Cost Per Hire Calculator

What Is Cost Per Hire?

Cost per hire measures the total expense a business incurs to fill an open position. It includes every dollar spent on recruiting, interviewing, and onboarding a new employee — from job board fees and recruiter costs to the internal staff time spent reviewing resumes and conducting interviews.

Most business owners underestimate this number significantly. They account for the obvious external costs like job postings but overlook the internal costs — the hours managers spend interviewing candidates, the HR time spent processing paperwork, and the productivity loss during the learning curve of a new hire. When you add it all up, the true cost per hire is often two to three times what owners expect.

Knowing your cost per hire helps you make smarter decisions about recruiting channels, retention investment, and whether to promote internally versus hire externally.

The Formula

Cost Per Hire = (Internal Recruiting Costs + External Recruiting Costs) / Number of Hires

Definitions

External recruiting costs are out-of-pocket expenses paid to third parties. This includes job board fees, recruiter or staffing agency fees, background check costs, drug testing, and any advertising costs related to the open position.

Internal recruiting costs are the value of time spent internally on the hiring process. This includes HR staff time, hiring manager interview time, and any administrative costs associated with processing the hire. To calculate these, multiply the hourly cost of each person involved by the hours they spent on the hiring process.

A Worked Example

A mid-size HVAC contractor hired 4 field technicians over the past quarter. Here are their costs:

External costs:

  • Job board postings: $800

  • Background checks (4 x $45): $180

  • Drug testing (4 x $35): $140

  • Total external costs: $1,120

Internal costs:

  • HR manager (8 hours x $35/hr): $280

  • Operations manager interviews (6 hours x $55/hr): $330

  • Onboarding and orientation (12 hours x $25/hr): $300

  • Total internal costs: $910

Total recruiting costs: $2,030 Number of hires: 4

Cost Per Hire = $2,030 / 4 = $507.50

External recruiting costs
Job board & advertising fees
$
Recruiter / staffing agency fees
$
Background checks
$
Drug testing
$
Other external costs
$
Total external costs: $1,120
Internal recruiting costs
HR staff time (hours x rate)
$
Hiring manager interview time
$
Onboarding & orientation time
$
Other internal costs
$
Total internal costs: $910
Number of hires
Total hires in this period
#
Total recruiting costs
$2,030
Number of hires
4
Cost per hire
$507.50
Internal costs represent 44.8% of total recruiting spend — often the most overlooked component.

Why This Number Matters

Cost per hire becomes especially valuable when compared to employee turnover. If your cost per hire is $500 and you lose a new hire within 90 days, you've spent that $500 for nothing and will spend it again to replace them. A business with high turnover and a $500 cost per hire that loses 20 employees per year is spending $10,000 just on recruiting — before accounting for lost productivity and training costs.

Tracking cost per hire over time also helps you evaluate which recruiting channels deliver the best candidates at the lowest cost. A $300 job board posting that delivers one quality hire beats a $100 posting that generates 50 unqualified applicants every time.

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