Want to know how much it costs to hire an employee through different recruitment channels? Here’s a quick breakdown:

• Cost-Per-Hire (CPH): Calculate total recruitment costs (internal + external) divided by the number of hires. For example, if you spend $80,000 to hire 20 people, your CPH is $4,000.
• Why It Matters: Analyzing CPH by channel helps identify the most cost-effective methods, optimize budgets, and improve hiring strategies.
• Key Recruitment Channels: Job boards, employee referrals, social media, agencies, career fairs, and AI tools like Ribbon.
• Steps to Calculate CPH:
  1. Track all internal (HR salaries, tools) and external costs (ads, job boards).
  2. Use the formula: CPH = Total Costs / Number of Hires.
  3. Compare costs across channels to see what works best.
• Tools You Need: ATS systems, Google Analytics, and expense tracking tools to monitor costs and outcomes.

Example Comparison:

Takeaway: Regularly review CPH data to focus on high-performing channels and cut costs. Tools like AI-driven Ribbon can streamline this process, saving time and money.

Cost Per Hire Metric - HR Metrics

Steps to Calculate Cost-Per-Hire

The Cost-Per-Hire Formula

To measure how much it costs to hire someone, use this formula:

CPH = (Total Internal Costs + Total External Costs) / Total Number of Hires

For instance, if your internal costs total $50,000, external costs are $30,000, and you hire 20 people, your cost-per-hire would be $4,000 ^[1]. Breaking costs into internal and external categories helps make the calculation more accurate.

Breaking Down Internal and External Costs

Understanding where your recruitment dollars go is key to assessing the performance of different hiring strategies. Here’s a breakdown:

Carefully tracking these costs ensures your calculations stay accurate ^[1][2].

Choosing a Time Frame for Analysis

Pick a consistent time frame, like quarterly or annually, to capture seasonal changes and long-term patterns ^[1]. This approach allows you to:

• Spot trends: See how recruitment costs shift over time.
• Plan budgets: Make better predictions for future hiring expenses.
• Compare channels: Assess which recruitment methods work best.

With a clear time frame and detailed data, you’re ready to dive deeper into analyzing specific recruitment channels.

Guide to Measuring Cost-Per-Hire by Channel

Setting Up Tools to Track Data

To measure cost-per-hire by channel effectively, you need tools that monitor candidate sources, expenses, and outcomes in real-time. These tools should cover every stage of your recruitment funnel.

Adding UTM parameters to job postings can help track where applications are coming from. Once your tools are set up, you’ll need to organize the data for analysis.

Organizing Data for Analysis

Properly structuring your recruitment data is key to analyzing channel performance. Pay attention to these categories:

With this framework, you can calculate and compare cost-per-hire across different channels to pinpoint the most productive ones.

Calculating and Comparing Channel Costs

Here’s how to calculate cost-per-hire for each channel:

1. Add Up Total Channel Costs
   Combine all channel-related expenses. For example, LinkedIn costs might include recruiter licenses, sponsored posts, and part of your ATS costs.
2. Count Channel-Specific Hires
   Track the number of hires from each channel. According to SHRM, the average cost-per-hire across industries is roughly $4,000, but this can vary widely by channel ^[1].
3. Use the Cost-Per-Hire Formula

   Channel CPH = (Channel-specific costs) / (Number of hires from channel)
   

To make comparisons easier, create a dashboard like this:

Review these metrics every quarter to refine your recruitment budget and focus on channels with the best return on investment ^[1][3]. Using AI-driven tools can streamline data collection and analysis, saving time and improving accuracy.

sbb-itb-c0f5693

Using Cost-Per-Hire Data to Improve Hiring

Assessing Channel Performance

Evaluating how well your recruitment channels are performing means looking at both numbers and quality. Here's a quick breakdown of key metrics:

For example, employee referrals cost about $625 per hire, while job boards average $1,667. Plus, referred employees tend to stick around 40% longer ^[1].

Reallocating Budgets for Better Results

To get the most out of your hiring budget, focus on spotting underperforming channels and reallocating funds where they'll make a bigger impact. Here's how:

• Identify Cost Outliers: Compare your channel costs to industry averages ^[1][3].
• Analyze ROI: Look at the total value - this includes recruitment costs, the time it takes for new hires to become productive, their tenure, and performance.
• Make Strategic Adjustments: Shift resources gradually based on what the data shows. For instance, LinkedIn averages $1,500 per hire and consistently delivers strong results, while general job boards cost more ($1,667 per hire) but often bring in lower-quality candidates.

AI tools can simplify this process by providing more accurate data and automating tasks, saving both time and money.

How AI Tools Like Ribbon Can Help

AI-powered recruitment platforms, such as Ribbon, can take your hiring strategy up a notch by automating tedious tasks and offering actionable insights. Here's what Ribbon brings to the table:

Ribbon also integrates with ATS systems and supports multiple languages, making it easier to manage hiring across different markets. Its features, like interview summaries and candidate insights, help pinpoint the channels that consistently deliver top candidates, enabling smarter recruitment decisions.

Summary and Final Thoughts

Key Takeaways

Here’s how you can refine your cost-per-hire strategy and the benefits each action offers:

By systematically applying these steps, you can make smarter, data-backed hiring decisions. Incorporating AI tools into your process can make these strategies even more effective.

Improving Hiring with Tools Like Ribbon

Today’s recruitment tech can help you manage costs without compromising on hire quality. AI-powered platforms simplify the hiring process by:

• Automating routine tasks
• Offering data insights for better channel performance
• Enhancing candidate matching
• Cutting down on administrative work

"Given the advantages of AI technology for recruitment ROI calculation, it is important for businesses to seriously consider implementing this technology into their hiring processes." - ExactBuyer Team

Don’t overlook employee referral programs - they save an average of $1,000 and 13 days per hire ^[3]. By blending traditional methods with modern AI tools, companies can create a hiring strategy that’s both efficient and cost-effective, delivering reliable results every time.

FAQs

How do you calculate the cost per hire?

The formula for cost-per-hire is simple: Total recruitment costs (including internal and external expenses) divided by the total number of hires within a set time frame ^[1][2].

For example, if you spend $15,000 on LinkedIn ads and hire 10 employees, your cost-per-hire would be $1,500.

To calculate this accurately, stick to a consistent time frame, track every expense (like job board fees or HR staff hours), and keep detailed records for each recruitment source.

This metric isn’t just about tracking costs - it helps you decide where to focus your budget and improve the performance of your recruitment channels. Regularly reviewing and adjusting based on these numbers can make hiring more efficient.

Related Blog Posts

• AI vs Traditional Recruitment: Comparing Cost and Efficiency
• 8 Ways AI Reduces Time-to-Hire in Manufacturing
• 10 Metrics for Real-Time Recruitment Success
• How Predictive Analytics Optimizes Remote Recruitment