How to calculate cost per hire: the formula and a free cost per hire calculator
To work out cost per hire (CPH), add all internal and external recruiting costs for a specified time period, then divide by the number of new hires in that period. The formula is one line; the skill is in knowing what to count and what to leave out.
In this guide you will learn how to calculate your CPH with the formula, a worked example with every line shown, the mistakes that skew the number, and a free calculator that does the math for you. For what hiring costs in the Treasure Valley, including local wages, read our pillar guide to cost per hire in Boise.
What is the cost per hire formula?
Cost per hire = (total internal recruiting costs + total external recruiting costs) ÷ total number of hires. The metric measures what you spend to fill a seat, not what you pay the person once they start.
This is the definition set by the ANSI/SHRM cost-per-hire standard, the one the Society for Human Resource Management uses in its benchmarking. Every “cost to hire formula” you will find online is a version of it.
The standard splits every recruiting dollar into two buckets: internal and external costs (SHRM, 2023). Internal costs are what your own people spend on the search. External costs are the invoices you pay to outside vendors.
The number of hires is the count of internal and external hires who started in the same period as the costs. For a single search, that number is one.
How do you calculate cost per hire step by step?
Pick a specific period, list all costs associated with hiring inside it, add them, and divide by the hires who started in that period. These five steps to calculate CPH cover it.
- Choose the period. A quarter or a year works for the whole company; a single search works for one role. Costs and hires must come from the same window.
- Value your team’s time. For each person involved, multiply their hours on the search by their hourly rate. A simple hourly rate is annual salary ÷ 2,080 working hours.
- Add the external invoices. Job ads, background checks, assessments, recruiter fees and the share of your applicant tracking system (ATS) used for the search.
- Add the two totals together. That sum is your total recruiting cost for the period.
- Divide by the number of hires. The result is your CPH.
Step two is the one most companies skip, and it is often the bigger half. In one industry report, a consultant put hard costs at 30 to 40 percent of the total and soft costs, mostly people’s time, at about 60 percent (SHRM, 2022).
What does a cost per hire calculation look like with real numbers?
Here is one hire for a marketing coordinator role paying $52,000 a year. Internal time comes to $976, external spend to $500, so the CPH is $1,476.
The HR generalist earns about $58,000 a year, which is $28 an hour. The hiring manager earns about $108,000, which is $52 an hour.
| Cost line | Internal or external | Amount |
|---|---|---|
| HR screening, resume review and phone screens (16 hours × $28) | Internal | $448 |
| Hiring manager interviews (8 hours × $52) | Internal | $416 |
| Offer and pre-start paperwork (4 hours × $28) | Internal | $112 |
| Job board postings on two sites | External | $350 |
| Background check | External | $80 |
| Skills assessment | External | $70 |
| Internal subtotal | Internal | $976 |
| External subtotal | External | $500 |
| Cost per hire: ($976 + $500) ÷ 1 hire | Both | $1,476 |
The rates and hours are illustrative, so swap in your own data points. Notice that internal time is two thirds of this total, even on a simple search with no agency fee.
Real searches usually run longer. The 2026 benchmarking data puts the median time to fill a nonexecutive role at 39 calendar days, and every extra interview round adds hours to the internal lines (SHRM, 2026).
If you would rather not build the table by hand, the free cost per hire calculator takes the same rows and does the math.
What counts as internal and external recruiting costs?
Internal costs are the hours your staff put into the search, valued at their pay. External costs are anything you pay an outside party to find, test or check candidates.
Internal costs include:
- Recruiter and talent acquisition time sourcing, screening and scheduling
- Hiring manager and panel time preparing for and running interviews
- Time spent writing the job description, checking references and making the offer
- Any internal recruitment team salary allocated to the period
External costs include:
- Job board fees and recruitment marketing
- Recruiter fees or external recruitment agencies
- Background checks, drug screens and pre-employment assessments
- ATS and recruiting software, allocated to the period
- Candidate travel, career fairs and referral bonuses
Internal costs are the hardest to see because no invoice arrives. A hiring manager who spends 15 hours in the recruiting process is not managing their team for those 15 hours.
External costs are easier to track because they come with receipts. The single largest external line, when you use one, is usually a recruiter fee. Our guide to internal vs external recruitment covers when that fee is worth paying.
What should you leave out of the cost to hire formula?
Leave out the new hire’s salary, benefits, payroll taxes, equipment and onboarding training. Those are the cost of employing someone, and mixing them in makes your CPH impossible to compare.
Benefits alone are large: in June 2026 they made up 30 percent of private-industry compensation (BLS, 2026). Add them to CPH and a senior hire looks far more expensive to recruit than a junior one, even when the search cost the same.
Keep cost per hire for recruiting and track the cost of employment separately. The pillar guide breaks the full cost of employment down line by line in what it costs to hire an employee in Boise.
What is a good cost per hire?
SHRM’s 2025 benchmark puts the average cost per hire at $5,475 for nonexecutive roles and $35,879 for executive roles. A good CPH sits at or below the benchmark for that seniority without stretching time to fill or lowering hiring quality.
Those figures are averages, and a few expensive executive and specialist searches pull them up (SHRM, 2025). A coordinator hire like the example above should land well under the average CPH for nonexecutive roles.
Your own history is the benchmark that matters most. Track CPH per role family and by quarter, and compare like with like.
What mistakes make a cost per hire calculation wrong?
Most wrong numbers come from four habits: counting only invoices, adding salary, mismatching periods and calculating once. Each one is easy to fix.
- Counting only external costs. Advertising and agency invoices are easy to total, but ignoring internal time can leave out most of the true cost.
- Adding salary. CPH measures the search, not the paycheck. Keep salary and training in your cost of employment.
- Mismatching the period. Divide a quarter of costs by a quarter of hires. A quarter of costs against a year of hires produces a meaningless figure.
- Calculating it once. A single figure is a snapshot. Recalculate every quarter so you can spot areas for improvement early.
How can you lower your cost per hire without hiring worse?
Cut the hours, not the quality of hire. Shorter processes, better sources and fewer failed hires reduce costs far more than squeezing vendor fees.
- Tighten the process. Screening and interviewing each average 8 to 9 days (SHRM, 2025). Fewer rounds in the hiring process means fewer internal hours. Our guide on how to reduce time to hire shows where the days go.
- Track your best sources. Measure which channel produces hires, not just applicants, and move your recruitment budget there.
- Build an employee referral program. A referral bonus is often cheaper than repeated ad spend.
- Avoid the rehire. A failed hire doubles your CPH for that seat, because you pay for the whole search again. Read the true cost of a bad hire for the full bill.
Frequently asked questions
Does cost per hire include salary?
No. Cost per hire covers what you spend to find and hire a new employee, while salary, benefits and payroll taxes belong in your cost of employment.
How often should you calculate cost per hire?
Calculate it at least once a year to set a baseline, and quarterly if you make more than a handful of hires. Tracking it by role and department shows where your recruitment efforts are getting more expensive before costs compound.
What is the recruitment cost ratio?
The recruitment cost ratio is total recruitment costs divided by the total first-year compensation of the people hired, shown as a percentage. It complements CPH by showing hiring spend relative to what the roles pay.
Can cost per hire be too low?
Yes, a very low figure can mean internal hours are missing or the search was rushed. Replacing an employee can cost from 40 percent of salary for frontline roles to 200 percent for leaders, so a cheap search that ends in a rehire is the expensive option (Gallup, 2024).
Run your own numbers
The formula is simple; the discipline is counting every hour and every invoice in the recruitment process. Put your figures into the free cost per hire calculator and see your cost of vacancy alongside it.
If the number surprises you and you want to optimize your recruiting, book a call with RNG Group. We are a Boise direct-hire recruiting firm, and we will tell you honestly whether your search needs outside help.
Filed under: Direct-Hire Placement
