The average cost per hire in the US recruitment industry is approximately $4,700, with executive roles often exceeding $28,000, and high-demand roles costing $6,000–$12,000+. [1] Understanding your recruitment costs is crucial for making informed hiring decisions and optimizing your HR budget. This comprehensive guide will walk you through everything you need to know about calculating, analyzing, and optimizing your cost per hire in 2025.
What is Cost Per Hire?
The cost per hire is an important human resources metric that measures the average expenditure to fill a single open position, including all expenses from the initial job posting to the successful onboarding of a new employee. Cost per hire offers valuable insights into the efficiency of the hiring process. It also helps identify ways to optimize recruitment spending.
Why is Cost Per Hire Important?
The cost per hire metric serves as a benchmark for comparing recruitment efficiency across different departments, positions, and periods. By tracking this metric consistently, organizations can make data-driven decisions about their recruitment strategies and budget allocation. Understanding cost per hire is crucial for several reasons:
- Budgeting: It helps HR departments and hiring managers allocate resources effectively for future hiring needs.
- Efficiency Evaluation: Tracking cost per hire allows companies to assess the efficiency of their recruitment processes and identify areas for improvement.
- Benchmarking: Organizations can compare their cost per hire with industry averages to determine if they are spending too much or too little on hiring.
- Strategic Planning: Knowing the cost per hire aids in making informed decisions about workforce expansion and talent acquisition strategies.
- Cost Control: Identifying high-cost areas in the hiring process enables targeted cost-reduction efforts without compromising the quality of hires.
In 2025, with potential increases in automation and changes in the job market, monitoring the cost per hire will be vital for staying competitive. Using an Applicant Tracking System (ATS) effectively helps reduce Cost per Hire by directly cutting expenses, saving time, and improving the quality of the recruitment process simultaneously in several ways:
- Reduce Job Posting Expenses: ATS enables simultaneous job posting across multiple channels, such as various job boards and social media platforms. This eliminates the need to pay for separate postings on each channel and allows you to analyze which channels provide the best return on investment.
- Save HR and Manager Time: Automated resume screening helps reduce the time spent reviewing unsuitable applications. Interview management tools facilitate easier coordination, and automated reporting reduces time spent on documentation.
- Improve Sourcing Efficiency: The system helps better track and manage talent pools, allows reconsideration of previously suitable candidates for new positions, and provides an easily searchable resume database.
- Enhance Decision-Making: Reports and analytics from ATS help identify which recruitment channels offer the best value, determine average recruitment timeframes, and analyze costs for each stage of the process.
Manatal enables recruiters to manage their cost per hire with its comprehensive advanced reporting features. Recruiters can set up custom reports to monitor their performance, cost per hire metrics and monitor them in real time using Manatal’s reporting dashboards.
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Cost Per Hire Formula
This formula calculates the average cost of hiring one employee by adding up all the internal and external costs related to the hiring process and dividing them by the total number of hires made in a given period. This is a simple and easy-to-use formula, but it may not capture all the nuances and variations of the hiring process, such as the quality, time, and source of hire. The standard formula for cost per hire is:
Internal Costs
Internal costs represent all expenses generated within your organization during the recruitment process.
- Salaries of HR staff involved in recruitment
- Time spent by managers and team members on interviews and evaluations
- Administrative expenses related to hiring
- Training and onboarding costs
External Costs
External costs include all third-party expenses incurred during the recruitment process.
- Advertising and job posting fees
- Recruitment agency fees
- Background check and assessment costs
- Travel expenses for candidates or hiring teams
- Technology and software used for recruitment
Total Number of Hires
This is the number of employees hired during a specific period, such as a month, quarter, or year.
The specific costs included can vary by organization, so companies should define what to include based on their unique hiring processes.
Average Cost Per Hire by Industry
Cost per hire varies significantly across different industries due to varying skill requirements, competition levels, and recruitment complexities. Understanding industry benchmarks helps you evaluate whether your organization's cost per hire is competitive and identify opportunities for improvement. Let's explore the average cost per hire, based on data from Wellhub updated in January 2025, [2] which shows:
- Tech: The technology and innovation industry requires highly skilled and specialized professionals with expertise in software engineering, data science, and product development. The high ceiling for skills creates challenges for recruiters in this field, which also impacts the cost per hire.
- Healthcare and Medicine: The stringent requirements and regulatory compliance in this field often lead to a higher average cost per hire. The cost includes expenses related to background checks, verification of credentials, drug testing, and other compliance measures. Healthcare organizations also often need to invest in specialized recruitment channels, extensive interviews, and thorough reference checks to ensure they hire competent and ethical professionals who can provide the highest quality of care to patients.
- Retail and Hospitality: These industries typically experience a high turnover rate, resulting in a constant need for new hires. The average cost per hire is relatively lower in this sector compared to others. Mainly due to the large pool of available candidates and the high volume of applications received. However, recruitment costs still include job advertising, background checks, training, and onboarding expenses. Retail and hospitality companies often rely on job boards, online applications, and referral programs to attract a large number of potential employees at a lower cost.
- Finance and Banking: The industry's average cost per hire is influenced by several factors, including the need for strict background checks, thorough screening processes, and extensive interviews to ensure competence and integrity. Financial institutions use their networks, professional associations, and recruitment agencies to attract top talent.
How Do You Calculate Cost Per Hire?
Calculating cost per hire requires systematic tracking of all recruitment-related expenses over a specific period. Begin by establishing a clear timeframe for your analysis, such as quarterly or annually, and ensure you capture all relevant costs during that period. Calculating cost per hire involves these steps:
- Identify Internal Costs: Compile all internal expenses, such as HR salaries, staff time, and onboarding costs.
- Identify External Costs: Gather all external expenses, including advertising, agency fees, and technology costs.
- Sum the Costs: Add internal and external costs to get the total recruitment cost.
- Determine the Number of Hires: Count the total number of employees hired during the period.
- Apply the Formula: Divide the total recruitment cost by the number of hires.
Example
Suppose a company has these costs over a quarter:
- Internal Costs: $15,000
- External Costs: $10,000
- Total Hires: 10
The company spent an average of $2,500 per new employee.
What Factors Influence Your Cost Per Hire?
Several key factors significantly impact your organization's cost per hire, and understanding these variables helps you make strategic decisions about recruitment investments and process improvements.
Industry
Your industry plays a fundamental role in determining the cost per hire. Highly regulated industries such as healthcare and financial services often experience elevated costs due to extensive background checks, licensing verification, and compliance requirements. Technology companies typically face higher costs due to intense competition for skilled talent and the need for specialized technical assessments. Competitive sectors like technology and healthcare face higher costs due to talent shortages and specialized needs. For instance, tech companies spent $6,000–$8,000 per hire in 2023, and healthcare roles can cost $9,000–$12,000.
Staff Size
Organization size significantly impacts cost per hire through economies of scale and resource allocation efficiencies. Large organizations often benefit from dedicated recruitment teams, established processes, and volume discounts with recruitment vendors, potentially reducing per-hire costs.
Location
Geographic location substantially influences cost per hire through varying salary expectations, local competition levels, and cost of living differences. Organizations in major metropolitan areas typically experience higher recruitment costs due to increased competition for talent and elevated salary expectations.
Position Level and Types
The level and type of position being filled dramatically affect the cost per hire. Executive-level positions typically command the highest recruitment costs due to extensive search processes, executive search firm fees, and comprehensive evaluation procedures. These roles may require months-long search processes and significant investment in candidate assessment and evaluation. Executive and senior roles, requiring extensive recruitment efforts, can cost significantly more, with examples like $28,329 for executives. Entry-level roles, conversely, are typically lower, around $2,000–$3,000.
Conclusion
Cost per hire serves as a critical metric for organizations seeking to optimize their recruitment processes and make data-driven hiring decisions. By understanding the components of cost per hire calculation, industry benchmarks, and key influencing factors, HR leaders can develop more effective recruitment strategies and demonstrate the value of their talent acquisition investments.
Frequently Asked Questions
Q: How can companies use cost per hire to benchmark recruitment performance?
A: Organizations can use cost per hire as a key performance indicator. They compare their figures against industry averages, competitor data, or their historical performance. This metric helps determine if recruitment processes are cost-effective. It also highlights areas needing improvement. Companies can benchmark across various departments, job levels, or geographic locations. This approach helps them understand variations in recruitment costs. It also aids in optimizing resource allocation where these costs are highest.
Q: How often should companies calculate and analyze their cost per hire?
A: Companies should calculate the cost per hire monthly or quarterly to maintain timely insights into recruitment efficiency. Regular analysis allows organizations to identify trends, seasonal variations, and the immediate impact of process changes or market conditions. Annual reviews provide broader strategic insights, but more frequent monitoring enables quick adjustments to recruitment strategies and budget management.
Q: How can cost-per-hire data support decisions in workforce planning?
A: Cost per hire data informs workforce planning by helping organizations budget accurately for future hiring needs and determine the most cost-effective recruitment channels. This information guides decisions about whether to hire internally, use external recruiters, or invest in employer branding initiatives. It also supports strategic choices about the timing of recruitment campaigns and resource allocation across different talent acquisition methods.
Q: What are the most effective ways to communicate cost-per-hire findings to stakeholders?
A: Effective communication involves presenting cost-per-hire data through visual dashboards, trend charts, and comparative analyses that show performance against benchmarks and targets. Stakeholders respond well to reports that connect cost per hire to business outcomes, such as time-to-productivity or employee retention rates. Regular executive summaries highlighting key insights, cost savings achieved, and recommended actions help maintain stakeholder engagement and support for recruitment investments.
Q: How do internal and external hiring practices impact cost per hire differently?
A: Internal hiring typically has lower direct costs since it eliminates external recruiter fees and reduces advertising expenses, but may involve hidden costs like training and backfill requirements. External hiring often carries higher upfront costs through agency fees, job board postings, and longer screening processes, but can bring immediate expertise and fresh perspectives. The impact varies by role complexity, urgency, and available internal talent, with external hiring generally showing higher cost per hire but potentially faster time-to-productivity for specialized positions.
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Citations
[1] SHRM
[2] wellhub
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