Any organisation must have a hiring process in place. Yet, it can be expensive, especially when you take into account the time, money, and effort required to discover the ideal applicant. One way to measure the efficacy of your hiring process is by analysing the cost per hire. This article will define cost per hire, explain its significance, and walk you through the process of calculating it. In order to assist you in precisely calculating cost per hire, we will additionally give an Excel template.

What is Cost Per Hire?

Cost per hire (CPH) is a recruitment indicator that calculates the whole expenditures made by a company to fill a vacancy. It covers all costs associated with finding, hiring, and onboarding a new employee. CPH assists businesses in assessing the efficacy and efficiency of their hiring procedures.

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Why is Cost Per Hire important?

Understanding your cost per hire is essential since it clarifies the whole expense of bringing in fresh talent for your business. You can use this information to guide your decisions about resource allocation, budgeting, and hiring tactics. You can find places to save costs and improve your hiring process by looking at your cost per hire.

How do you Calculate Cost Per Hire?

Cost per hire is calculated by adding up all recruitment-related costs and dividing that total by the total number of hires made over a certain period of time. Cost per hire is calculated using the following formula:

CPH = (Internal Costs + External Costs) / Total Number of Hires

Let’s break down this formula further:

Internal Costs: An organisation will suffer internal expenditures while hiring a new employee. These expenses include the recruitment team’s salary and perks, the price of marketing and publicising the job opportunity, and the price of background checks and assessments.

External Costs: When hiring external firms to handle recruitment tasks, a business incurs external costs. These expenses consist of the commissions paid to recruiters, the price of advertising, and the price of background checks and assessments.

Total Number of Hires: The total number of hires is the total number of employees hired in a specific time frame, such as a month or a year.

Using the formula above, you can calculate your cost per hire accurately. However, to make the process easier, we have created an Excel template that you can use.

Also read: 11 Ways to Improve Candidate Onboarding Experience

Excel Template for Cost Per Hire Calculation:

how do you calculate cost per hire with excel template

All the formulae and fields needed to precisely calculate your cost per hire are included in our cost per hire Excel template. The template is simple to use and can be modified to meet the demands of your company. The template can be used as follows:

Step 1: Download the Excel template from our website.

Step 2: Enter the internal and external costs in the respective fields.

Step 3: Enter the total number of candidates recruited.

Step 4: The template will automatically calculate the cost per hire.

Step 5: Analyse the results to identify areas for improvement and cost optimization.

Factors that affect Cost Per Hire:

There are several factors that can affect your cost per hire, including:

  1. Industry: Your cost per hire might be considerably impacted by the sector in which you work. For instance, highly specialised positions in the technology or healthcare sectors could necessitate more expensive hiring procedures and examinations, raising the cost per employee.
  2. Geographical location: Your cost per hire may change depending on where you are located due to differences in the cost of living and wage rates. Due to increased living expenses and greater competition for top people, recruiting might be more expensive in major urban regions, for instance.
  3. Recruitment sources: The sources you use to find candidates can also impact your cost per hire. For example, recruiting through social media platforms may be less expensive than using traditional job boards or recruitment agencies.
  4. Time to fill: The cost per hire rises if a post is taken longer to fill. This is because it takes more time and money to find the ideal individual the longer a post is open.
  5. Employer brand: Your cost per recruit may be impacted by your company’s employer brand and reputation. It might be simpler and less expensive for businesses with a strong brand and reputation to draw in and keep top people.

Also read: What is Candidate Experience, How to Improve it, and Why it Matters for Your Business?

Benefits of Calculating Cost Per Hire:

Knowing your cost per hire can provide several benefits, including:

  1. Budget planning: You can more efficiently plan and distribute your recruitment budget if you know your cost per hire. You can pinpoint places where you may cut expenses and streamline the hiring procedure.
  2. Recruitment process optimization: You can find areas where you can streamline your recruitment process to make it more successful and efficient by looking at your cost per hire.
  3. Recruitment performance evaluation: You can assess the success of your hiring process by looking at cost per hire and comparing it to industry standards.
  4. Better decision-making: When deciding on recruitment tactics and resource allocation, having a clear understanding of your cost per employee might be helpful.


Any company wishing to assess the success of its hiring procedure must use cost per hire as a key performance indicator. Knowing your cost per hire will help you plan your spending, allocate resources, and develop recruitment methods. The cost per hire calculation formula is simple, and our Excel template can help make it even simpler. Recall that your cost per employee might be impacted by factors including industry, geography, and recruitment providers. You may enhance your hiring procedure and gradually save costs by examining your cost per hire and identifying areas for improvement.

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