Cost Per Hire: Calculation, Benchmarks, and Strategies for Reduction
Cost-per-hire is one of the most important metrics in recruiting. It shows how much a company spends on average to fill a new position—and makes recruiting efficiency comparable, measurable, and thus optimizable. If you don’t know your cost per hire, you lack a basis for making strategic recruiting decisions.
What is the cost per hire?
Cost-per-Hire (CPH) encompasses all costs incurred in filling an open position—from the job posting to the signed employment contract. It is a key KPI for HR departments and recruiting teams to compare the effectiveness of various channels and initiatives.
Given the ongoing shortage of skilled workers and rising recruitment costs, controlling the cost per hire has become more important for companies of all sizes. Companies that invest in expensive channels without first evaluating them and measuring the results are wasting significant portions of their budgets.
A high cost per hire isn’t a problem if the quality of the hires is right. An unplanned cost per hire is always a problem.
Formula and Calculation
The calculation of cost per hire follows a simple basic formula:
This infographic shows how event marketing works on social media—from targeting audiences to choosing a platform to measuring success.
From defining your target audience to building engagement—this infographic shows how event planning and social media work together seamlessly.
Cost per Hire = (Internal Costs + External Costs) ÷ Number of Hires
This formula can be applied to individual positions, departments, or the entire recruiting period. Important: Only positions that were actually filled are included in the denominator—open or discontinued processes do not count.
Internal vs. External Costs
Cost per hire consists of two cost categories that many companies fail to fully account for:
| Internal Costs | External Costs |
|---|---|
| HR Team Work Hours | Job Postings (Job Portals) |
| Working Hours in the Specialist Department (Interviews) | Headhunters and Recruitment Agencies |
| Internal administrative and IT costs | Social media recruiting campaigns |
| Onboarding Effort | Trade Shows and Career Events |
| Background Checks | Employer branding initiatives |
Benchmark: What is a typical cost per hire?
The cost per hire varies greatly depending on industry, job level, and company size. According to the SHRM (Society for Human Resource Management), the average cost per hire in the U.S. is around $4,700—and is significantly higher for specialized and executive positions.
| Job Level | Average CPH (guideline value) |
|---|---|
| Entry-Level Positions / Apprenticeships | 1,500 – 3,000 € |
| Specialist (2–5 years of experience) | 3,000–7,000 € |
| Senior / Specialist | 7,000 – 15,000 € |
| Executive / Management | 15,000 – 50,000 € |
Factors Affecting Cost Per Hire
Why do costs vary so much? These factors have the greatest impact:
Recruiting Channel
Whether it’s job postings on job portals, social media recruiting,
Duration of the Recruitment Process
The longer a position remains open, the more expensive it becomes. Every week that a position remains unfilled results in lost productivity, overtime for other employees, and ongoing HR costs. Time-to-hire is therefore an integral KPI that goes hand in hand with cost-per-hire.
Employer branding pays off directly in terms of cost per hire: Companies known as attractive employers receive more and better applications—and spend less on active recruiting.
Reducing Cost Per Hire — 6 Effective Strategies
A high cost per hire is rarely unavoidable. With the right measures, it can be systematically reduced:
Strengthen Employer Branding
A strong employer brand attracts candidates organically—without expensive ads
Employee Referrals (Referral Programs)
Referred candidates are less expensive to recruit and stay with the company longer
Build a talent pool
Make a note of interesting candidates who aren’t a good fit right now for future positions
OptimizeJob Postings for SEO
Well-targeted ads on Google for Jobs reduce reliance on expensive job portals
Streamline the application process
Fewer process steps, faster decisions, and clear communication reduce dropout rates
Professionalizing HR Marketing
Targeting suitable candidates rather than a scattergun approach
Cost Per Hire vs. Other Recruitment KPIs
Cost per hire alone says nothing about the quality of hires. It should always be considered in the context of these metrics:
| KPI | Definition | When it is particularly relevant |
|---|---|---|
| Time to Hire | Days from job posting to contract signing | For positions with tight deadlines and critical roles |
| Quality of Hire | Performance and Retention of New Hires | For a Long-Term Recruitment Strategy |
| Offer Acceptance Rate | Percentage of accepted offers | When the rejection rate is high |
| Candidate Experience | Candidate Satisfaction Throughout the Process | For Employer Branding and Word-of-Mouth Recommendations |
How does cost per hire differ from cost per applicant?
Cost per applicant measures the cost per application received—that is, how much you spend to generate an applicant. Cost per hire measures the cost per position actually filled and is therefore a more meaningful indicator of the overall efficiency of the recruiting process.
Should internal HR hours be factored into the cost per hire?
Yes, absolutely. Many companies only track external costs and, as a result, significantly underestimate their cost per hire. For many companies, internal labor hours account for 30–50% of total costs.
How Does Employer Branding Help Reduce the Cost Per Hire?
Strong employer branding increases the number and quality of applications received, reduces reliance on expensive channels such as headhunters, and shortens the time to hire—all factors that directly lower the cost per hire.
Skilled Labor Shortage in SMEs: Finding, Retaining, and Attracting Employees
Employer Branding for SMEs: Employer Brand, Attracting and Retaining Employees
Candidate Experience: Optimizing the Application Process, Recruiting & Talent
Active Sourcing: SME Strategy, Direct Outreach, and Talent Acquisition
Recruiting marketing: Attracting talent via social media
Employer branding agency: tasks, campaigns, costs
4.9 / 5.0