Cost Per Hire: Definition, Calculation & How to Reduce

Finding top talent can be expensive. 

Companies spend thousands of dollars per hire. And when you consider the fact that a limited recruiting budget is a leading  challenge for HR professionals, it’s clear why reducing cost per hire is on so many recruiters’ minds.

In this Willo article, we explain the key details behind cost per hire and how to reduce it by optimizing your hiring process.

What Is Cost Per Hire?

Cost per hire (CPH) is a recruitment metric that measures the total cost of recruiting and onboarding a new employee, divided by the number of hires made in a given period. It tells you how much you need to spend to recruit a new employee (on average). 

It includes a wide range of expenses, including:

• Job board subscriptions and posting fees
• Recruitment software and ATS fees
• Employee referral program bonuses
• External recruiter or agency fees
• Background check and screening costs
• Recruiter time (calculated as a portion of their salary)

Tracking cost per hire helps you understand the financial impact your recruitment efforts have on your organization. It can also help you improve the efficiency of your recruiting process, budget for recruiting initiatives, and compare the cost of different recruiting methods.

How to calculate cost per hire

Calculating cost per hire involves summing up all the expenses associated with the hiring process and then dividing that total by the number of hires made within a specific period. 

The formula is: 

• Total Recruiting Costs / Number of Hires = Cost Per Hire

Therefore, CPH = (Internal recruiting costs + External recruiting costs) ÷ Number of hires

• Internal costs include recruiter salaries, tech tools (ATS, scheduling platforms), and employer branding efforts.

External costs cover job board fees, agency commissions (15–30% of salary), referral bonuses, and background checks.

Here’s a step-by-step guide to help you compute this metric:

1. Identify all cost categories: Create a spreadsheet or document to track the different expenses incurred during the recruitment process.
2. Fill in data for each new hire: Whenever you have an open position, add in the relevant data for that particular hiring process.
3. Sum the expenses: Add up the totals in each category, and then add the category totals to get the total cost.
4. Divide by the number of hires: Add up the number of hires included in your data set, and divide the total cost by that number to get your cost per hire.

Here’s a basic example to illustrate:

However, the average cost-per-hire is just the starting point.

Why Average CPH Doesn’t Show Your Full Recruitment Cost

The average cost per hire (CPH) is a useful benchmark but often fails to capture the full financial impact of recruitment. This baseline CPH, based on the SHRM/ANSI formula, covers direct expenses like recruiter salaries, job board fees, and agency commissions. 

However, it misses critical "soft/hidden" costs that can significantly inflate the true cost of hiring, especially for specialized roles or inefficient processes. 

Here’s why the average CPH doesn’t tell the whole story and how overlooking these costs creates budget blind spots.

1. Hidden costs of inefficiency are often excluded

The average CPH focuses on measurable, direct expenses but typically omits "soft" costs that can account for a significant portion of the total recruitment cost. These include:

• Interviewer time: The hours spent by hiring managers and team members in interviews are rarely tracked, but add up fast. For example, 6–8 interviewers spending 2–4 hours each at a loaded hourly rate of $100 can contribute $1,200–$3,200 per hire. Many organizations don’t log this time, so it’s absent from standard CPH calculations.
• Vacancy costs: Unfilled roles lead to lost productivity, which can cost $500 per day or more, depending on the role. A senior engineering position open for an extra 20 days could add $10,000 to the cost, a figure often ignored in baseline estimates. For critical roles, each week of delay can escalate this further, especially in industries like tech, where product development stalls.
• Ramp productivity loss: New hires often take months to reach full productivity. For instance, an engineer with a $10,000 monthly salary operating at 50% productivity for three months incurs a $15,000 loss in output. This is rarely factored into the average CPH but can double the cost for high-salary or specialized roles.

These soft costs vary by role, industry, and market conditions, making the $4,700 average a poor fit for organizations hiring for niche positions (e.g., tech roles averaging $35,000) or facing long time-to-fill periods.

2. Role complexity and seniority skew costs

The average CPH assumes a one-size-fits-all approach, but costs vary dramatically by role. Junior roles might align with the $4,700 benchmark, but executive or highly specialized roles, like engineers or C-suite positions, can cost $20,000–$28,000+. This is due to:

• Higher agency fees: Agencies can charge 15–30% of a candidate’s salary, so a $120,000 role could incur $18,000–$36,000 in fees alone.
• Longer search times: Specialized roles take longer to fill, increasing vacancy costs and recruiter effort.
• Extended ramp periods: Senior sales executives, for example, often have 3–6 month ramp-ups, amplifying productivity losses.

For example, a small company hiring a specialized engineer might see a true CPH of $20,000–$35,000, far above the average, while a support role might stay closer to $8,500. Relying on the average obscures these differences, leading to under-budgeting for critical hires.

3. Industry and location variations break the average

The $4,700 benchmark is U.S.-centric and doesn’t translate neatly across industries or geographies. For instance:

• Industry differences: Hospitality roles average $8,500, while tech roles can hit $35,000 due to competitive markets and longer ramps.
• Geographic disparities: Costs in high-demand urban markets or regions with talent shortages (e.g., tough markets cited by Reddit recruiters) can push CPH to $6,000–$10,000, compared to $3,000 in favorable conditions.

Using a generic average ignores these nuances, causing misaligned budgets or unrealistic expectations when justifying costs to finance or board members.

4. Process maturity impacts true costs

Organizations with efficient talent acquisition processes—asynchronous screening, automation tools, and consistent tracking—may spend less than those with ad-hoc setups. 

Many companies don’t track CPH at all, relying instead on proxies like time-to-fill or interview counts, which miss critical expenses. Inefficient processes lead to:

• Prolonged time-to-fill: Each extra week an engineering role stays open can cost $10,000 in lost product development.
• Manual data collection: Recruiters cobbling together spreadsheets for job board invoices or agency fees waste time and risk errors, underestimating costs.
• Over-reliance on agencies: Paying 20–25% agency fees for multiple $100,000 hires can equal the cost of a full-time recruiter, yet many teams don’t model these trade-offs.

Mature teams using tools like asynchronous screening, like Willo, can significantly lower CPH. For example, InHealth saved $50,000 in recruitment costs by cutting 1,000 screening hours with Willo. The average CPH assumes no such optimization, masking potential savings.

5. Strategic decisions require the full picture

Focusing solely on the average CPH can lead to poor strategic choices, like cutting budgets in ways that harm hire quality or prolong vacancies. For example:

• Underinvestment in resources: Ignoring soft costs makes a low CPH seem efficient, but it might reflect slow hiring that delays revenue or burdens staff.
• Missed trade-offs: Without a full CPH (baseline + efficiency costs), leaders can’t compare agency fees (15–30% of salary) to in-house (~12%) or fractional recruiters (50–70% savings).
• Board scrutiny: Startups and SMEs face pressure to justify recruiting spend to investors. A baseline CPH of $4,700 might look fine, but hidden costs doubling the figure could expose inefficiencies.

What must be known or measurable before a “real” CPH calculation is possible

To calculate a true cost per hire (not just the surface-level formula), you must already have access to multiple underlying data points across cost and efficiency. 

That includes:

• Baseline financials like average recruiter salary, job ad spend, etc. 
• Both internal and external costs.  
• Vacancy efficiency metrics like time-to-hire and output loss per day. 
• Ramp productivity curve 
• Channel attribution 

Without those inputs, any calculator becomes guesswork and defaults to industry averages, which is exactly what most TA leaders are trying to move away from because it weakens budget justification.

‍

Of all these metrics, the time-to-hire figure is the most difficult to track. Most calculators subtract the posting date from the hire date, ignoring screening and coordination time. 

To get an accurate track of the average hours per candidate. For example, if a team averages 10 hours total per hire at €100/hour, that's €1,000 added. Check our time-to-hire and screening efficiency calculator for deeper insights on optimizing this step.

Why Is Cost Per Hire an Important Metric to Track?

There are tons of reasons we could cover here, but let’s stick with the highlights:

• Financial transparency: Understanding your cost per hire provides a clear picture of recruitment expenses. This financial transparency allows for better budgeting and resource allocation, ensuring you spend wisely on your hiring process.
• Identifying inefficiencies: By tracking this metric, you can pinpoint areas where your recruitment process may be inefficient. If certain methods or channels are consistently costly without yielding quality candidates, you can re-evaluate and refine your strategy.
• Benchmarking performance: Comparing your cost per hire over time or against industry standards helps you gauge the effectiveness of your recruitment efforts. This benchmarking allows you to identify trends, set realistic goals, and continuously improve your hiring process.
• Supporting business growth: Lowering your cost per hire can free up funds for other critical business activities, supporting long-term growth and stability.

What’s the Average Cost of Recruiting a New Employee

The average cost of recruiting a new employee in the U.S. is approximately $4,700, based on the latest data from the Society for Human Resource Management (SHRM) benchmark. 

This baseline cost-per-hire (CPH) covers direct expenses such as recruiter salaries, job board fees, and agency commissions. However, for executive or highly specialized roles, costs can soar up to $28,000+ due to increased complexity and market competition.

Are You Spending Too Much to Hire? Use Industry Benchmarks to Find Out

Here’s a quick overview of typical cost-per-hire (CPH) ranges by role and industry. These are ballpark figures that can vary depending on location and company size. The data comes from several trusted sources:

• SHRM cost-per-hire report
• The National Association of Colleges and Employers
• The Bureau of Labor Statistics
• TimeClick cost of hiring an employee
• Dover’s report on tech recruiter fees

5 Tips to Reduce Cost Per Hire

1. Prioritize internal recruiting

Internal recruiting means looking to your current roster when a position opens up. Studies show it’s typically 1.7X less expensive to hire from within than it is to hire externally. 

To put that in perspective, with an average cost per hire of $5K, you’d save an estimated $2K for every internally filled position.

The key to success here is accurate data. You need to understand:

• Who you have available
• What skills they have
• What proficiency individuals have in needed skills
• Who would take their place in their current role

Filling all these gaps is relatively easy, it just requires an organized approach to HR and regular check-ins with your employees. Periodic skill and skill gap assessments are also incredibly useful for internal recruiting. 

2. Develop a strong talent pipeline

When a higher percentage of the candidates your talent pipeline supplies are good, cost per hire (generally) decreases, since you need to spend less time and resources filtering.

So, how do you develop a strong talent pipeline? Here are some strategies:

• Leverage your data: Use past hiring data to identify the channels that have historically led to the most successful hires. Then, focus your sourcing resources on these channels.
• Create talent communities: Instead of a one-size-fits-all pipeline, segment your candidates into specialized communities based on skills, experience levels, and career aspirations. Then, personalize your communication and outreach for better results.
• Implement skills-based hiring: Move beyond traditional resume screening by developing skills assessments that accurately predict job performance. Once you have this data on hand, it’s easier to accurately slot candidates into roles they’re well-suited for.

3. Implement a pre-screening process

Unqualified candidates are a big drain on recruiting resources—and this issue is compounded the longer they go unnoticed in your pipeline. Pre-screening helps you catch unqualified candidates as early on in the process as possible by screening for baseline, must-have requirements.

This might include:

• Legality: Are they legally allowed to work for you? (e.g. UK tier 2 visa)
• Language skills: Do they speak the language(s) required in your organization?
• Technical skills: Do they have all the specific technical skills required? (e.g. Java)
• Availability: Are they available to work when required?
• Basic qualifications: Do they have all the required certifications or licenses? (e.g. CPA certification)

We have a whole article on pre-screening interviews and how to implement them if you’re interested in a deep dive.

4. Switch to async video interviews

Async video interviews are a kind of virtual interview where candidates record responses to preset questions and then submit them for review. And due to the async, fully remote nature of these interviews, they can significantly reduce your cost per hire.

Here’s how:

• Reduced scheduling time: Interview scheduling takes up a huge percentage of recruiter time, and async video interviews help you reclaim all of it. You can check out our time saving calculator for an estimate.
• Increased recruiter capacity: Async video interviews let recruiters screen more candidates in less time, effectively boosting their productivity. Smaller teams can handle larger candidate backlogs when they can focus fully on reviewing responses.

For a real-world example of this impact, Lunio was able to save over $50,000 using Willo’s async interview tools to screen and hire seven SDRs. In the process, they also saved 42 hours compared to traditional phone screens.

Source: How Lunio’s HR team saved over $50,000 using Willo to hire SDRs

To get started, all you need to do is:

1. Find an async interview tool. Willo offers video interviews and supports your team with interview features like interview scorecards, question generation, commenting, ID verification, and more.
2. Create your interview. Write (or generate questions), set a number of redos, set a time limit, and create an expiration date for your interview.
3. Share with candidates. To share your interview with candidates at scale, you can add the secure sharing link to emails or application forms.
4. Review responses. Once candidates complete the async interview, their responses will be available for review. You can easily score candidates using the built-in scorecard feature.

5. Implement employee referral programs

Employee referral programs are a cost-effective way to find quality candidates. 

By offering incentives such as bonuses, extra vacation days, or gift cards, you can encourage your employees to refer candidates, tapping into a valuable network of potential hires. Referred candidates often fit well with the company culture and have higher retention rates, reducing turnover costs.

For example, offering a $500 bonus to employees for successful referrals can save on external recruiting costs while leveraging the existing workforce to find candidates who are likely to succeed in the company environment.

Reduce Cost Per Hire With Willo

Cost per hire is an important recruiting metric that helps give you a high level overview of your hiring costs. It may not yield all the information you need, but it‘s an important starting point for recruiters that are starting to investigate inefficiencies and possible areas for improvement.

Our top recommendation for reducing cost per hire? Cut out resource intensive live interviewing and replace it with Willo’s async video interviews. This will let you gather the information you need at significantly reduced cost—all while improving candidate experience.

Book a free demo today and experience a better way to interview.

‍