Cost per Hire
Also known as CPH, Recruitment Cost per Hire
Cost per hire is the total internal and external recruiting spend divided by the number of hires in a period. It is the standard efficiency measure for talent acquisition and the basis for comparing sourcing channels against each other.
Formula
Cost per Hire = (Total internal recruiting costs + Total external recruiting costs) ÷ Total number of hiresInternal costs include recruiter salaries, ATS and tooling, and referral bonuses. External costs include agency fees, job board spend and advertising. Excluding internal cost is the most common way this figure gets understated.
Worked example
- Scenario
- Annual recruiting cost of £520,000 (£310,000 internal, £210,000 external) producing 148 hires.
- Calculation
- £520,000 ÷ 148
- Result
- £3,514 cost per hire
What good looks like
Cost per hire commonly falls in the £3,000–£5,000 range for professional roles, rising sharply for senior and agency-sourced positions. Because inclusion rules vary so much between organisations, external comparison is weak — channel comparison within your own data is where the value is.
Why cost per hire matters
Cost per hire is how recruiting justifies its structure — in-house team versus agency, job boards versus employer brand investment. Read against quality of hire and first-year attrition, it prevents the most common false economy in recruiting: a cheap channel that produces hires who do not stay.
How to improve it
- 1Calculate by channel, not just overall. The blended figure hides that one channel may be several times more expensive per retained hire.
- 2Include internal costs. Excluding recruiter salaries makes in-house look free and agencies look uniquely expensive.
- 3Always report alongside first-year attrition for the same cohort — cost per hire that does not stay is cost, not investment.
- 4Track referral channels separately; they usually combine low cost with strong retention, which is the case for investing in them.
Common mistakes
- Excluding internal recruiting salaries and tooling, which typically understates the figure by half or more.
- Optimising cost per hire in isolation, which pushes volume toward the cheapest and often weakest channels.
- Counting a hire in a different period from the costs that produced it.
Frequently asked questions
What should be included in cost per hire?
All internal costs (recruiter salaries and on-costs, ATS and sourcing tooling, referral bonuses, careers-site spend) plus all external costs (agency fees, job board spend, advertising, assessment tools, background checks). Omitting internal costs is the most common error and understates the figure substantially.
What is a good cost per hire?
Around £3,000–£5,000 is typical for professional roles, but the figure only means something against your own channel mix. A low cost per hire paired with high first-year attrition is worse than a higher figure that produces people who stay.
Related metrics
Quality of hire is a composite measure of how well new hires perform and how long they stay, typically combining early performance rating, ramp speed, retention and hiring-manager satisfaction. It is the metric that tells you whether recruiting is producing good hires rather than just fast, cheap ones.
Source of HireSource of hire records which channel produced each hire — job board, referral, agency, direct sourcing, careers site or internal move — usually reported as a percentage mix. It is the basis for every recruiting budget decision, and it is most useful when combined with cost and retention data per channel.
Time to FillTime to fill measures the days from requisition approval to the new hire's start date. Because it includes sourcing, selection, offer and notice period, it is the metric that hiring managers and workforce planners care about — it describes how long the work goes uncovered.
New Hire Turnover RateNew hire turnover rate is the percentage of new employees who leave within a defined early window — most often 90 days, six months or one year of joining. It is a hiring and onboarding metric rather than a retention one, because departures this early usually trace back to selection, role clarity or the first-weeks experience.
Cost of Employee TurnoverCost of turnover is the total financial impact of an employee leaving and being replaced, combining direct replacement costs with the productivity lost while the role is vacant and while the replacement ramps up. It is the number that converts a retention conversation into a budget conversation.
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