Cost of Hire (TA Metric)

Cost of Hire measures the total recruiting cost to fill an open position. This includes advertising/job boards, recruiter salaries or agency fees, referral bonuses, travel and interview costs.

In some cases, it also includes assessment tools, signing bonuses, relocation, and onboarding costs – divided by the number of hires in that period.

The Society for Human Resource Management (SHRM) estimates the average cost per hire globally is about $4,683.

This can be much higher for senior or technical roles). This metric helps organizations understand recruiting ROI and budget for talent acquisition.

Like any business function, recruitment must consider efficiency and return on investment. Lowering cost of hire means hiring effectively with less spend, which directly saves money.

However, cost must be balanced with quality of hire – the cheapest process isn’t worthwhile if it yields poor hires. The key is optimizing cost without undermining outcomes. Tracking this metric allows companies to spot inefficiencies: e.g., if one source or method is disproportionately expensive.

It also helps in forecasting budgets. If a TA leader know their hiring ~$5K on average to hire someone, hiring 100 people should roughly cost $500K (assuming similar profile roles).

Driving down cost per hire can free budget for other HR initiatives or allow more hiring for the same budget, supporting company growth. Importantly, by analyzing cost per hire alongside other metrics, companies can invest in what works best.

For instance, if referrals produce quality hires faster and cheaper, it makes sense to funnel resources into referral programs (even paying referral bonuses) rather than expensive job ads with low yield.

Efficient recruiting can save millions for large companies.

Calculating Cost of Hire

Cost per hire is a classic efficiency metric that, when optimized, improves the talent acquisition operating budget and overall business profitability.

In order to calculate this metric, here is an example below:

If Company A and Company B both hire 1,000 engineers a year but A’s cost per hire is $10,000 (perhaps using pricey agencies) while B’s is $5,000 (using referrals and internal tools), Company B spends $5 million less for the same talent – a huge competitive advantage.

Over time, those savings can be reinvested in employee development or higher salaries that improve retention and quality, creating a positive cycle.

Hiring efficiency (cost and speed) often go hand in hand.

It’s notable that companies like Amazon, which hire at enormous scale, have honed highly streamlined, mostly in-house recruiting operations to keep costs manageable.

Amazon’s obsession with metrics extends to recruiting costs – they track hires per recruiter per month, job family, etc., to ensure they hit productivity targets and budget.

GE likewise aligns recruiting with business strategy and efficiency; by aligning recruiting with the company’s strategic needs, GE avoids wasted efforts and hires the right people at the right cost.

A practice highlighting cost mindfulness is the rise of internal mobility – it’s often cheaper to fill a role with an internal candidate (little to no recruiting cost) than an external hire. Many top firms have strong internal transfer programs, which reduce external hiring volume (and thus cost) and boost morale.

In summary, by tracking and refining cost per hire, organizations drive financial value and ensure their talent acquisition is not only effective but sustainable and scalable.