Key figures & process
Cost-per-Hire
Also: Cost per Hire · Cost per Hire
Cost-per-Hire is the average total cost of a hire: internal and external expenses divided by the number of hires. These include ads, tools, personnel time, and service provider fees.
Key Points
- Formula: (internal costs + external costs) divided by the number of hires in the period.
- External costs include job ads, recruitment consultancy, tools; internal costs primarily involve the time spent by those involved.
- Cost-per-Hire is only meaningful together with quality and retention.
- An inexpensive hire that quickly resigns is ultimately costly.
How is Cost-per-Hire calculated?
Cost-per-Hire (Kosten pro Einstellung) summarizes all expenses necessary to fill a position and divides them by the number of hires in a period. The basic formula is: internal costs plus external costs, divided by the number of hires.
- External costs: job advertisements and job boards, recruitment consultancy or agency fees, software and assessments, travel or relocation expenses.
- Internal costs: work time of recruiting, management, and department staff, proportional costs for recruiting team and tools.
An example calculation
Assume a company fills five positions in a quarter. External costs (ads, an agency fee, tools) total 18,000 EUR, while internal labor costs are estimated at 7,000 EUR. Cost-per-Hire = (18,000 + 7,000) divided by 5 = 5,000 EUR per hire. This figure makes recruiting costs comparable and budgetable.
Why the pure price is misleading
It's not just about the price
An inexpensive hire who leaves shortly after causes the costs again. Therefore, Cost-per-Hire should always be considered together with the quality of hire and retention.
The lowest Cost-per-Hire is rarely the goal. It's more relevant to ask which channel provides the best balance of cost, speed (Time-to-Hire), and quality for each successful hire.
Frequently Asked Questions
- What is the difference between Cost-per-Hire and Cost-per-Application?
- Cost-per-Application measures the cost per application received, while Cost-per-Hire measures the cost per actual hire. Many low-cost applications can still lead to a high Cost-per-Hire if few are suitable.
- Does the salary of the new hire count in the Cost-per-Hire?
- No. Cost-per-Hire only captures the costs of the hiring process, not the ongoing salary. The salary is part of the employment costs, not recruiting costs.