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The Ultimate Guide to Cost per Hire: Everything You Need to Know

Cost per hire is a crucial metric that measures the cost incurred by an organization during the recruitment process. It is an essential tool for evaluating the effectiveness and efficiency of the hiring process. The cost per hire metric includes all expenses related to sourcing and recruitment advertising costs, onboarding, referral bonus program costs, among others. Understanding cost per hire is critical for businesses to track their hiring costs and make informed decisions about future recruitment strategies.

What is Cost Per Hire?


Cost per hire is defined as the total cost of all recruiting activities divided by the total number of hires in a given period. The cost of recruiting activities includes both internal and external costs. Internal costs include the salaries of in-house recruiters, while external costs include expenses such as job board fees, recruiting agency fees, and advertising costs.

Why is Cost Per Hire Important?

Measuring cost per hire is important for several reasons:

  • It helps organizations evaluate the effectiveness of their recruitment process and identify areas for improvement.
  • It provides insight into the costs associated with hiring new employees, which can help organizations make more informed decisions about their hiring budget.
  • It allows organizations to compare their recruitment costs to industry benchmarks and identify areas where they may be overspending or underspending.

Overall, cost per hire is an important metric that can help organizations optimize their recruitment process and make more informed decisions about their hiring budget.

How to Calculate Cost Per Hire

Calculating cost per hire is an essential part of managing a company's recruitment budget. It helps determine the efficiency and effectiveness of the recruitment process and provides insight into areas that need improvement. This section will explain the formula for calculating cost per hire and the factors to consider when doing so.


The formula for calculating cost per hire is straightforward. It involves adding up all the costs associated with hiring a new employee and dividing it by the number of hires made in a specific time frame. The formula is:

Cost per Hire = (Total Internal Costs + Total External Costs) / Total Number of Hires

Internal costs include expenses such as salaries and benefits for recruiters and hiring managers, while external costs include expenses such as advertising, job board fees, and recruitment agency fees. Total number of hires is the number of new employees hired during a specific time frame, such as a quarter or year.

It's important to note that the formula can be adjusted to fit a company's specific needs. For example, a company may want to calculate cost per hire for a specific department or job position.

Factors to Consider

When calculating cost per hire, it's important to consider various factors that can affect the overall cost. These factors include:

  • Time to Fill: The longer it takes to fill a position, the higher the cost per hire. This is because the recruitment process can be lengthy and require additional resources.
  • Quality of Hire: Hiring the wrong person can result in additional costs such as training and turnover. It's important to consider the quality of hire when calculating cost per hire.
  • Recruitment Method: Different recruitment methods have different costs associated with them. For example, using a recruitment agency may be more expensive than posting a job on a job board.
  • Geographical Location: The cost of living and wages can vary depending on the geographical location of the job position. This can affect the overall cost of hiring.

By considering these factors, companies can gain a better understanding of their recruitment costs and make informed decisions about their recruitment budget.

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Cost Per Hire Benchmarks

When it comes to measuring the cost of hiring new employees, it's important to have benchmarks available to compare against. These benchmarks can help organizations understand how they're doing in relation to others in their industry or to their own past performance. In this section, we'll explore both industry and company-specific benchmarks for cost per hire.

Industry Benchmarks

According to the Society for Human Resource Management (SHRM), the average cost per hire across all industries and company sizes is $4,425. However, this number can vary widely depending on the industry and the location of the organization. For example, the healthcare industry has an average cost per hire of $10,273, while the retail industry has an average cost per hire of $2,868.

It's important to note that these benchmarks are just averages and may not be applicable to every organization. Factors such as the type of position being filled, the level of experience required, and the location of the organization can all impact the cost per hire.

Company-Specific Benchmarks

In addition to industry benchmarks, organizations can also establish their own company-specific benchmarks for cost per hire. This can be done by analyzing past hiring data and identifying trends and areas for improvement.

For example, if an organization has historically spent an average of $6,000 to hire a new employee, they may set a company-specific benchmark of $5,000 for future hires. This can help the organization identify when they're spending more than they should be and take steps to reduce costs.

It's important to regularly review and update company-specific benchmarks to ensure they remain relevant and accurate. As the organization grows and changes, so too may the benchmarks for cost per hire.

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