How to Calculate Cost Per Hire: Formula + Free Cost Per Hire Calculator

The cost per hire (CPH) formula is straightforward: add up all internal and external recruiting costs, then divide by the total number of hires in that period. The hard part is knowing what to count. Learn how to calculate CPH with these simple steps to calculate the metric, and you can benchmark and optimize every search. This article walks through the formula, a worked example, and a free calculator so you can run your own numbers in under five minutes.

If you want the full picture of what hiring costs beyond the formula itself, start with our overview of the real cost of hiring.

The Cost Per Hire Formula

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

That is the whole thing. Every variation you will find online is a version of this same equation. This CPH formula is the standard used across talent acquisition and HR teams to calculate CPH consistently, and the key is being honest about what goes into each bucket.

Internal costs are everything your team spends internally: the hours your HR staff, hiring managers, and interviewers put into the process, each valued at their hourly rate.

External costs are every dollar that leaves the company: job board fees, background checks, assessments, agency fees, and any other vendor or tool you pay to support the search.

Number of hires is the total headcount brought on during the specific period you are measuring. Divide your total recruiting cost by that number and you have your cost-per-hire for the period. If you are calculating cost per hire for a single search, that number is one.

A Worked Example with Real Numbers

Here is a straightforward example using a single hire for a Marketing Coordinator role at $52,000 per year.

Internal costs

External costs

The calculation

($976 + $500) ÷ 1 hire = $1,476 CPH

This is a simplified example covering the most common line items. Real costs often run higher once you account for extended searches, multiple interview rounds, and the time your team is not doing other work while the seat is open. The Society for Human Resource Management (SHRM) puts the average cost per hire at around $4,700 across all company sizes, and senior or specialized roles push well above that. As a headline HR performance indicator, it is worth getting right.

One cost this example does not capture: the cost of the role sitting empty while you search. That is a separate but equally important number. Run yours with the calculator below.

Internal vs. External Costs

Understanding the distinction between internal recruiting costs and external recruitment costs matters because they behave differently when you try to reduce them, and because each source of spend responds to a different fix in your recruiting process.

Internal costs are the hardest to see because they do not show up as a line item on any invoice. They are the indirect costs that live in your team’s calendars and quietly drain productivity. A hiring manager spending 15 hours on a search is spending 15 hours not managing their team, not closing deals, not building whatever it is they are supposed to be building. To calculate internal costs, multiply the number of hours each person spends on the hire by their effective hourly rate (annual salary divided by 2,080 working hours).

External costs are easier to track because they generate receipts. The most common ones are job listings, applicant tracking system and recruiting technology fees, background and reference check services, pre-employment assessments, and any agency or recruiter fees. If you used a staffing agency for the search, that fee alone can represent 15 to 25 percent of the hired candidate’s first-year salary and will likely be the largest single line item in your external spend.

The practical implication: internal costs reward a faster, tighter hiring process. External costs reward knowing in advance which tools and channels are worth paying for. The sum of your internal plus external spend is your CPH, so both sides of the recruitment process are worth watching. Both reward getting the hire right the first time. If you want to understand what a wrong hire costs on top of all of this, see our article on the cost of a bad hire.

How to Reduce Your Cost Per Hire

Once you can calculate the cost, the next step is to reduce costs and lower your cost per hire without lowering hiring quality. Optimizing your recruitment this way improves your average CPH over time. A few moves consistently move the number:

• Build an employee referral program. Referrals are one of the cheapest ways to source new hires and take pressure off your recruitment budget.
• Track your best sources. Measure which job board or channel produces top candidates and hires, then concentrate your recruitment efforts and HR budget there.
• Tighten the recruiting process. Every extra interview round adds internal cost, so give your recruitment team a clear, fast workflow to optimize your recruiting.

Small process changes like these are usually enough to cut the cost to hire a new employee and optimize your recruitment spend. Track the costs associated with hiring, review your CPH each quarter, and these changes compound as you make more hires — steadily lowering your average CPH and your total recruitment costs.

Use the Free Calculator

The formula above is useful. The calculator below is faster.

Enter your internal hourly rates, estimate your team’s time, add your external costs, and the calculator handles the math. It also shows you the cost of vacancy alongside your CPH so you can see the full financial picture of an open role.

Try the Cost Per Hire Calculator →

No spreadsheet required.

Free Template

Prefer to work in a spreadsheet? Download our free cost per hire template. It includes the formula pre-built, a line-item list of the most common internal and external cost categories, and a summary tab that calculates your CPH and recruiting cost ratio automatically.

Download the Free Spreadsheet Template →

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Common Mistakes When Calculating Cost Per Hire

Most cost per hire numbers are wrong in the same few ways. Avoid these and your CPH will actually be useful:

• Counting only external costs. Job board and agency invoices are easy to add up, but if you ignore internal recruiting costs — the HR and hiring manager hours — you can understate your true recruiting cost by half.
• Mixing in salary. Cost per hire measures what you spend to find and hire someone, not what you pay them afterward. Keep salary and onboarding training in your cost of employment, not your CPH.
• Using the wrong number of hires. Divide your total recruiting costs by the number of hires in the same specific period. Comparing a quarter of costs against a year of hires produces a meaningless benchmark.
• Never revisiting it. A single CPH figure is a snapshot. Recalculate it each quarter so you can benchmark trends, catch rising recruitment costs, and see whether your process changes are working.

Get these right and cost per hire becomes a reliable recruiting metric you can compare against the SHRM benchmark, track by role, and use to make a real case for how you invest your recruitment budget.

FAQ

What is a good CPH?

SHRM benchmarks the average cost per hire at around $4,700 across companies of all sizes. For entry-level and administrative roles, a CPH under $2,000 is achievable. For mid-level professional roles, $3,000 to $6,000 is a reasonable range. Senior or specialized positions often exceed $10,000. The most useful benchmark is your own historical data tracked consistently over time.

What should I include in cost per hire?

Include all recruiting-related costs incurred before the employee starts. That means internal staff time (HR, hiring managers, interviewers), external job advertising, background and reference checks, pre-employment assessments, agency fees, and any ATS or recruiting software costs allocated to that search. In short, include every cost associated with hiring — from recruitment marketing to external recruitment agencies — for a given number of new hires. Do not include salary, onboarding training costs, or equipment after the hire is made. Those belong in your total cost of employment calculation.

Does CPH include salary?

No. Cost per hire measures what you spend to find and hire the person. Salary, benefits, and payroll taxes are tracked separately as part of your total compensation cost. Including salary would make cost per hire unusable as a benchmarking metric since salary levels vary widely by role and market.

How often should I calculate it?

At minimum, calculate CPH annually so you have a baseline to improve against. If your company makes more than 10 hires per year, a quarterly calculation will show you seasonal patterns and help you catch rising costs before they compound. The companies that get the most value from this metric track it per role and per department, not just as a company-wide average. Tracking these data points over time surfaces clear areas for improvement and shows whether your changes are working.

Can cost per hire be too low?

Yes. A very low CPH can signal that you are underinvesting in the search, relying entirely on free or low-quality channels, and accepting the first available candidate rather than the right one. The goal is not the lowest possible number. It is the number that consistently produces great hires. Quality of hire is the metric that tells you whether your cost per hire is actually working.

Run Your Numbers

The formula is simple. The discipline is in tracking every cost honestly and using the result to make better decisions about where to invest in future searches. Break down CPH this way and calculate your CPH each quarter, and you will always know the financial resources you need to hire well.

Try the Cost Per Hire Calculator →