Hiring new employees is one of the biggest tasks for any company. But have you ever thought about how much it actually costs to find the right person? Every time a business hires someone, it spends money on things like job ads, interviews, and background checks. These expenses add up, and if you’re not careful, they can take a big bite out of your budget.

That’s where Cost-Per-Hire (CPH) comes in. Knowing how much you spend to hire each employee can help your company save money, hire smarter, and make the whole process more efficient.

Let’s dive in and explore what cost-per-hire is, how to calculate it, and some ways to make it better. 

What Is Cost-Per-Hire?

Cost-Per-Hire is a simple way to figure out how much money you spend every time you hire a new employee. It includes all the money you spend on the hiring process, both inside your company and outside of it.

Here’s an example: If your company spends money on job ads, pays recruiters, and uses interview rooms, those are all part of your hiring costs. Add them up, and that’s your cost-per-hire.

Tracking this number can help you see if you're spending too much, or maybe not enough, to bring in the right people. A low cost-per-hire means you’re hiring efficiently, but a very low one might mean you’re cutting corners. A high cost-per-hire, on the other hand, suggests you may need to find ways to cut unnecessary costs.

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Why Does Cost-Per-Hire Matter?

Knowing your cost-per-hire helps you understand how much money you’re putting into recruiting. It also shows whether your recruitment process is working well or if it needs improvement.

For example, let’s say you’ve hired ten people over the last year, and your cost-per-hire is $6,000 per employee. If you realize that many of these new hires left the company after just a few months, it might mean that you're not investing enough in hiring the right people from the start. This could cost you more in the long run.

Here’s why cost-per-hire is such a big deal:

1. It helps you spend smarter: By knowing your hiring costs, you can figure out where you’re spending too much. Maybe you're paying for job ads on too many websites, or hiring agencies that charge a lot.
2. It shows you how efficient your hiring process is: A high cost-per-hire can mean that your process is slow or not reaching the right candidates. Improving it can save time and money.
3. It lets you measure success: If your cost-per-hire is low but you’re still hiring great people, it means your process is working. But if you’re spending a lot and not getting good results, something needs to change.

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How to Calculate Cost-Per-Hire

The good news is that calculating cost-per-hire is simple. You just need to know how much you’re spending on hiring and how many people you hired. The formula looks like this:

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

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What Are Internal and External Costs?

Let’s break it down:

• Internal Costs: These are costs inside your company. For example, the salaries of your HR team, referral bonuses, interview expenses (like renting a meeting room), or office equipment for hiring.
• External Costs: These are costs from outside sources. These can include job ad fees, recruitment agency fees, background checks, or travel expenses if you're flying someone in for an interview.

For instance, if you spent $60,000 last year on hiring, including HR salaries and job ads, and you hired 10 people, your cost-per-hire would be $6,000. This tells you how much it costs your company to hire one person.

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Why Is Monitoring Cost-Per-Hire Important?

Tracking cost-per-hire over time helps you keep tabs on your recruitment spending. It’s like a check-up on how healthy your hiring process is. Here’s why:

1. It Saves Money

By monitoring cost-per-hire, you can see where you might be overspending. Are you paying too much for job postings? Maybe you’re relying on expensive recruiters when you could be using employee referrals instead. Knowing where your money is going allows you to cut down on unnecessary expenses and save money.

2. It Points Out Inefficiencies

A high cost-per-hire can show that your hiring process isn’t as smooth as it could be. Maybe it’s taking too long to hire people, or you’re spending too much time on interviews with candidates who aren’t the right fit. Fixing these inefficiencies can lower your cost-per-hire and help you hire faster.

3. It Shows How Well You’re Doing

Cost-per-hire also gives you a clear picture of how well your recruitment efforts are working. If your cost-per-hire is reasonable and you’re getting great employees, you’re doing things right. But if it’s high and you’re not happy with the results, it might be time to adjust your strategy.

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How to Improve Your Cost-Per-Hire

So, now that you know what cost-per-hire is and why it matters, let’s look at some simple ways to improve it. Here are a few best practices to help lower your recruitment costs while still bringing in top talent.

1. Use Targeted Recruiting

Instead of posting job ads everywhere, focus on the platforms that are most likely to reach the best candidates for your roles. For example, if you’re hiring for a tech role, post on job boards that specialize in tech talent, like LinkedIn or Stack Overflow. This targeted approach saves money and helps you get better candidates.

2. Start a Referral Program

One of the easiest ways to reduce cost-per-hire is through employee referrals. Your current employees can recommend people they know, which often results in great hires. Plus, it’s cheaper than using a recruitment agency. Offering small bonuses or incentives for successful referrals can motivate your employees to help with hiring.

3. Leverage Social Media

Social media platforms like LinkedIn, Twitter, and Instagram are fantastic for recruiting. Not only can you post job openings, but you can also engage with potential candidates by sharing content about your company culture. Best of all, using social media is often free or very low-cost.

4. Write Better Job Descriptions

Job descriptions are your first chance to grab a candidate’s attention, so make sure they’re clear and appealing. Use the right keywords, focus on what makes your company unique, and make the responsibilities and qualifications crystal clear. A well-written job ad can attract the right talent and reduce the number of unqualified applicants.

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How Gloroots Can Help Lower Your Cost-Per-Hire

Using an Employer of Record (EOR) like Gloroots can make a huge difference in your recruitment costs. With Gloroots, you don’t need to worry about handling everything yourself; we take care of the hiring, onboarding, and payroll for you.

Here’s how Gloroots can help:

1. Faster Hiring: Gloroots speeds up the hiring process, helping you find talent quickly without wasting time.
2. Compliance Made Easy: We ensure your company complies with local employment laws, so you avoid fines or legal troubles.
3. Global Reach: Gloroots helps you hire talent from around the world, which opens up a bigger pool of candidates and allows you to find top talent at competitive rates.

By working with an EOR, you can focus on finding the best talent while leaving the heavy lifting to us.

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Conclusion: Boost Your Hiring Efficiency with Gloroots

Improving your cost-per-hire is one of the smartest ways to make your hiring process more efficient. By calculating and tracking your cost-per-hire, you can identify areas where you’re overspending, make smarter decisions, and ultimately bring in great employees without breaking the bank.

If you want to take your hiring process to the next level, Gloroots can help. Our platform makes it easy to hire and manage talent worldwide, reducing your recruitment costs and helping you find the best people for the job.

Ready to get started? Book a demo today and see how Gloroots can streamline your hiring and lower your cost-per-hire.

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