it up and where employers can realistically save.
Key Takeaways
- Cost per hire equals total internal plus external recruiting costs for a period, divided by the number of hires in that period.
- Internal costs, such as recruiter salaries and interviewer time, are the ones most often left out.
- SHRM benchmarking data from 2022 reported an average cost per hire of $4,683 and an executive average of $28,329.
- Your own trend over time matters more than an outside benchmark.
- Lower cost per hire is only good if quality and retention hold. A cheap hire who leaves in six months is expensive.
The basic formula
The widely used approach, reflected in the cost per hire standard developed by SHRM and the American National Standards Institute, is:
Cost per hire = (total external costs + total internal costs) / total number of hires
Use the same time period for every input, usually a quarter or a year. Count only hires actually made in that period.
What to include
External costs
These are payments to outside parties for recruiting. SHRM's guidance lists examples such as:
- Job board and advertising fees
- Third party recruiting or agency fees
- Career fair and event costs
- Background checks, assessments and drug screening
- Candidate and recruiter travel
- Relocation and sign on costs, if you choose to include them
Internal costs
These are costs inside your organization that support recruiting:
- Recruiter and talent acquisition salaries and benefits
- Hiring manager and interviewer time, at a loaded hourly cost
- Employee referral bonuses
- Applicant tracking system and recruiting software
- Administrative time for scheduling, offers and paperwork
Interviewer time is the line most teams skip. If five people each spend three hours on a finalist round, that is fifteen hours of salaried time per candidate.
A hypothetical example
The figures below are invented for illustration only.
A mid sized engineering firm made 20 hires last year. It spent $30,000 on job boards, background checks and an outside search for one hard to fill role. Internally, it estimates $50,000 in recruiter time, $18,000 in interviewer hours and $6,000 in referral bonuses and software.
| Cost type | Amount |
|---|---|
| External costs | $30,000 |
| Internal costs | $74,000 |
| Total | $104,000 |
| Hires | 20 |
| Cost per hire | $5,200 |
If the firm had counted only external costs, it would have reported $1,500 per hire. The full picture is more than three times higher.
How your number compares
SHRM's 2022 Talent Access benchmarking report found an average cost per hire of $4,683 across surveyed organizations, with a median of $1,244, and an executive average of $28,329. The gap between average and median shows how much costs vary by role and employer. Use outside figures as a reference point only. Industry, location, role level and how you count internal costs all change the result, so your own trend from year to year is the better guide.
What drives cost per hire up
- Long searches. More weeks means more advertising, more screening and more interview hours.
- Unclear requirements. Changing the job description mid search leads to reposting and re-interviewing.
- Too many interview rounds. Each round adds hours from several salaried people.
- Offer declines. Losing a finalist late means paying for much of the search again.
- Early turnover. When a new hire leaves quickly, you pay the full cost again for the same seat.
- Specialized roles. Hard to find skills in areas like engineering, healthcare or skilled trades often need more sourcing effort.
Practical ways to lower it
- Start with a strong intake. Agree on must haves, pay range and interview plan before posting. Our hiring intake meeting checklist walks through it.
- Track source of hire. Spend more on the channels that produce people you actually hire and keep, and cut the ones that do not.
- Tighten interviews. Use a structured scorecard and fewer, better rounds. See our engineering project manager scorecard for an example format.
- Move faster with finalists. Quick feedback and offers reduce declines that restart the search.
- Invest in onboarding. Keeping a new hire past the first year protects what you spent to bring them in.
- Use outside help selectively. For hard to fill or urgent roles, compare the cost of a staffing partner to the internal hours and weeks of vacancy a long search would take.
Measure cost and quality together
Cost per hire tells you what you spent, not whether it worked. Pair it with time to fill, first year retention and hiring manager satisfaction. A slightly higher cost per hire for a role that stays filled and performs well is usually a better result than a cheap hire you have to replace.
Talk with CareerPath Staffing
If your recruiting costs are rising or key roles are taking too long to fill, CareerPath Staffing can talk through the roles and your options. Contact us to start the conversation.