Cost per hire is an important metric to track to optimize your recruitment processes & save money in the long run. It compares your costs associated with the recruiting process of hiring employees to the industry standard for similar roles. It lets you know if you are spending too much compared to your competitors. If this is the case, then you know that you need to tweak your recruitment strategy to optimize it to save money.
Hiring is often one of the largest expenses in a company. If a company doesn’t have enough money to hire talent, it can’t scale or compete. To help manage downstream costs, hiring managers need a metric that measures the cost of hiring employees. The metric “cost per hire” does precisely this. This metric lets you know if you have under-or over-budgeted for the hiring process. If you’re spending more money than the industry average, you can change your strategies to minimize hiring time and keep recruiting costs down.
When determining the cost of hiring an employee, you should calculate all costs associated with hiring. This includes both internal and external costs such as interviews and head-hunters. You should then divide this sum by the number of employees in a department.