Everything You Need To Know About Cost-of-Hire

September 19, 2022
Nina Khorasanee
Everything You Need To Know About Cost-of-Hire

Cost of Hire measures the costs you have on average per hire. But don’t be fooled: this is not just another finance number. It also holds valuable insights on your talent acquisition team’s efficiency.

Q1: Why is CoH important?

Cost of Hire refers to the average costs that occur when you seal the deal and close a role. Where some roles may be more expensive than others, CoH display what a new hire costs on average.

This is important because it allows you to assess the health of your TA engine and forecast more accurately for your next hiring wave. Let’s quickly look at both these points.

  1. TA efficiency is extremely important, especially when you are preparing the team for the next big push. As the calculation behind CoH involves fees such as for staffing agencies or job advertisements, you can use the metric to understand if your TA engine is above or below market standards for your location. On average, the CoH ranges from $3-5k. However, economies of scale show their impact: Usually larger organizations have a lower CoH than smaller ones. A good tip is to look for benchmarks that include both your industry and geography.
  1. Forecasting your future CoH is key when it comes to resource-based planning in TA. Knowing what your next hires will cost allows you to budget and plan better. Make sure to include future efficiency gains and newly occurring costs for more senior hires in your calculation!

Q2: How do I calculate CoH?

Calculating your very own CoH is actually quite straightforward. You simply summarize your internal and external hiring costs, then divide them by your total number of hires. But of course, the devil is in the details!

There are two main things to take into consideration.  The first is your timeframe, and the second your individual cost factors.

  1. Your CoH will vary dependent on which timeframe you are looking at. You can calculate your CoH on a monthly, quarterly, bi-yearly, or yearly basis - and theoretically, everything in between! We recommend looking for periods of hiring activities that best resemble your TA motion.
  1. What you include in your CoH calculation directly impacts this metric. We recommend including the following cost factors:
    - recruiter salaries
    - acquisition costs like job boards
    - employer branding budget
    - external service fees, e.g. for recruiting agencies
    - technology cost

If you want to get the most accurate look at your own CoH make sure to check out our CoH template to get started!