Introduction to the Cost per Hire KPI
The Cost per Hire KPI measures how much an organization spends to recruit and onboard a new employee. It’s a key HR and recruitment metric that helps companies evaluate the efficiency of their hiring processes and budget more effectively.
What Is Cost per Hire?
This KPI aggregates all expenses involved in sourcing, selecting, and onboarding a candidate. The formula is:
(Total External Recruiting Costs + Total Internal Recruiting Costs) ÷ Number of Hires
Costs typically include advertising, agency fees, HR staff time, assessment tools, background checks, referral bonuses, and onboarding materials.
Why This KPI Matters
Cost per Hire gives organizations a clear view of how efficiently they attract and hire talent. It provides insights into:
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Recruitment process effectiveness
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HR budget allocation and cost control
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Quality of sourcing channels
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Areas where hiring can be optimized or automated
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ROI of recruitment investments
A high cost per hire may signal inefficiencies or reliance on expensive channels, while a lower cost often reflects streamlined processes and effective employer branding.
How to Use This KPI Effectively
Companies typically track this KPI quarterly or annually and compare results across departments, job types, and sourcing channels. When analyzed alongside metrics like Time to Hire, Quality of Hire, and Offer Acceptance Rate, it provides a well-rounded view of recruitment performance and workforce planning.