Cost per hire (CPH) is a human resource management metric used to calculate the total cost of filling a vacant position within an organization. It helps HR teams understand the financial implications of their recruitment efforts by considering all expenses associated with bringing in new employees.
HR teams use cost per hire (CPH) as a recruiting metric to determine the average amount of money spent on each new employee hired by the organization. The metric is applied to both in-office recruitment and virtual recruitment.
Tracking the cost per hire helps recruiters and organizations make informed decisions about their recruitment strategy, helping to manage recruitment expenses and align with business goals.
Calculating the cost of hiring is a simple calculation that follows an easy hire formula:
Cost per hire = Total recruitment costs (internal and external) / Total number of hires
Breaking this formula down, the steps to calculate cost per hire is as follows:
Add external and internal recruitment costs within a specific time period.
Divide the above total by the total number of hires within the same period.
The result is the cost per hire from identifying a candidate to hiring, onboarding, and training them.
Factors that affect the cost per hire include recruitment sources, time required to fill a position, company size, industry, and turnover rate.
To optimize your cost per hire, consider utilizing social media platforms for job postings, implementing an employee referral program, improving candidate screening techniques with AI, automating recruitment processes through Applicant Tracking Systems (ATS), and leveraging HR software like Helios for streamlined HR administration.