Question 1

What is the SHRM cost per hire formula?

Accepted Answer

According to SHRM (Society for Human Resource Management), Cost Per Hire = (Internal Costs + External Costs) / Total Hires. Internal costs include recruiter salaries, hiring manager time, and ATS software. External costs include job boards, agency fees, background checks, and assessments. The 2024 SHRM Human Capital Benchmarking Report found the average cost per hire across industries is $4,700.

Question 2

What costs are included in internal recruiting costs?

Accepted Answer

Internal costs include: recruiter salaries and benefits (prorated by time spent recruiting), hiring manager interview time, HR administrative processing, employee referral bonuses, employer branding initiatives, ATS (Applicant Tracking System) software subscriptions, career site development and maintenance, and internal recruiting events. According to LinkedIn Talent Solutions, internal costs typically represent 40-60% of total recruiting spend.

Question 3

What costs are included in external recruiting costs?

Accepted Answer

External costs include: job board postings (Indeed, ZipRecruiter, industry-specific boards), recruiting agency/headhunter fees (typically 15-25% of first-year salary), LinkedIn Recruiter licenses, background checks ($30-300 per hire), drug testing, skills assessments, relocation packages, signing bonuses, job fair participation, and recruitment advertising. Agency fees alone can represent 30-50% of total external costs for companies using them heavily.

Question 4

How does cost per hire vary by industry?

Accepted Answer

According to SHRM research, cost per hire varies significantly by industry: Technology averages $7,800 (high competition for talent), Healthcare $5,200, Finance $6,500, Manufacturing $4,200, Retail $2,100, and Hospitality $1,800. Industries with specialized skill requirements and competitive talent markets typically have higher costs per hire.

Question 5

Which recruiting sources have the lowest cost per hire?

Accepted Answer

Employee referrals consistently have the lowest cost per hire ($1,200 average) and often produce the highest quality hires with better retention rates. Career site applicants average $2,100, LinkedIn sourcing $4,500, job boards $4,800, and recruiting agencies $12,000+ (typically 15-25% of annual salary). Glassdoor research shows referred employees are 15% more likely to stay beyond their first year.

Question 6

How does time-to-hire impact cost per hire?

Accepted Answer

Time-to-hire directly impacts costs through vacancy costs (lost productivity, overtime for existing staff) and extended recruiting spend. According to Glassdoor Economic Research, the average time to hire is 42 days. Each day an position remains open costs approximately 25-50% of the daily salary in lost productivity. Reducing time-to-hire by even 10 days can save thousands in vacancy costs per hire.

Question 7

What is quality of hire and why does it matter?

Accepted Answer

Quality of hire measures how well new employees perform and contribute to the organization. Key metrics include: first-year performance ratings, retention rate after one year, time to full productivity, and hiring manager satisfaction. According to LinkedIn's Global Talent Trends report, quality of hire is the #1 most valuable recruiting metric. A bad hire can cost 30-150% of their annual salary when factoring in recruiting, training, and termination costs.

Question 8

How can I reduce my cost per hire?

Accepted Answer

Strategies to reduce cost per hire include: strengthening employee referral programs (lowest CPH source), optimizing job postings for better quality applicants, building talent pipelines before positions open, improving your employer brand to attract inbound candidates, using data to identify most effective recruiting channels, streamlining interview processes to reduce time-to-hire, and negotiating volume discounts with vendors. SHRM research suggests companies can reduce CPH by 20-40% through strategic channel optimization.

Question 9

How do you calculate cost per hire?

Accepted Answer

The SHRM-standard formula is: Cost Per Hire = (Total Internal Costs + Total External Costs) / Total Number of Hires in the period. Internal costs include recruiter salaries (prorated by recruiting time), hiring manager interview hours, HR admin time, ATS software, and employee referral bonuses. External costs include job board postings, agency fees, background checks, assessments, and candidate travel. For example, if your team spent $120,000 on internal costs and $80,000 on external costs to hire 40 people, your cost per hire is $5,000 — 6% above the SHRM average of $4,700.

Question 10

What is a good cost per hire?

Accepted Answer

According to the SHRM Human Capital Benchmarking Report, the average cost per hire across all industries is $4,700. However, what is 'good' depends heavily on the role and industry. Technology roles average $7,800, finance $6,500, and healthcare $5,200. Entry-level retail and hospitality roles average $1,800 to $2,100. A cost per hire significantly below your industry benchmark may signal under-investment in quality sourcing, while costs well above benchmark suggest efficiency opportunities. Track your cost per hire alongside quality of hire and 90-day retention to get the full picture.

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