Cost per Hire
The total recruiting spend (advertising, tools, staff time, agency fees) divided by the number of hires made in a given period.
Cost per hire is total recruiting spend over a period — job ad spend, ATS/software costs, agency or staffing fees, recruiter time, and any hiring events — divided by the number of hires made in that same period.
The widely-used standard (popularized by SHRM's benchmarking research) splits the numerator into external costs (advertising, agency fees, job board postings, background checks) and internal costs (recruiter and hiring-team time, referral bonuses, relevant technology spend), then divides the total by hires made in the period. The internal-cost half is where most calculations quietly go wrong, because recruiter and hiring-manager time rarely gets tracked as a real dollar figure the way a job-board invoice does — so a process that looks cheap on paper because it only counts hard, billed costs can still be expensive once staff time is priced in at a reasonable hourly rate.
Counting the hidden half
A staffing agency spends $1,200 on job ads and $300 on background checks in a month — $1,500 in easy-to-see external costs. That same month, two recruiters spent roughly 60 hours combined screening, interviewing, and following up with candidates, at a loaded cost of about $35/hour — another $2,100 in internal cost that never shows up on an invoice. The agency made 10 hires that month. Counting only the external costs gives a cost per hire of $150; counting both gives $360 — more than double, and the more accurate number.
In staffing & high-volume hiring
For a staffing agency, cost per hire is usually watched alongside margin per placement rather than in isolation, since a lower cost per hire only matters if the hire also sticks and performs. It's easy to undercount: recruiter and hiring-manager time rarely gets tracked as a real cost, so a process that looks cheap on paper because it only counts hard costs like job-board fees can still be expensive once staff time is priced in.
Common mistakes
- Counting only external, invoiced costs (job ads, agency fees) and leaving out internal recruiter and hiring-manager time, which understates the real number substantially.
- Comparing cost per hire across very different role types without adjusting for how much screening or sourcing effort each one actually requires.
- Treating a lower cost per hire as an unambiguous win without checking it against quality of hire and retention for the same hires.
Related terms & reading
Cost per Hire FAQ
What should be included in cost per hire?
The common standard (used by SHRM's benchmarking) includes external costs (advertising, agency fees, job boards, background checks) plus internal costs (recruiter and hiring-team time, referral bonuses, relevant technology costs) divided by total hires in the period.
Is a lower cost per hire always better?
Not on its own — a cheaper hire that leaves within 90 days or underperforms costs more in the long run than a slightly pricier hire who stays and performs well. It's best read next to quality of hire and retention, not by itself.
How do you estimate recruiter time cost if it's never been tracked before?
A reasonable starting estimate is average hours spent per requisition (sourcing, screening, interviewing, coordinating) multiplied by a loaded hourly cost for that recruiter's role — it won't be perfectly precise, but it's far closer to the truth than leaving internal time out entirely.
Does cost per hire include the cost of a bad hire who leaves quickly?
Not directly — cost per hire only measures the cost of making the hire, not what happens afterward. The cost of a quick departure shows up in a separate calculation (often called cost of turnover) and in quality of hire trends, not in cost per hire itself.
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