A company’s cost per hire represents the average cost associated with hiring new employees.
Recruiter fees and salaries, traveling expenses, learning and development expenses, advertising, and assessment center fees can all affect your average cost per hire.
Hiring costs vary by industry, organization, and region. On average, U.S. and UK companies spend about $4,000 on hiring a new employee.
A thorough understanding of how and why your organization spends its money is vital.
All of the recruiting budgets goes towards hiring-related activities. Typical costs could be attributed to such things as the number of new hires, staff turnover, onboarding costs, assembling a team of recruiters for campus recruitment, travel and housing expenses during campus season, or purchasing pre-hire assessments.
Quantifying your hiring efforts depends on knowing how much each step of the recruitment process costs. It can help you identify where money is being spent, where it is being wasted, and where it can be spared.
How to calculate the cost per hire?
In order to do this, you should apply one simple formula: divide your total recruitment costs by the total number of hired employees in a specific time frame.
Total recruitment costs can be divided into internal recruiting costs and external recruiting costs. The first includes recruiter’s fees, software costs, screening, background checks, traveling, etc., and for the latter some examples may include advertising costs, outsourcing recruiters’ costs, assessment fees, etc.
A few tips for reducing cost per hire
- Implement recruitment technology
Today’s HR technology tools and software are capable of carrying out the entire hiring process on their own with minimal human involvement.
With this method, you can screen, evaluate, interview, and hire new candidates without going over the trouble of scheduling, reminding, following up, and interviewing. Thanks to this, you can significantly reduce the time and resources spent on outdated processes.
- Automation of tedious tasks
With modern recruitment technologies, Recruiters can focus on building meaningful relationships with the candidates instead of having to set up calendars, schedule interviews, and even chat. A well-tailored software tool can do all these things for them nowadays.
The recruiter does not have to follow up with every candidate and ensure they are all nurtured. The automation of routine tasks helps to reduce the cost per hire significantly.
- Use saved data
With today’s technology, it is possible not just to store candidate data, but to reuse it effectively as well. Those candidates who do not qualify for a specific spot at one point could create a pool of unused potential for you that you can use in the future if you need to hire quickly for a vacant position.
This way, you can save money on printing ads, hiring outsourced recruiters, and using job portals.
Final words
You must understand your cost per hire in order to have an analytical and data-driven hiring strategy. This is a great way to achieve hiring success. Despite the fact that cost per hire might differ from industry to industry or country to country, knowing it helps the recruiting team make better informed hiring decisions.
