How to calculate cost per hire, and the three costs almost nobody counts

The external costs, which are the easy half

Advertising and job board spend, agency fees, assessment and testing tools, background checking, referral bonuses, relocation if you pay it, and the share of any recruiting software subscription attributable to the period. These arrive on invoices, which is why they are the half everybody counts. Attribute them to the requisition rather than to the month, because a figure per hire needs costs that belong to hires.

The three that are almost always missed

First, your own people's hours: the hiring manager's screening and interviewing, the recruiter's, the panel's, priced at their loaded hourly cost. Second, the cost of the vacancy itself if the role produces or bills, which is frequently larger than everything else combined. Third, the cost of the hires that did not work out, because a fill that leaves in three months means the requisition is paid for twice.

Keep internal and external cost per hire apart

External cost per hire is what you paid other people, and it is the number you can compare between channels and against an agency fee. Total cost per hire includes your own hours and is the number that belongs in a headcount plan. Blending them produces a figure that answers neither question. Work both, label them, and use the first to decide how to fill a role and the second to budget for filling it.

What the figure is for

Three decisions. Whether an agency fee is worth paying for a particular role, which is a comparison between the fee and your own total cost of filling it in house. What the next headcount plan should budget per hire, which needs the total rather than the external figure. And which sourcing channel is actually cheaper once your own hours are counted, which regularly changes the answer people assumed. The free sheet works all three from your own numbers.