Cost
Per Hire Calculator helps to calculate the costs
associated with the advertising, recruiting and staffing etc borne by a company
to fill an open position. In other words, Cost Per Hire or CPH means expenses
incurred by an employer for recruiting a new staff from advertising to joining
an employee against the total number of recruitments.
CPH or Cost Per Hire is one of
the widely used HR metrics to measure the effectiveness of the recruiting
process.
It is advisable to have low CPH
while recruiting. It should be kept in mind that maintaining the quality of
recruit is also necessary.
Cost Per Hire = Direct Expenses + Indirect Expenses / No
of Candidates Recruited.
Advt. Cost Per Candidate = Sum of all advertising
expenses / no. of CVS received
Reviewing Cost Per Candidate = No. of HR staff employed X
No. of days X Cost per Day / No. candidates selected for the interview.
Interviewing Cost Per Candidate = No. of
interviewers X No. of days X Cost Per Day / No. of Candidates Selected.
Joining Cost Per Candidate = Medical Examination Expenses
+ Training Expenses + Other Expenses / No .of Candidates Recruited
Misc. Cost per Candidate = Background or reference check
+ Other Costs / No. of Candidates Recruited
Direct Expenses = Salaries of recruiting staff, expenses
incurred by recruiting staff, candidate background checks, reference checks
etc.
Indirect Expenses = Recruiter Fees, Advertising costs,
Career Fair Expenses, Job board postings etc.
The CPH varies according to the
size of the organization, recruitment channels, the seniority of the position
etc.
There are seven main expense categories in our spreadsheet. Each is explained below:
What should be included in recruiting costs?
Internal recruiting costs are
organizational costs and internal expenses, like recruiters’ salaries and money
you spend on your referral program. External recruiting costs refer to every
expense you pay outside of your company, like job board fees, agency fees and
costs associated with a background check service.
1.
Job
boards and advertising fees.
What you pay job boards to display your job openings
2.
Candidate
assessment costs.
Fees for companies that offer pre-employment tests or coding challenges
3.
External
recruiter expenses.
Money spent to pay individual recruiters, recruiting agencies or staffing
firms.
4.
Employer
branding efforts.
Funds spent on events related to recruiting, like campus recruiting days and
careers fairs.
5.
Careers
page costs.
Expenses that include the setup, maintenance and redesigning of your careers
page.
6.
Internal
recruiters’ costs.
Often the highest recruiting line item, this includes recruiters’ salaries,
benefits and travel expenses.
7.
Training Cost-Cost incurred in freshers or
specialised person training
8.
Background verification Cost: Background check services usually
charge an amount per candidate. Funds spent on selected candidates Previous
employment, Education, Police Check, Drug check, Physical Address Verification
9.
Visa Processing Cost: Visa processing cost incurred in
case of overseas manpower required by the client/company
10.
Referral
program Cost: incentive costs like bonuses given for the referral
11.
Relocation
Cost:
Paying for their travel and accommodation expenses
12.
Applicant Tracking Systems Cost: Applicant Tracking Systems are a
monthly or annual cost, though they can help reduce overall costs by saving
hiring managers’ time and making the hiring process faster.
1. Job boards & advertising: This category includes any expense associated with posting your open position as you source candidates. Every job board should be included as well as any of your company's paid recruiting accounts (e.g. LinkedIn premium). Add the number of postings per job board and the cost of each posting. Cost per posting may be fixed or variable, depending on whether you use a pay-per-click model.
2. Assessment: This category includes any kind of candidate assessments your company pays for (tests, competitions etc.). Companies can buy tests from consultancies or other firms to use during the hiring process. The cost of these kinds of assessments are usually calculated per candidate. Below you can see an example of how much a GAT test would cost along with the annual total and monthly average in the last columns:
3. External recruiting: This category of your budget template reflects any external recruiting costs. It'll usually include recruitment agencies and headhunters. Sourcing software may also fall under this expense category.
4. Employer branding events" Employer branding costs should be separate from marketing efforts. Only include costs directly associated with recruiting. Career fairs, recruitment events and conferences are the most common examples. An important addition is "branding materials," which include any the costs of items you hand out or use during recruiting events.
5. Careers page: An attractive and easy-to-use career page is important. Associated costs include development, maintenance or redesign expenses. These recruiting costs can be allocated to an external service or the salary of an in-house employee.
6. Partnerships: Partnering with universities or other institutions is a good way to source qualified candidates but it isn't cheap. Include all kinds of paid affiliations and partnerships directly linked to your recruitment efforts.
1. Salary costs of your hiring team: This is often a high cost and it's challenging to calculate. In this context, your hiring team is in-house; external recruiters are included in category 3 (see above). You can calculate salary costs by multiplying the hours spent on recruiting (for one position or multiple positions) by the hourly salary of employees. Imagine how high these costs can get when a VP or manager has to consistently dedicate time to hiring. The example below shows the costs of a recruiter and a VP spending time hiring for one position during a month:
It's very important to keep track of this expense and take steps to minimize it. Since high level employees are most commonly involved in interviewing, make sure it's worth their time.
What are other expenses associated with recruiting?
Other recruiting expense categories can add up. If companies use referral programs, they may have to consider incentive costs like bonuses. Companies may also choose to bring in candidates from different areas, paying for their travel and accommodation expenses. Background check services usually charge an amount per candidate. Applicant Tracking Systems are a monthly or annual cost, though they can help reduce overall costs by saving hiring managers' time and making the hiring process faster.
How do I make sense of the numbers?
There's value in knowing that, for example, your company spent $3,000 on external recruiters in January. But what this expense means and how it impacts your company and recruiting pipeline isn't always immediately obvious.
First, consider that recruiting is often a "bumpy cost", one that doesn't remain stable throughout the year. One month, your hiring team may be stressed out, trying to fill multiple open positions and going to lots of career fairs. Another month, recruiting may slow down. Calculate your average monthly expenses by adding the costs of all months and dividing by 12. (You can also calculate quarterly costs by dividing by 4). In the example below, you can see how the number of Indeed postings went up during the third month and how this increase affected total and average spend:
Second, it's very important to compare your actual recruiting expenses with budgeted amounts. Did external recruiter expenses fall short of, meet or exceed your allocated budget? Maybe the budget wasn't realistic. Or maybe it'd be worth spending extra money on your hiring efforts.
Lastly, consider recruiting metrics and data in your analysis. For example, you may have spent 40% of your budget on certain job boards but only got about 15% of your qualified candidates from them. Figure out what this yield means for your company. Maybe an external recruiting budget cut had a negative impact on your time-to-fill or time-to-hire metrics. Valuable knowledge can be drawn from the right metrics, so try to make your analysis as thorough as possible.
Use our free tool to calculate your current cost per hire and plan your future recruiting spend.
What other types of plans should I use?
Many useful recruiting budget plans can support a more complete outlook of the hiring process. For example, a spreadsheet listing number of hires or money spent per department can help you determine whether you achieved your goals. It'd also be useful to create a spreadsheet with salaries of future hires, including the start date of each position and the budget allocated for their salary from that date on. It's helpful to compare budgeted salaries with actual salaries (resulting from negotiation).
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