Recruiting

Calculating Cost per Hire

According to a survey conducted by the Society for Human Resource Management (SHRM), the average cost per hire is $4,169. The cost generally ranges anywhere from $500 to $4,500—but it may be even higher.


How do you know what your company is spending on talent acquisition?

Use a Tool

There are tools that make it easy to calculate this expense, including one from Recruiting Daily Advisor.
The tool requires that you enter the following human resources department costs for the full year:

  • Total salary cost for recruiting staff
  • Benefit costs as percent of salary (e.g., 30 percent)
  • Travel expenses for recruiting staff
  • Entertainment expenses

Then, you must enter other costs, using full-year numbers:

  • Search firm fees
  • Candidate travel expenses
  • Entertainment expenses not previously included
  • Advertisements
  • Job fairs
  • College recruitment
  • Employee referral awards paid
  • Background checks
  • Pre-employment testing
  • Other costs not listed

Finally, you enter the number of new hires during the year.
The tool will do the work for you, calculating cost per hire. In addition, it provides you with two charts. The first chart shows annual cost per hire from the standpoint of HR cost and other cost, while the second chart provides a breakdown of HR costs. These charts, along with cost per hire, may prove eye-opening—and serve as the basis for change.

Other Calculations

Warning: Once you calculate cost per hire, you may get hooked on metrics.
Other numbers you may want to look at include:

  • Time to fill
  • Average employee tenure
  • Annual overall turnover rate
  • Annual voluntary turnover rate
  • Annual involuntary turnover rate

Data isn’t just for geeks; it’s for decision makers. Cost per hire and other talent acquisition metrics will help you make informed decisions.
 

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