Cost per hire is a metric that estimates how much it costs your company to hire new workers.
One of the needs of a company is to evaluate the cost of each product or service sold by the company. Personnel costs are obviously included in this evaluation.
To monitor the cost of hiring you also need to monitor various aspects, such as internal and external recruiting costs, as well as the total number of hires for a particular period, for example, monthly or annually.
Let’s learn more about this concept and learn how to optimize expenses when recruiting your workforce.
Definition of cost for hiring personnel
The cost per hire is the overall cost of hiring or recruiting. The company calculates it including everything that has been spent to achieve this hiring.
Hiring employees is not an easy task for a company. The cost of hiring can vary greatly due to many factors that are not always taken into account. It is important to plan the hiring process and evaluate the costs involved.
How to calculate the cost of hiring employees
To calculate the expense for hiring personnel, use the following formula:
(Internal recruitment costs + External recruitment costs) / total number of hires = Cost per hire.
Internal recruiting costs refer to the internal personnel, capital, and organizational costs spent to fill a given position. These costs may include internal salaries for the talent acquisition team, salary costs for time spent by hiring managers, referral program costs (e.g., employee bonuses), etc.
External recruitment costs refer to any expenses for external suppliers or individuals that may exist during the recruitment process. These costs may include third-party agency fees, job postings, background checks, branding activities (e.g., career fairs), etc.
It can be calculated a priori by taking the projections in terms of number of hires with the potential costs, or a posteriori by evaluating the costs during the past year.
Tips to improve your staff hiring process
If you follow these tips you can make the hiring process more efficient, and therefore, optimize your recruiting process:
- Prepare for recruitment (expression of need)
- Define the profile of the new employee
- Write the job offer
- Choose the means of dissemination of the job offer
- Analyze and classify the applications received, verify their references
- Send answers and information to candidates selected in the interview
- Conduct the interviews. Check out the interview rate for hiring personnel.
- Select the candidate according to previously established criteria
- Give the new employee the good news that they are part of the team.