Cost of Hiring an Employee
What is Cost Per Hire?
Cost per hire (CPH) is the total amount of money spent by an employer throughout the entire process of a new hire. This is calculated for each position filled. The overall goal of the employer is to reduce the CPH, so that the return on the investment is greater. This is especially devastating if the hire ends up being the wrong fit, so there is a lot to take into consideration when calculating CPH.
How to Calculate Cost Per Hire?
The average employer in the United States spends about $4,000 and 52 days when hiring a new employee, but every recruitment process differs. However, there are factors that go into just about every CPH and are totaled at the end of a certain timeframe. Here are some examples:
Third-party recruitment agencies (cost of service)
Advertising (cost of service)
Job fairs (cost of service & Personnel Costs)
Travel (for candidate or hiring team)
Job board posts (cost of service & Personnel Costs)
Background/reference checks (cost of service & Personnel Costs)
Drug testing (cost of service & Personnel Costs)
Assessments (surveys, job trials, etc.-cost of service & Personnel Costs)
Negotiation with Candidate (Personnel Costs)
Recruiting team salaries (Personnel Costs)
OnBoarding (admin, training, etc- Personnel Costs)
Turnover Hardware (Computers, company phones, etc.-(cost of service & Personnel Costs)
Software (Applicant Tracking Systems, Microsoft Office, etc.-(cost of service & Personnel Costs)
Referral incentives-(cost of service)
If you want to calculate the average CPH, you simply add up all of the external and internal costs and divide by the amount of employees hired during that timeframe in which you tracked the amount spent. You may also want to consider other metrics, such as the length of the process, amount of turnover, and the quality of each hire.
These metrics combined with the calculation for CPH above will give you insight into what is working in your recruitment process and areas that need some improvement.
Virtual Staff Efficiency Report
Evaluating your HR Plan & Payroll Management
Average Cost per Hire
Average Time to Fill an Employment Vacancy
Annual Overall Turnover Rate
Involuntary TurnOver Rate
Organizations with Succession Plans
HR Expense to Operating Expense Ratio
Average Employee Tenure