Cost-Per-Hire
Meaning & Definition
Cost-per-hire is a key metric in recruitment, reflecting the total expense associated with bringing a new employee into an organisation. It encompasses all costs related to the recruitment process, including:
- Recruitment fees
- Equipment
- Travel costs
- Administrative expenses
- Benefits
Calculation
To determine cost-per-hire:
This formula helps organisations assess the efficiency and cost-effectiveness of their hiring processes, guiding budgeting and identifying areas for improvement.
Frequently Asked Questions
Q. What should be included in the cost-per-hire?
The cost-per-hire should include all expenses related to the recruitment process such as advertising, recruitment software, relocation fees, and any other associated costs.
Q. How is cost-per-hire calculated?
Calculate cost-per-hhire by dividing the sum of all recruitment expenses by the number of hires within a specific period. This metric helps evaluate recruitment effectiveness and inform budget decisions.
Q. What is the average cost-per-hire?
As of 2021, the average cost-per-hire is approximately ₹3,29,310 (or $4,425). On average, it takes 36 to 42 days to fill a position. Recruitment costs account for about 15% of HR expenses, and hiring a new employee with benefits may cost up to 40% of their base salary.
Q. Does the cost-per-hire include salary?
Yes, salary is included in the cost-per-hire. It also encompasses costs related to sourcing, recruitment staff, performance bonuses, and benefits.
Q. Why is cost-per-hire important?
Understanding cost-per-hire enables better strategic decisions regarding recruitment investments. It provides insight into the financial implications of hiring, helps evaluate recruitment methods, and can reveal whether spending is adequate to attract suitable candidates.
Q. How can organisations reduce their cost-per-hire?
A. Organisations can lower their cost-per-hire by streamlining their recruitment processes and using cost-effective methods. Implementing an efficient applicant tracking system can reduce administrative burdens and improve process efficiency. Leveraging employee referral programs often results in lower recruitment costs and quicker hires. Additionally, investing in training for recruitment staff can enhance their effectiveness and reduce the need for external recruiting services. By evaluating and refining their recruitment strategies regularly, organisations can identify cost-saving opportunities and improve overall hiring efficiency.
Q. How does cost-per-hire vary by industry or job role?
A. Cost-per-hire can differ significantly by industry and job role. High-demand industries, such as technology and healthcare, often have higher recruitment costs due to competitive talent pools. Similarly, specialised or senior roles generally incur greater hiring expenses compared to entry-level positions. Factors influencing these variations include the complexity of the job, the level of expertise required, and the geographic location. Therefore, organisations must consider these variables when budgeting for recruitment and tailor their strategies accordingly.
Q. What tools or software can help in calculating or managing cost-per-hire?
A. Various tools and software can aid in calculating and managing cost-per-hire. Applicant tracking systems (ATS) often include features for tracking recruitment expenses and analysing cost data. Recruitment analytics platforms provide insights into hiring costs and process efficiency, allowing for better budgeting and decision-making. Additionally, integrated HR management systems can streamline expense tracking by consolidating recruitment costs and other HR functions into one platform. Choosing the right tool depends on the organisation’s size, needs, and budget, so careful evaluation is essential.
