What is Recruitment Cost?
Recruitment cost (cost per hire) is the total expense of filling a vacancy, including agency fees, job board advertising, internal recruiter time, interview panel time, and onboarding. Understanding this cost helps optimize recruitment channels and justify investments in employer branding. Plan your headcount budget with the Hiring Plan Calculator and measure the cost of losing people with the Employee Turnover Calculator.
The Formula
Cost per Hire = (Agency Fees + Job Board Costs + Internal Recruiter Time + Interview Panel Time + Onboarding) ÷ Number of Hires
Worked Example
3 hires in one quarter: 1 via agency ($15,000 fee), 2 via job boards ($2,000 total). 40 hours internal recruiter time at $30/hour. $4,500 total onboarding across all 3.
- Agency fees = $15,000
- Job boards = $2,000
- Internal time = 40 × $30 = $1,200
- Onboarding = $4,500
- Total recruitment cost = $22,700
- Cost per hire = $22,700 ÷ 3 = $7,567
📌 Average cost per hire: $7,567. The agency hire cost $15,000+ while the job board hires averaged $3,850 each, highlighting the cost premium of agency recruitment.
Why This Matters
Channel optimization
Tracking cost per hire by channel reveals where to invest. If LinkedIn direct sourcing costs $2,000 per hire vs $12,000 via agencies, shifting effort to direct sourcing saves $10,000 per hire, meaningful when hiring 10+ people per year.
Budget planning
Knowing your average cost per hire enables accurate budgeting. A plan to hire 8 people at $7,500 each requires $60,000 in recruitment budget on top of salaries, a number that surprises many finance teams.
Time-to-fill correlation
SHRM data shows a direct relationship between recruitment spend and time-to-fill. Companies spending below $3,000 per hire average 52 days to fill a role, while those investing $5,000-8,000 average 36 days. Each vacant day costs $500-1,000 in lost productivity, so underspending on recruitment often costs more than overspending.
Common Mistakes
❌ Ignoring interview panel costs
A 5-person panel spending 1 hour interviewing 6 candidates costs 30 person-hours. At $40/hour average, that's $1,200 in interview time alone, per hire. Structured interviews with fewer rounds reduce this without sacrificing quality.
❌ Not measuring quality of hire
A $2,000 hire who leaves after 3 months costs more than a $10,000 agency hire who stays 3 years. Track 12-month retention and performance by recruitment channel to understand true value, not just upfront cost.
❌ Excluding employer branding costs
Careers pages, employer review site management, recruitment marketing content, and social media employer posts all contribute to recruitment cost but rarely appear in per-hire calculations. Companies that track these indirect costs find they add 10-20% to the true cost per hire.
Industry Benchmarks
| Category | Good | Average | Poor |
|---|---|---|---|
| Cost per hire | Below $4,000 | $4,000-8,000 | Above $12,000 |
| Agency fee as % of salary | Below 15% | 15-20% | Above 25% |
| Time-to-fill (days) | Below 30 | 30-45 | Above 60 |
Source: Bureau of Labor Statistics & SHRM Human Capital Report
Benchmark data sourced from Bureau of Labor Statistics & SHRM Human Capital Report.