Published on
July 28, 2023

How to reduce your cost-per-hire in 5 easy steps

Fair or not, recruiting departments today face the constant pressure to reduce cost-per-hire. Here’s how to optimize your recruitment process for a reduced CPH.

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Do you know your how much you spend on a hire? What you are spending on your hires now is an essential point of comparison for optimizing your talent attraction process and your costs.

According to the Society for Human Resource Management’s (SHRM’s) new Human Capital Benchmarking Report, the average cost-per-hire is $4,129.

Of course your cost per hire can highly depend on other factors, such as the industry you are recruiting in, your recruitment methods and the availability of the talent you are looking for. Here are some industry benchmarks to give you a general idea:

Industry benchmarks

  • $4129: according to SHRM
  • $4000: according to Bersin
  • $3400: cost for an entry-level employee
  • 16% of annual salary: cost for a 30K or less job
  • 20% of annual salary: cost for a 75K or more job


How to calculate your cost per hire

The way you can easily calculate your cost per hire, is like this:

CPH is the average amount of money you spent on making a hire. This is calculated as recruitment costs divided by the total number of hires.

Before you start calculating, chose a fixed time-frame for the numbers, such as a business year or a quarter.

Firstly, you can estimate the number of hires. This can be one of your KPIs, a company estimate or a definitive plan of hires.

Secondly, you can estimate your recruitment costs by adding up internal and external recruitment costs, such as what you spend on advertising on job boards, recruiter costs or external agencies.

Once you have a rough number, you can simply divide the recruitment costs with the total number of hires, and you have your cost per hire.

For example, if you plan to hire 100 people in a year, and your estimated a total spend of $412,900 for recruiting, your cost per hire is $4,129.

So what would happen if you wanted to reduce your CPH? Because decreasing the number of hires is not an option in most cases, the answer is to reduce your recruitment costs.

Optimize your recruitment process to reduce cost-per-hire

Every industry and company is different, but there some tips and tricks you can follow in order to reduce your costs. Below are our tips on how to optimize your current process so you can push down the cost per hire.

1. Keep your data up to date

It’s simple; you cannot base measurements on outdated data. Checking your cost per hire regularly, and if possible, analyzing it by other factors such as department, position or time per hire helps you with having accurate estimates.

If possible, you should analyze their correlations with each other and use cost per hire data for strategic planning.

Pro-tip: did you know Q5 is the perfect moment for low talent acquisition costs

2. Reach out to your network

Referrals are still the most effective way to get hires; 45% of hires are through referrals.

Reaching out to as many people as possible in your network is one of the cheapest ways to find your next hire. You should also use the network of every employee at the company; you multiply your chances by just letting them know who you are looking for.

Reaching out to your network is even easier online.

3. Utilize internal resources

If you don’t have one already, set up a dedicated career site as part of your company website and post your jobs there.

If you already use a hiring software, a branded career site can be set up for you easily. For example, Wonderkind uses Recruitee and LeadBoost to optimize the career page for you.

Sometimes, simple things like increasing the visibility of the career page on your website, or adding a popup ‘we are hiring’ can make a huge difference. If your company is running any form of ongoing marketing campaign, see where you can try and spread the word that your company is hiring.

4. Go online!

Being active on sites such as LinkedIn, or using free platforms to advertise your jobs is much easier and cheaper than traditional methods, and is the backbone of modern recruitment. You can also post jobs on Facebook, or advertise open positions on social media.

This way, you can also reach passive candidates, who are not actively browsing job boards and job posting sites – which gives you a 80% bigger talent pool to hire from.

Social media advertising makes it easy to tailor your job ads to exact audiences and also update and adapt advertising campaigns whenever you need to.

5. Upgrade your tooling & automate

Take a critical look at your current tooling and paid recruitment solutions. Are they working? Is there maybe a cheaper alternative that works better? Is there something you can introduce in your recruitment process that can help you cut costs?

Simple things like opting for a Skype interview can reduce the cost of your hire already. Also, you might already be using an applicant tracking system where you can expand your plan and start using candidate screening.

This can help you with filtering out the right candidates for a personal meeting, so you don’t waste your budget on unfitting hires.

You can also integrate your ATS with other solutions, such as automated job ads on social media. Especially if you are looking to fill a larger amount of positions, repetitive tasks such as posting jobs online can take up a lot of your time, and reducing your efficiency.

Automating the recruitment process can help you reduce your cost per hire by 84%, like our solution did for KFC.

The Takeaways

In order to successfully reduce your cost per hire, you first need to be aware of it. By calculating your cost per hire, you can set up goals and comparisons.

Applying methods from as simple as letting your colleagues know that you are recruiting to upgrading your tooling are ways to reduce your recruitment costs, and therefore your CPH.

Wonderkind helps companies reduce their cost per hire with AI-driven technology that finds talent where its active. If you have any questions, contact us for a demo.

Want to learn more about our Talent Attraction Technology?

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