Internal Recruiting Costs
External Recruiting Costs
Hiring Data
Recruitment Cost Analysis
This cost per hire calculator is a practical human resources tool designed to help businesses measure their recruitment efficiency. By combining your internal and external hiring expenses and dividing them by your new talent count you gain a clear view of your financial investment in team growth.
Cost per Hire Formula
The official mathematical formula used to determine your average recruitment spending is highly standardized. You must add all internal and external recruiting costs together to find your total recruitment cost. Then you divide that total cost by the number of successful hires made during that period.
Cost per Hire = (Internal Costs + External Costs) / Total Hires
Example: If your internal costs are 4000 and your external costs are 6000 your total spend is 10000. If you hired 5 people during this time you divide 10000 by 5. Your average cost per hire equals 2000.
Total Recruitment Cost Formula
Before you can establish your individual hiring average you must calculate your total investment. This is simply the sum of all money spent internally and externally to attract interview and onboard candidates.
Total Cost = Internal Costs + External Costs
Example: An internal team cost of 12000 combined with external agency fees of 18000 results in a total recruitment cost of 30000.
Common Cost per Hire Calculations
| Internal Costs | External Costs | Total Hires | Cost per Hire |
|---|---|---|---|
| 1000 | 1000 | 2 | 1000 |
| 2000 | 4000 | 3 | 2000 |
| 5000 | 5000 | 4 | 2500 |
| 10000 | 15000 | 5 | 5000 |
| 15000 | 25000 | 8 | 5000 |
| 20000 | 40000 | 10 | 6000 |
| 50000 | 50000 | 20 | 5000 |
| 100000 | 150000 | 50 | 5000 |
Frequently Asked Questions
What is considered a good cost per hire?
A good benchmark depends entirely on your industry and the seniority of the role. Hiring an entry level retail worker might cost 500 while recruiting a senior software engineer or executive could easily exceed 15000. Monitoring your own company average over time is the best way to measure success.
What are internal recruiting costs?
Internal costs encompass all expenses managed inside your organization. This includes the salaries of your internal recruitment team employee referral bonuses applicant tracking system software costs and the monetary value of the time managers spend conducting interviews.
What are external recruiting costs?
External costs are the expenses paid to outside vendors during the hiring cycle. This typically covers job board posting fees recruitment agency retainers background check services marketing campaigns and external candidate assessment tools.
Why is calculating recruitment cost important?
Tracking this metric allows businesses to properly allocate annual human resources budgets. It highlights inefficiencies in the hiring process helps negotiate better contracts with external job boards and ensures the company is not overspending to acquire basic talent.
How can I reduce my average cost per hire?
Building a strong employer brand and encouraging employee referrals are two of the most effective ways to lower costs. Referrals often bypass expensive agency fees. Additionally retaining your current staff longer directly reduces the sheer volume of replacements you need to fund each year.