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Cost Per Hire Calculator

Cost Per hire compares hiring methods and associated costs and analyses the models to identify the most cost effective way of employing new staff.

The cost Per hire calculation includes the medium used for advertising, the geographical challenges of employment (Travel, relocation etc) and associated time costs.

Cost Per Hire Calculator
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What is Cost Per Hire?

Cost Per hire is means of comparing quantifying hiring methods and associated costs and, typically, comparing the models to identify the most cost effective way of employing new staff.

The calculation typically includes the medium used for advertising, the geographical challenges of employment (Travel, relocation etc) and associated time costs.

Cost per Hire calculations are beneficial for holistic new employee costings, particularly when relocation or specialist skills / capabilities are required which involve international relocation.

How to Calculate Cost Per Hire | Cost Per Hire Formula

There are a number of means of calculating cost per hire, the best of which (and the Cost per Hire Algorithm used on this calculator) was developed by the Employment Management Association (EMA). The Employment Management Association (EMA) is a specialist group of the Society for Human Resources Management.

Cost Per Hire = AD + AF + ER + T + R + RC + 10%

  • AD Advertising Costs
  • AF Agency Fees
  • ER Employee Referral Costs
  • T Travel Costs
  • R Relocation Costs
  • RC Recruiters Time
  • 10% Administrative costs associated with the hire

Introduction

In the field of human resources, understanding the cost per hire is crucial for organizations to evaluate the effectiveness and efficiency of their recruitment process. Cost per hire is a metric that measures the average cost incurred to fill a job vacancy within an organization. By analyzing this metric, HR professionals can gain insights into the financial impact of their hiring efforts and make informed decisions to optimize recruitment strategies.

Calculation of Cost per Hire

Cost per hire is calculated by dividing the total recruitment costs by the number of hires made within a specific period. The formula is as follows:

Cost per Hire = Total Recruitment Costs / Number of Hires

Components of Recruitment Costs

Recruitment costs consist of various elements that contribute to the overall expenses incurred during the hiring process. Some common components include:

  • Advertising costs for job postings
  • Agency fees
  • Background checks and pre-employment assessments
  • Travel and accommodation expenses for candidates
  • Employee referral bonuses
  • Onboarding and training costs

Benefits of Analyzing Cost per Hire

By analyzing the cost per hire, organizations can achieve the following benefits:

  • Budget Optimization: Understanding the cost breakdown helps HR departments allocate their recruitment budget effectively and identify areas where cost savings can be made.
  • Performance Evaluation: Cost per hire serves as a performance metric for HR teams, enabling them to measure their efficiency and effectiveness in attracting and selecting candidates.
  • Process Improvement: By analyzing cost per hire over time, organizations can identify trends, spot inefficiencies, and implement process improvements to streamline their recruitment efforts.
  • Decision Making: With insights gained from cost per hire analysis, organizations can make data-driven decisions, such as whether to invest in alternative sourcing methods or enhance internal talent development programs.

Sample Cost per Hire Analysis

Sample Cost per Hire Analysis
Year Total Recruitment Costs ($) Number of Hires Cost per Hire ($)
2021 150,000 30 5,000
2022 180,000 40 4,500
2023 200,000 45 4,444

Based on the sample data above, we can see the trend of cost per hire over the years. It is evident that the cost per hire has been decreasing gradually, indicating potential improvements in the recruitment process efficiency.

Conclusion

Cost per hire is a vital metric that provides insights into the financial impact of the recruitment process. By analyzing this metric, HR professionals can optimize their recruitment strategies, allocate budgets effectively, evaluate performance, and make informed decisions. Regular monitoring of cost per hire and implementing process improvements can lead to more efficient and cost-effective hiring practices.