What Is Cost Per Hire (CPH)?
Cost per hire (CPH) is a metric for quantifying the total expenses incurred in the recruitment and hiring process for a new employee. It encompasses various direct and indirect costs, including advertising, recruiter fees, employee referrals, travel expenses, and administrative overheads. Calculating CPH provides insights into the efficiency and effectiveness of an organization’s recruitment practices. By analyzing CPH, managers can assess the impact of different recruitment strategies, evaluate the return on investment (ROI) of hiring efforts, and identify opportunities to streamline processes and reduce costs. Ultimately, understanding CPH helps leaders make informed decisions to optimize recruitment resources and improve overall talent acquisition outcomes.
How Do You Calculate Cost Per Hire?
To calculate the cost per hire (CPH), you need to sum up all expenses associated with the recruitment and hiring process for a specific position and then divide it by the total number of hires for that position within a defined period. Include direct costs like job advertising, recruitment agency fees, background checks, and any travel expenses incurred during the hiring process. Also, indirect costs such as internal recruiter salaries, referral bonuses, and overhead costs like office space and equipment usage should be evaluated. The formula for calculating CPH is:
CPH = (Total Recruitment Costs) / (Total Number of Hires)
For example, if your company spent $20,000 on recruiting in a quarter and filled four new positions, your CPH would be $5,000 ($20,000 / 4 hires). This calculation offers valuable insights into the efficiency and cost-effectiveness of your organization’s hiring processes.
Why Is Cost Per Hire Important For Businesses?
Cost per hire (CPH) is vital for businesses because it provides crucial insights into the effectiveness and efficiency of their recruitment processes. By understanding the total expenses incurred to bring in new talent, organizations can make informed decisions to optimize their hiring strategies and allocate resources effectively. A high CPH may indicate inefficiencies or excessive spending in the recruitment process, prompting businesses to explore cost-saving measures or streamline procedures. Conversely, a low CPH suggests efficient recruitment practices, enabling companies to maintain a competitive advantage and allocate resources to other critical areas. Ultimately, monitoring CPH helps businesses enhance their talent acquisition strategies, improve overall recruitment outcomes, and achieve better financial performance.
