Cost Per Hire: Formula, Benchmarks and Practical Tips to Calculate It
Calculate cost per hire with the right formula, benchmarks and examples. Get insight into your recruitment costs and lower your cost per hire.
You calculate cost per hire by dividing all internal and external recruitment costs by the number of hires made in a fixed period. This insight is essential for stopping budget leakage and structurally improving your recruitment ROI.
You calculate cost per hire by adding up all your internal and external recruitment costs and dividing that total by the number of new hires made in the same period. That gives you a realistic figure per hire, so you can make better decisions on budget, channels and ways of working.
This method only works well, by the way, if you genuinely include every cost and always use the same measurement period. In this article, you'll find the exact formula, a worked example, current Netherlands benchmarks and practical ways to bring your cost per hire down.
- The cost-per-hire formula gives you instant insight into your total hiring cost per new employee.
- Many organisations underestimate the cost, because recruiter hours and tooling often get overlooked.
- Always compare your figures by sector, job family and hiring channel.
- Small improvements in time and process bring your total costs down directly.
What does calculating cost per hire mean, and why does it matter?
Cost per hire is simply the average cost of one new employee. By calculating cost per hire, you get a clear view of your investment per hire, and you see straight away how efficient your hiring process really is. On top of that, it helps you steer on recruitment ROI, in other words, the actual return on all your hiring efforts.
With this figure, you can see exactly where budget is leaking and which channels genuinely deliver. That lets you make structurally better decisions, and back up your approach solidly with management or your clients.
How does calculating cost per hire work in practice?
The formula is surprisingly simple, and applies directly to any hiring team. You simply add up all costs incurred and divide that amount by the number of employees hired within a specific period.
Cost-per-hire formula: internal recruitment costs plus external recruitment costs, divided by the number of hires.
Always work with a fixed period, such as a quarter or a calendar year. This prevents skewed comparisons in your data and makes long-term trends clearly visible.
- Choose a clearly defined measurement period.
- Carefully gather all your internal recruitment costs.
- Then add all your external recruitment costs on top.
- Finally, divide the total amount by the number of hires.
Anyone who calculates cost per hire structurally gets reliable steering information straight away, and spots far more quickly where optimisation is needed.
Which costs do you include when calculating cost per hire?
Internal recruitment costs
Internal recruitment costs are often underestimated in practice, even though they have a huge influence on the final outcome once you start calculating recruitment costs.
- Recruiter hours and salaries, including all employer costs and time genuinely spent.
- Management time for interviews and internal alignment.
- The cost of your recruitment ATS and any other software licences you need.
- Costs related to employer branding activities and content creation.
- Referral bonuses paid out per new employee.
- The time HR and the relevant managers spend on onboarding.
- Tooling, including the cost of a LinkedIn seat and various sourcing tools.
If you forget to include these specific items, your cost per hire will come out unrealistically low.
External recruitment costs
External recruitment costs, on the other hand, are usually clearly visible in the budget, though the amounts can vary a lot by channel.
- Posting fees on paid job boards.
- Spend on social media and search engine advertising.
- Recruitment agency fees, which typically sit between 15 and 25 percent of an annual salary.
- Spend on external assessments and testing.
- Costs for specialist campaigns run by external agencies.
Keep in mind that agency fees in particular often have a substantial impact on your average cost per hire.
Tip: Elvatix gets more out of every InMail credit. Higher response rates, lower cost per contact.
See how →A full worked example of calculating cost per hire with figures
Say a hiring team makes eight new hires in one quarter. Total internal recruitment costs for that period come to €58,000, while external recruitment costs come to €28,000. Total hiring costs then add up to €86,000.
The sum is then simple: €86,000 divided by 8 hires makes €10,750 per hire. This concrete example shows clearly that a thorough, complete calculation is absolutely necessary to get genuinely reliable insight.
Cost per hire by sector: current Netherlands benchmarks
Using a cost-per-hire benchmark is extremely valuable when interpreting your own figures. In the Netherlands, these costs can vary quite a bit by sector. Look up relevant recruitment statistics, and you'll quickly find that factors such as labour market scarcity and hiring volume play a crucial role here.
We see, for example, that the IT sector often has a considerably higher cost per hire, mainly because of severe scarcity and longer time-to-fill. Healthcare tends to post somewhat lower cost per hire, but has a much higher hiring volume in return. The financial sector usually sits somewhere in between. So always look carefully at comparable roles and seniority levels; that way you avoid steering your decisions based on the wrong conclusions.
Calculating cost per hire by channel for better decisions
While the total figure gives you a clear direction, you only get real grip on the situation once you break the detail down by channel. By calculating cost per hire per channel, you immediately discover where your allocated budget delivers the most return.
Sourcing through LinkedIn, for example, calls for internal time and comes with licence costs (LinkedIn seats). Referrals might cost you a hiring bonus, but save you a lot of active search time at the same time. Job boards mostly run on fixed posting fees, while recruitment agencies tend to be considerably more expensive, but do save valuable internal capacity.
Always combine this data with extra metrics, such as time to hire and the actual quality of your hires. That's how you build a complete, honest picture of your recruitment ROI.
How can you lower cost per hire without losing quality?
If you want to structurally lower cost per hire, it's wise to look critically above all at your time investment and the processes behind it. Time is, after all, practically always the biggest hidden cost factor in recruitment.
Actively building talent pools consistently leads to faster placements. On top of that, a well-balanced channel mix prevents unnecessary budget waste. And reduced dependency on external agencies directly lowers your hiring costs.
Working more efficiently obviously helps directly too. By, for example, speeding up InMail personalisation, you cut a good deal of time off every message you send. The logical result is that your internal recruitment costs fall while your total output actually rises.
In a real-world case study on time savings, you can see clearly how spending less time writing messages leads directly to more actual conversations and better hiring results.
For larger teams, we also offer smart solutions for corporate recruiters. These tools help you work at scale while keeping all your costs under control.
What commonly goes wrong when calculating cost per hire?
Many organisations simply forget to weigh recruiter hours and software costs (tooling) into the total. On top of that, it regularly happens that costs incurred and actual hires get measured across completely different time periods. That inevitably leads to a badly distorted picture.
On top of that, roles sometimes get compared to each other without the right context factored in, which makes the data essentially unusable straight away. Simply steering towards the lowest possible cost backfires too, by the way; poor-quality hires only end up causing extra, hidden costs in the long run.
The role of recruitment automation in calculating cost per hire
Recruitment automation helps you enormously to save valuable time and make hiring processes considerably more consistent. And since time is directly tied to cost, an automated process also has a direct positive effect on your eventual cost per hire.
Structural, manual outreach and its follow-up cost a team a good number of hours every single day. Automation can support these repetitive steps excellently, without the quality of your work suffering. That way, your approach stays personal, while you end up working considerably faster and more efficiently on the bottom line.
Calculate and improve your own cost per hire
Try mapping your figures afresh every quarter, and break this data down clearly by job family and by channel. Then look carefully at where the biggest hidden costs sit, and discover where you can optimise further.
Want help sharpening your calculation, or looking for more insight into any missing cost items? You can always get in touch to take a critical look at your data together. That way, calculating cost per hire becomes a genuinely practical steering tool for your organisation.
Frequently asked questions about calculating cost per hire
What counts as a good cost per hire?
That varies enormously by specific sector and job family. Use a current cost-per-hire benchmark as a general guide, but compare the outcome mainly against your own historical company data.
Should onboarding costs be included too?
Yes, absolutely. Onboarding simply takes time and a lot of internal capacity, and therefore firmly belongs in a complete overview of your internal recruitment costs.
How often should you calculate cost per hire?
Ideally, do this at least once a quarter. That way you spot trends faster and can adjust course in good time wherever needed.
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