What is cost per hire?
Cost per hire is a recruitment metric that measures how much a business spends to hire one employee. It includes expenses like job ads, recruiter fees, hiring software, interview time, and onboarding costs.
In simple terms, it shows the total investment needed to fill a role successfully.
What does cost per hire include?
A proper cost per hire calculation includes both direct and indirect recruitment costs.
Common costs include:
- Candidate travel expenses
Many SMEs forget to include internal staff time, which can quietly increase the real employee cost per hire. The more complex the hiring process, the higher the overall recruitment spend tends to be.
UK employer guidance from AXA UK reports the average UK hiring cost at around £6,125 per employee.
How is cost per hire calculated?
The standard cost per hire formula is:
Total recruitment costs ÷ Total number of hires
So, if a business spends:
- £1,000 on hiring software
- £1,500 on interview and onboarding time
The total hiring spend is £8,000.
If the company hires 4 employees, the cost per hire calculation is:
£8,000 ÷ 4 = £2,000 cost per hire
Why cost per hire matters for UK businesses
Hiring costs add up quickly, especially for SMEs working with tight budgets and lean teams. Tracking your cost per hire metric helps you understand whether your recruitment process is efficient or quietly wasting money.
It can also highlight problems such as:
- Over-reliance on agencies
- Expensive job advertising
How to reduce cost per hire
Reducing cost per hire in recruitment does not mean cutting corners. It means hiring smarter. Businesses can lower recruitment costs by:
- Building a stronger employer brand
- Using employee referral schemes
- Writing clearer job descriptions
- Speeding up interview stages
- Improving employee retention
According to LinkedIn’s Future of Recruiting report, companies using data-driven hiring processes are more likely to improve hiring efficiency and reduce wasted recruitment spend. Faster, more targeted hiring usually leads to a lower employee cost per hire over time.
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