Definition
Cost per hire shows how much an organization spends, on average, to fill a position. It adds external costs (ads, job boards, agency fees, checks, travel) and internal costs (recruiter and manager time, software, referral bonuses).
Formula
Cost per hire = (external costs + internal costs) / number of hires in the period.
Illustrative example: a small business makes 12 hires in a year. External costs: $6,000 in ads and $18,000 in agency fees. Internal costs: about 400 hours valued at $45 ($18,000) and $2,400 in software. Total: $44,400, or $3,700 per hire.
Key takeaway
Internal time is the most often forgotten line, and often the heaviest. A very low cost can also hide fast departures: always read it with quality of hire and turnover rate. The cost of hiring in Canada guide details differences by province, and the ROI calculator helps put a number on screening and follow-up hours.