Hiring new employees is costly, and most companies and recruiting agencies know that by now. It’s much less expensive to hire from within or promote current employees than it is to hire someone new. The main costs are associated with the cost of recruitment services, skills training, slow adoption of corporate culture and norms, costs associated with adding employees to programs, in-house HR costs, background and reference checks, referral bonuses, uniforms, and credit checks. Indirect costs include things like recruiter travel expenses, time at employment fairs and other hiring events, and advertising.

Cost Per Hire
Cost Per Hire

Depending on the position, length of the hiring process, and the job sector, among other factors, a new hire can cost between $240 and $10,000. And that doesn’t include executive new hire which can be much more expensive. With all these factors and such a range of numbers, talking about the average can be a bit misleading. It’s better to look at the averages for specific industries or positions in order to gain an understanding of what is normal within your field.

Typically, we can point to numbers around $4500-$5000 as a reasonable average cost per hire. But depending on the source you may find numbers closer to $8000-$10000. Do these numbers mean anything to your company?

Calculate Your Own Cost per Hire

A more valuable number these days is the cost per hire that you can calculate from within your company. While you can calculate how much it costs in expenses, a more valuable number is the cost to your company for having a vacancy within the company.

The first number you’ll need is annual sales. This can be from your division or entire company, depending on size and variety. You’ll also need to know an average number of days it takes to hire a new employee. If the recruiting department has specific costs, you can add these in.

Start by finding daily revenue per employee by dividing the annual sales by 250. Multiply your result by the number of days your company takes to hire someone new. If you have additional costs, add those to your result. The result is the cost to your company of hiring someone new.

As you can imagine, the length of time to hire someone new is in fact a key factor. By reducing the length of time it takes to hire someone new, you can ensure you’re bringing in the maximum revenue possible within your company.