Cost per hire is the recruiting metric most often quoted and most often wrong. Not because the formula is difficult, but because almost everyone omits the largest cost in the process.
The formula
Cost per hire = (external recruiting costs + internal recruiting costs) / number of hires in the period
That is the entire calculation. The difficulty is entirely in what goes into the numerator.
External costs: the easy half
These appear on invoices, so they get counted:
- agency and search firm fees
- job board postings and sponsored listings
- advertising and employer brand campaigns
- assessment and background check providers
- ATS and recruiting tool subscriptions
- referral bonuses paid out
- careers events and travel
- relocation and signing bonuses, where you treat them as acquisition cost
Internal costs: the half that gets omitted
These do not appear on an invoice, which is precisely why they are missed — and in most companies they are the larger half.
Recruiter time
Fully loaded salary of the recruiting team, apportioned to the period. If a recruiter costs 60,000 a year fully loaded and makes twenty hires, that is 3,000 per hire from one person before anything else is counted.
Interviewer time
The cost nobody wants to compute, and usually the biggest single line. Work it out per hire:
- screening call: 1 interviewer, 30 minutes
- first round: 2 interviewers, 60 minutes each
- technical or task stage: 2 interviewers, 90 minutes each, plus 30 minutes preparation
- final round: 2 interviewers, 60 minutes each
- debrief: 4 people, 30 minutes
That is roughly ten hours of interviewer time for a single candidate who reaches the final stage. If you interview four candidates to that depth per hire, and the average interviewer costs 50 per hour fully loaded, interviewer time alone is in the region of 2,000 per hire — before the recruiter, the tooling, or a single advert.
Hiring manager time
Intake meeting, CV reviews, debrief participation, offer approval. Frequently five to ten hours per role, at a higher hourly cost than anyone else in the process.
Administrative time
Scheduling, coordination, offer paperwork, onboarding preparation. Real, and largely automatable — which is where tooling pays for itself.
A worked example
A 200-person company making 30 hires a year, one full-time recruiter.
External, annual: job boards 12,000; ATS 9,000; assessments 4,000; two agency placements 30,000; referral bonuses 6,000. Total 61,000.
Internal, annual: recruiter fully loaded 65,000; interviewer time (30 hires x 10 hours x 50) 15,000; hiring manager time (30 roles x 7 hours x 70) 14,700; coordination time 8,000. Total 102,700.
Cost per hire = 163,700 / 30 = approximately 5,457.
The version that counts only external costs gives 2,033 — less than forty per cent of the real figure. This is why cost-per-hire benchmarks across companies are close to useless unless the methodology is stated.
How to use the number
Segment it. A blended figure across a warehouse role and a senior engineering role describes neither. Segment by role family and seniority first.
Track the direction, not the level. Comparing your number to a published benchmark is comparing two different methodologies. Comparing your number to your own number last quarter is a real measurement.
Pair it with quality. Cost per hire is trivially reduced by hiring worse people faster. Reported alongside offer acceptance and first-year attrition, it is informative. Reported alone, it drives the wrong behaviour.
Use it to price interventions. The number becomes useful when it answers a decision: if interviewer time is 2,000 per hire, cutting one redundant interview round from a four-round loop is worth roughly 500 per hire — which is how you decide whether restructuring the loop is worth the effort.
The related number nobody calculates
Cost per hire measures what filling the role cost. It does not measure what not filling it cost. For revenue-generating roles, the daily cost of a vacancy frequently exceeds the entire cost of hiring — which reframes what "efficient recruiting" means. That calculation is a separate exercise, and usually a more persuasive one in a budget conversation.
If pulling these figures means exporting to a spreadsheet each quarter, the reporting side of Hireall is built to produce them directly. The rest of the measurement set is in eleven recruiting metrics worth tracking.