TL;DR

Cost-per-hire is the total investment required to fill a single open position, calculated by dividing all internal and external recruiting expenditure in a period by the number of hires made. SHRM's 2024-2025 benchmarking data puts the US average at approximately $4,700, though executive and specialist roles routinely exceed $28,000. The SHRM/ANSI standard formula is the most widely accepted calculation method, covering both internal costs (recruiter salaries, time allocation) and external costs (job boards, agency fees, assessment tools).

Key Takeaways

• SHRM's 2024-2025 benchmarking puts the average US cost-per-hire at approximately $4,700 for a typical role; executive hires average $28,000 and tech/engineering roles average $6,200
• The SHRM/ANSI standard formula: Cost-per-Hire = (Total Internal Recruiting Costs + Total External Recruiting Costs) / Total Number of Hires in the period
• Internal costs include recruiter salaries, HR team time, referral bonuses, and internal system costs; external costs include agency fees, job board subscriptions, assessment tools, and background check services
• Agency fees remain the single largest driver of elevated cost-per-hire — a typical contingency agency charges 15-25% of first-year salary, which for a £50,000 role means £7,500-£12,500 per placement

FAQ

Q: How do you calculate cost-per-hire? A: Using the SHRM/ANSI standard: add all internal recruiting costs (recruiter salaries prorated to time spent, ATS licensing, referral programme payouts) and all external recruiting costs (job board fees, agency fees, assessment tool subscriptions, background check costs, careers site maintenance). Divide the total by the number of hires completed in the measurement period. For example: £200,000 total recruiting spend / 40 hires = £5,000 cost-per-hire. Include only costs attributable to hires that completed in the period, not roles still in progress.

Q: What is the difference between cost-per-hire and cost-per-applicant? A: Cost-per-applicant measures how much it costs to generate a single application — typically calculated as advertising and sourcing spend divided by applications received. Cost-per-hire measures the total investment to reach an accepted offer and includes all downstream costs (interviewing time, assessment, onboarding administration). Cost-per-applicant is useful for optimising top-of-funnel sourcing channels; cost-per-hire reflects the full economic efficiency of the recruiting function. A low cost-per-applicant channel that produces poor-quality candidates may result in a high cost-per-hire once interviewing and rejection costs are factored in.

Q: What drives high cost-per-hire? A: The three biggest drivers are agency usage (contingency fees of 15-25% of salary), slow time-to-fill (increasing recruiter time costs and extended vacancy costs), and poor sourcing channel mix (over-reliance on expensive paid channels rather than employee referrals or direct sourcing). Organisations with mature internal talent acquisition functions typically have cost-per-hire 40-60% lower than those relying heavily on staffing agencies, per Bersin by Deloitte benchmarking data.

Why Cost-per-Hire Matters Beyond Budget Tracking

Cost-per-hire is frequently treated as a budget control metric — a number finance tracks to ensure recruiting spend stays within approved headcount plan. That framing undersells its strategic value. A high cost-per-hire is often a symptom of sourcing channel misalignment: over-reliance on contingency agencies charging 15-25% of first-year salary, insufficient direct sourcing capability, or a weak employer brand that forces the organisation to pay premium for active candidate attention. Organisations that invest in diagnosing cost-per-hire by sourcing channel typically find that their single most expensive channel is also their lowest-quality channel — a double inefficiency that no budget line item makes visible.

SHRM's 2024-2025 benchmarking puts the average US cost-per-hire at approximately $4,700 across all roles, but this figure is misleading as an aggregate. Technology and engineering roles average $6,200; executive placements average $28,000; high-volume operational roles can be filled for under $2,000 through optimised careers site and programmatic advertising. Using a single company-wide average to evaluate recruiting efficiency flattens meaningful variation and obscures where the real cost drivers sit.

Bersin by Deloitte research found that organisations with mature in-house talent acquisition functions operate at cost-per-hire 40-60% lower than companies that rely heavily on staffing agencies for the same role types. This is the economic case for building internal sourcing capability: not that agencies are always the wrong tool, but that defaulting to them for roles that could be filled directly represents a systematic cost premium that compounds with every hire.

The SHRM/ANSI Cost-per-Hire Formula

The SHRM/ANSI standard formula divides total recruiting spend into internal and external cost categories:

Cost-per-Hire = (Total Internal Recruiting Costs + Total External Recruiting Costs) / Total Number of Hires in the Period.

Internal costs include recruiter and TA team salaries prorated to time spent on hiring activities, ATS and HRIS licensing fees attributable to recruiting, employee referral bonus payouts, recruiter travel, and HR business partner time on hiring-related activities. External costs include job board and aggregator fees, agency and executive search fees, assessment tool subscriptions, background check and right-to-work verification costs, careers site hosting and content production, and any programmatic advertising spend.

A worked example: a company makes 40 hires in a quarter. Internal costs total £90,000 (recruiter salaries for the quarter, ATS licensing, referral bonuses). External costs total £110,000 (job board spend, three agency placements at £12,000 each, background checks). Total spend: £200,000. Cost-per-hire: £200,000 / 40 = £5,000.

The most commonly disputed inclusion is hiring manager interview time. Strictly, the SHRM standard excludes it on the grounds that hiring managers are not a recruiting cost — they are business costs who also happen to interview. In practice, organisations that want to understand the true total cost of hiring include an estimated hourly rate for manager time per interview panel hour. This produces a more accurate figure but is harder to calculate consistently at scale.

Cost-per-Hire by Industry and Role Level

The $4,700 US average hides wide sector and role variation. Technology companies filling senior engineering roles regularly see cost-per-hire above $10,000 when agency usage, technical assessment tools, and extended sourcing campaigns are factored in. Professional services firms filling consulting associate roles through graduate recruitment programmes may achieve under $3,000 once the economies of scale of cohort hiring are applied. Healthcare and government roles, where credential verification and compliance checks are mandatory, carry structural cost premiums that push figures above the sector average regardless of sourcing efficiency.

The most dramatic variable is agency usage. A single agency placement at a 20% fee on a £50,000 salary costs £10,000 in external fees alone — before internal recruiter time is counted. The same hire made through direct LinkedIn Recruiter outreach might cost £1,500 in tool licensing and recruiter time allocation. Across 30 hires per year, that differential represents £255,000 in avoidable spend. This is the arithmetic that justifies in-house sourcing investment for most organisations above 100 employees making 20+ hires per year.

Cost-per-Hire in Practice

A talent acquisition director at a 600-person professional services firm begins tracking cost-per-hire by sourcing channel rather than as a single aggregate figure. The monthly breakdown reveals that employee referrals produce hires at an average of £1,200 per placement (referral bonus plus recruiter admin time), while agency placements average £9,000 per placement across the same role types.

The referral programme has historically had modest participation — approximately 8% of hires per quarter — because employees receive a flat £500 bonus regardless of role seniority and the payout timing is slow (paid at 3 months post-start). The director restructures the programme: bonuses scaled by seniority (£500 for individual contributor, £1,500 for manager, £3,000 for senior specialist), paid at 30 days post-start rather than 90. Participation increases to 22% of quarterly hires within two quarters. Agency placements decline proportionally. Annual cost-per-hire falls from £5,800 to £4,100, with no reduction in fill speed or quality of hire score — which the team measures quarterly through 90-day hiring manager surveys.