Cost per hire is total internal plus external recruiting costs, divided by the number of hires.
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Add up internal recruiting costs and external recruiting costs, then divide by the total number of hires made in the period. This follows the standard formula used by SHRM (the Society for Human Resource Management): (internal costs plus external costs) divided by total hires. A company that spends $20,000 internally and $30,000 externally to make 10 hires has a cost per hire of $5,000.
Tracking cost per hire over time, and by role or department, shows whether recruiting spend is trending in the right direction and where hiring is quietly getting more expensive.
Internal costs typically include the recruiting team's salaries and benefits, the time hiring managers spend interviewing, applicant tracking software, and internal referral bonuses. External costs typically include job board postings, recruiting agency or headhunter fees, background checks, assessment tools, and any relocation or signing bonuses.
Costs left out of most standard cost-per-hire formulas include onboarding and training expenses after the start date, since those are usually tracked separately as onboarding cost rather than recruiting cost. Keeping the line between the two consistent makes cost per hire comparable across periods and departments.
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