What this calculator does
Cost per hire is the standard recruiting metric and it is almost always quoted too low, because the internal side gets left out. Agency fees and job board spend arrive as invoices and are easy to count. The time a hiring manager spends reading applications and sitting in interviews does not, and on most hires it is the larger number.
Expressing the result as a share of starting salary is the part that makes it comparable. Four thousand dollars sounds like a lot until you see it is under five per cent of a first-year salary, and twenty thousand on a single hire sounds reasonable until you see it is nearly a quarter.
The formula
The formula is the total of external and internal recruiting costs divided by the number of hires those costs produced. External means money leaving the organisation: advertising, agencies, job boards, assessment tools, travel. Internal means money already inside it: recruiter salaries apportioned to the role, hiring manager and interviewer time, referral bonuses, onboarding administration.
| Term | Meaning |
|---|---|
| External costs | Invoiced spend. Easy to count and usually the smaller half on internal hires. |
| Internal costs | Staff time and referral payments. Harder to count and routinely omitted. |
| Cost per hire | The total divided by hires made in the same period. |
| As a share of salary | The figure that lets you compare a graduate hire with an executive one. |
The inputs explained
| Field | What to enter |
|---|---|
| External costs ($) | Advertising, agency fees, job boards, assessments, candidate travel. Everything invoiced. |
| Internal costs ($) | Recruiter time, hiring manager and interviewer hours at their loaded cost, referral bonuses. Use total employment cost to value that time properly rather than at base salary. |
| Hires made | Hires actually made in the period the costs relate to. Counting spend against a different period is the most common way this metric gets distorted. |
| Average starting salary ($) | Average starting salary of those hires, used only to express the cost as a percentage. |
When to use it
Comparing agency against direct hiring
Run the agency route with its fee as an external cost and almost no internal cost, then run the direct route with a large internal figure and little external. The totals are often closer than either side of the argument expects.
Working out what a vacancy is costing
A single hire absorbing the whole recruiting budget costs $20,000 on these figures, which is 23.5 per cent of the salary. That is the number to put beside the cost of leaving the role open.
Valuing interviewer time honestly
Four interviewers for two hours each, at a loaded cost of $60 an hour, is $480 per candidate. Across twenty candidates that is $9,600, which is usually more than the job advert cost.
Worked examples
Every figure in the tables below is produced by this page’s own calculator at build time, so the numbers and the tool always agree. Select any row to load that scenario.
How does the hire count change the cost?
The same recruiting budget, spread across a different number of hires.
| Hires made | Cost per hire | As a share of starting salary | Total recruiting spend |
|---|---|---|---|
| 1 | $20,000.00 | 23.5% | $20,000.00 |
| 2 | $10,000.00 | 11.8% | $20,000.00 |
| 5 | $4,000.00 | 4.71% | $20,000.00 |
| 10 | $2,000.00 | 2.35% | $20,000.00 |
| 20 | $1,000.00 | 1.18% | $20,000.00 |
What does agency spend do to the figure?
The internal effort is held constant and the external spend rises.
| External spend | Cost per hire | External share | As a share of starting salary |
|---|---|---|---|
| $0 | $1,600.00 | 0.000% | 1.88% |
| $5,000 | $2,600.00 | 38.5% | 3.06% |
| $12,000 | $4,000.00 | 60.0% | 4.71% |
| $25,000 | $6,600.00 | 75.8% | 7.76% |
| $40,000 | $9,600.00 | 83.3% | 11.3% |
Questions
What counts as an internal cost?
Any time already on the payroll that went into the hire: recruiter hours, hiring manager and interviewer time, administration. Value it at loaded cost rather than base salary, since the employer pays the on-costs either way.
Should onboarding be included?
By most definitions no, because cost per hire ends at acceptance. Onboarding and training are a separate cost, and mixing them in makes the figure incomparable with anyone else's.
Why express it as a share of salary?
Because the absolute number depends entirely on the seniority of the role. Twelve per cent of salary means roughly the same thing whether the role pays $60,000 or $300,000, and the raw dollar figure does not.
Is a lower cost per hire better?
Not necessarily. Cutting recruiting spend lowers the metric and may raise turnover, which costs far more. It is a cost measure rather than a quality measure, and it should be read next to turnover.
How do I handle a hire that took two periods?
Count the cost in the period the spend occurred and the hire in the period the offer was accepted, or report a rolling twelve months. Mixing the two is the most common source of a misleading figure.
To value the time that goes into hiring, see total employment cost. For how many applications a vacancy needs there is the recruitment funnel, and the cost of churn sits with employee turnover rate.