Cost Per Hire: Formula, Benchmarks, and How to Reduce It

Cost per hire is the total internal and external recruiting spend divided by the number of people you hired in the same period. The standard cost per hire formula is:

Cost per hire = (Internal recruiting costs + External recruiting costs) / Total hires

The calculation is simple. Getting a useful number is harder because many teams count invoices but leave out recruiter time, hiring manager time, interview coordination, and onboarding work.

This guide shows how to calculate cost per hire, how to read a benchmark, and how international staffing can change the economics without treating a low upfront number as proof of a good hire.

What is cost per hire?

Cost per hire, often shortened to CPH, measures what your organization spends to fill a position during a defined period. SHRM's benchmarking research is the usual reference point for the standard formula and recruiting cost categories.

Include two types of spending:

• Internal recruiting costs: recruiter wages, hiring manager time, HR and applicant tracking software, interview coordination, and internal recruiting operations.
• External recruiting costs: job advertising, agency fees, background checks, assessments, travel, relocation, and other vendor costs.

Keep the period consistent. If you total recruiting costs for one quarter, divide by the hires made in that quarter. If a recruiter works on several roles, allocate their time across those roles instead of assigning the full salary to one hire.

How to calculate cost per hire

Use these three steps for a cost per hire calculation that reflects the work your team actually does.

1. Add internal recruiting costs

Start with time. Multiply the hours each person spends on recruiting by their fully loaded hourly cost, which includes salary and employer costs. The U.S. Bureau of Labor Statistics employer cost data is a useful reference for understanding the difference between wages and total employer compensation.

Then allocate shared costs such as:

• Applicant tracking system and HR software
• Recruiting team management
• Interview scheduling and coordination
• Skills testing and internal assessments
• Onboarding preparation and training time, if your version of CPH includes the post-hire period

2. Add external recruiting costs

Review the invoices and expenses linked to the role. Depending on your process, that can include:

• Job board and recruitment advertising fees
• Search or staffing agency fees
• Background checks and reference checks
• Candidate travel and relocation
• Immigration or employment setup work
• Equipment and remote-work setup

Separate recruiting cost from compensation. The employee's salary belongs in your workforce budget. It only belongs in CPH if you are calculating a broader cost-to-hire or total hiring investment measure.

3. Divide the total by hires

Imagine your team spends $47,000 on internal and external recruiting in a quarter and makes 10 hires:

$47,000 / 10 hires = $4,700 cost per hire

That is a cost per hire example, not a universal benchmark. The right comparison is another period with a similar role mix and hiring volume.

Average cost per hire and benchmarks

There is no single useful cost per hire benchmark for every company. Entry-level hiring, specialist hiring, executive search, and high-turnover sales hiring create very different cost profiles.

Use this practical range as a budgeting framework, not as a claim about every employer:

SHRM's current benchmarking resource is the right place to check published HR benchmarks and methodology. Avoid presenting a single average cost per hire as a target. A $4,700 average can hide a low-cost, high-volume hiring program alongside a much more expensive specialist search.

What drives cost per hire up?

The biggest cost drivers are usually visible in your recruiting funnel, not hidden in the formula.

Time to fill

An open role consumes recruiting and manager time while the team loses the output that role was meant to produce. LinkedIn's Global Talent Trends report shows how hiring conditions and talent movement vary across markets, so compare time to fill by role and location rather than using one company-wide average.

Agency fees

An agency fee based on first-year salary grows with the role's compensation. Compare the fee, the replacement terms, the shortlist quality, and the time saved. The cheapest percentage is not always the lowest total cost.

Rework

Every extra interview, duplicate assessment, and unclear approval adds labor. A defined scorecard and a decision owner reduce work before it reaches the offer stage.

Turnover

If someone leaves after six months, the original CPH did not buy a full year of capacity. Track cost per hire by recruiting source and connect it to 90-day performance and 12-month retention.

A weak hiring process

Unclear requirements create broad shortlists. Broad shortlists create more interviews. More interviews slow decisions and increase the chance that strong candidates accept another offer.

Cost per hire vs. cost to hire

Cost per hire normally measures the recruiting cost of each completed hire. Cost to hire is sometimes used more broadly to include onboarding, equipment, training, and lost productivity during the ramp period.

Choose one definition and use it consistently. A useful dashboard can show both:

• Recruiting CPH: sourcing through accepted offer
• Total cost to hire: recruiting CPH plus setup, onboarding, and ramp costs

This distinction matters when you compare a local hire with a remote or international hire. A lower recruiting number is not useful if setup, management, or replacement costs erase the difference.

How international staffing can reduce hiring costs

International staffing can lower the cost of hiring by changing both the talent market and the operating model. The comparison should include the staffing partner's fee, compensation, payroll and HR administration, equipment, onboarding, and manager time.

Conexo recruits and supports full-time international professionals for companies worldwide. Its service page lists rates starting at $11 CAD per hour and reaching $19 CAD per hour for specialized expertise, with the exact recruitment fee confirmed before a deposit. It also states that the first shortlist usually arrives within 3 to 4 weeks and that placements include a 12-month replacement guarantee.

The model is different from a one-time candidate introduction. Conexo describes a process that includes sourcing, testing, reference checks, employment, payroll, HR administration, onboarding, and performance follow-up. That makes the partner fee part of the operating cost, not just a recruiting fee.

Conexo hires from more than 50 countries, including Madagascar, the Philippines, India, Morocco, Kenya, and markets across South America. It also hires English- and French-speaking professionals, which can matter for customer support, sales development, finance, and documentation-heavy roles.

A simple international staffing comparison

Build the comparison from your own numbers. Do not compare a local employee's full cost with an international worker's hourly rate alone.

The decision is sound when the model lowers total cost while keeping performance, communication, and retention at an acceptable level. Start with one role family, define success at 30 and 90 days, and compare the result with your existing CPH.

How to reduce cost per hire

These changes lower waste without asking the team to hire faster at any cost:

1. Use one scorecard per role. Define the must-have skills and the evidence that proves each one.
2. Measure recruiter and manager hours. Add time to the formula instead of treating it as free.
3. Track CPH by source. Compare referrals, inbound applicants, agencies, and international staffing separately.
4. Shorten approval loops. Name the decision owner before interviews begin.
5. Review the first 90 days. A cheap hire who cannot perform is an expensive repeat search.
6. Model retention. Add replacement probability to your forecast when a source has high early turnover.
7. Test international hiring on repeatable work. Customer support, sales development, bookkeeping, operations, software development, and administrative work can often be assessed with a clear practical test.

For a role that depends on outbound sales, compare the full cost of building a remote cold calling team with local recruiting and management costs. For senior roles, compare the model with executive search firms and international staffing.

What to track alongside CPH

CPH tells you what you spent. It does not tell you whether the hire worked.

Track these measures beside it:

• Time to fill: Days from approved requisition to accepted offer
• Time to productivity: Days until the hire meets the role's agreed output standard
• Quality of hire: A documented 30-, 60-, or 90-day manager assessment
• Offer acceptance rate: Accepted offers divided by offers made
• Early turnover: Hires leaving within 90 days or 12 months
• Cost per productive hire: Total hiring investment divided by hires who reach the agreed performance standard

This view stops a low headline CPH from hiding poor retention or slow ramp-up.

FAQ

What is the cost per hire formula?

The cost per hire formula is (Internal recruiting costs + External recruiting costs) / Total hires in the period. Include recruiter and hiring manager time, software, advertising, agency fees, assessments, and other costs tied to filling the roles.

How do I calculate cost per hire?

Choose a consistent period, total internal and external recruiting costs, and divide by the number of hires made in that period. Break the result down by role, department, location, and source so the average does not hide expensive searches.

What is the average cost per hire?

There is no universal average cost per hire that works as a target. SHRM's benchmarking resource provides published HR benchmarks, but your meaningful baseline is your own CPH by role and hiring channel.

What is a good cost per hire benchmark?

A good benchmark is one that matches the role, market, seniority, and quality standard you need. Compare CPH with time to fill, quality of hire, and retention instead of optimizing the lowest possible number.

What costs should be included in cost per hire?

Include internal labor, HR and applicant tracking software, job advertising, agency fees, assessments, background checks, travel, relocation, and other recruiting expenses. Add onboarding and ramp costs separately if you want a broader cost-to-hire measure.

How can international staffing reduce cost per hire?

International staffing can reduce CPH through a different compensation market and a partner-led recruiting, employment, payroll, and HR process. Compare the complete cost, including partner fees, management time, equipment, onboarding, and replacement terms, before deciding.

Is cost per hire the same as recruiting cost per hire?

Usually, yes. Both terms normally describe recruiting spend divided by completed hires, but companies define them differently. Write down whether your metric includes onboarding, ramp time, equipment, or lost productivity.

What is the cost per hire calculation in Excel?

Put total internal and external recruiting costs in one cell and total hires in another, then divide the first cell by the second. In Excel, a simple formula is =TotalRecruitingCosts/TotalHires; add separate columns if you want to compare role, source, or quarter.

Sources & References

• SHRM Benchmarking: formula and HR benchmarking context
• LinkedIn Global Talent Trends: hiring and talent movement data
• U.S. Bureau of Labor Statistics Employer Costs: employer compensation context
• Conexo Global and Remote Staffing: service model, rates, shortlist timing, and guarantee
• Conexo Remote Cold Calling Team Guide: remote sales team planning

If you want to test the numbers for a specific role, talk to Conexo about the role, target skills, timeline, and expected budget.