Cost per hire answers one question: on average, how much does it cost your organization to fill one open role? The formula is short. You add up everything you spent on recruiting, then divide by the number of people you hired.
The widely used version comes from the ANSI/SHRM 06001.2012 standard: Cost per Hire = (Total Internal Recruiting Costs + Total External Recruiting Costs) / Total Number of Hires in a given period. SHRM developed this standard and ANSI approved it in 2012 so that companies measure recruiting costs the same way and can compare results. The rest of this guide breaks down each part, walks through a worked example, and shows how to lower the number without cutting corners.
Key takeaways
- Use the ANSI/SHRM formula: add internal and external recruiting costs, then divide by the number of hires in the period.
- External costs are money paid to outside parties (job ads, agency fees, background checks). Internal costs are your own team's time and infrastructure.
- Pick a clear time window and a consistent set of cost components so your numbers stay comparable over time.
- A SHRM benchmark put average US cost per hire at $4,129, but that figure reflects fiscal year 2015 data and should be treated as historical, not current.
- Cost per hire measures efficiency only. It ignores quality of hire, time to fill, and lost productivity, so do not read it alone.
Why it matters
Recruiting spends real money, and most of it hides in many small line items. Job board fees, agency invoices, recruiter salaries, background checks, and software subscriptions all add up. Without a single metric, that spend is hard to see or control. Cost per hire pulls it into one number you can track, budget against, and explain to finance.
The standard also makes comparison possible. SHRM and ANSI approved the 06001.2012 standard in 2012 to give organizations a shared method. When everyone uses the same formula and the same cost categories, your number means something next to last quarter's number, or next to an industry figure. Without that discipline, two companies can report different costs simply because they counted different things.
The formula and its components
The ANSI/SHRM formula
Cost per Hire = (Total Internal Recruiting Costs + Total External Recruiting Costs) / Total Number of Hires in a given time period. SHRM developed this standard and ANSI approved it in 2012 to give organizations a shared, comparable way to measure recruiting costs. Two inputs feed the top of the fraction (internal and external costs), and one input feeds the bottom (the count of hires). Keep all three tied to the same time window.
External recruiting costs
External costs are payments to outside vendors or individuals during recruiting. Under the standard they include: job advertising and job board posting fees, third-party recruiter and agency or search firm fees, job fairs and campus recruiting, signing bonuses, candidate travel reimbursement, background checks and drug screening, relocation packages, employee referral rewards, and recruiting technology or applicant tracking system (ATS) subscriptions. These are usually the easiest to find because they show up as invoices.
Internal recruiting costs
Internal costs cover the staff, capital, and organizational cost of running recruiting in house. They include: fully loaded compensation (salary plus benefits) for the talent acquisition team and recruiters, sourcing staff time, internal referral program administration, recruiter training and development, recruiting department overhead and infrastructure, and internal recruiting technology costs. Hiring managers' and interviewers' time spent recruiting is an optional inclusion that represents paid labor. Decide whether you count it, then stay consistent.
Worked example (illustrative numbers)
These figures are made up to show the math, not a benchmark. Suppose over one quarter your external costs are: job ads $6,000, agency fees $20,000, background checks $1,000, referral rewards $3,000, and ATS subscription $2,000. That is $32,000 external. Your internal costs are: recruiter compensation for the period $40,000 and recruiting overhead $8,000, so $48,000 internal. Total recruiting cost is $32,000 plus $48,000, which is $80,000. If you hired 16 people that quarter, cost per hire = $80,000 / 16 = $5,000 per hire. Change the hire count or the agency spend and the number moves quickly.
The $4,129 benchmark caveat
SHRM's Human Capital Benchmarking Report found an average US cost per hire of $4,129. That number reflects fiscal year 2015 data, collected February to April 2016 from a random sample of 2,048 SHRM members. The same report put average time to fill at 42 days. Treat $4,129 as a historical reference point, not a current target. Cost per hire varies by industry, role seniority, and company, so your own trend over time is more useful than any single national figure.
What cost per hire does not capture
Cost per hire is an efficiency metric, not a quality metric. AIHR notes it must always be balanced against quality of hire, because a very low cost per hire can mean you are sacrificing candidate quality, while spending more upfront often leads to better retention and stronger long-term return. The metric also ignores time to fill on its own and lost productivity during ramp-up. Read it alongside other measures, not by itself.
What the standard excludes from scope
Cost per hire under the ANSI/SHRM standard covers the cost of getting an employee to day one. It excludes post-hire expenses: the new employee's salary, onboarding and post-hire training, lost productivity while they ramp up, and the cost of the vacancy itself. So cost per hire alone does not show the full economic impact of a hire or the cost of leaving a role unfilled. Keep those expenses in a separate view if you need the bigger financial picture.
How to calculate it, and reduce it
Step 1: Pick your time period and hire count
Choose a clear window, such as a quarter or a year. Count every person hired in that window. This count is the denominator of the formula, so be precise about what counts as a hire (for example, accepted offers who started).
Step 2: Add up external recruiting costs
Pull together every payment to outside parties in that window: job ads and job board fees, agency and search firm fees, job fairs and campus recruiting, signing bonuses, candidate travel, background checks and drug screening, relocation, referral rewards, and ATS or recruiting tech subscriptions. These are mostly invoices, so finance can help you find them.
Step 3: Add up internal recruiting costs
Total your in-house costs for the same window: fully loaded compensation for recruiters and the talent acquisition team, sourcing time, referral program administration, recruiter training, recruiting overhead and infrastructure, and internal recruiting technology. Decide whether to include hiring managers' and interviewers' time (an optional inclusion) and apply that choice consistently every period.
Step 4: Apply the formula
Add internal and external costs together, then divide by the number of hires. (Internal + External) / Hires gives your cost per hire. Save the breakdown, not just the final number, so you can see which components move it over time.
Step 5: Reduce it through referrals and internal mobility
Employee referrals are a leading lever. Referral hires take less time to fill (about 29 days versus 39 days for other sources) and cut sourcing and agency spend. Internal mobility, meaning promoting from within, avoids external recruiting costs entirely. Both lower the numerator without sacrificing quality.
Step 6: Reduce reliance on agencies and improve sourcing
Third-party agency fees are often the largest single external cost. Building a stronger employer brand and improving direct sourcing lets you fill more roles yourself, which cuts agency spend. Trim the biggest line items first, and watch quality of hire so you do not cut cost at the expense of better candidates.
Do this
- Tie internal costs, external costs, and the hire count to the same time period.
- Keep the full cost breakdown, not just the final number, so you can see what drives changes.
- Decide once whether to include hiring manager and interviewer time, then apply that rule every period.
- Read cost per hire next to quality of hire and time to fill, never on its own.
- Treat the $4,129 SHRM figure as historical context, not a current target.
- Track your own cost per hire trend over time instead of chasing a single benchmark.
- Look at your largest line items first, usually agency fees, when you want to cut cost.
- Protect candidate quality when you reduce spend, since cheap hires can cost more later.
Common mistakes to avoid
Treating it as a quality score
A low cost per hire is not automatically good. AIHR warns it must be balanced against quality of hire, because cutting cost too far can mean weaker candidates and worse retention. Spending more upfront often pays off in the long run.
Mixing time periods
If your costs cover a year but your hire count covers a quarter, the number is meaningless. Keep both inputs on the same window so the math reflects reality.
Forgetting internal costs
External invoices are easy to total, so many teams stop there. But recruiter salaries, sourcing time, and recruiting overhead are real internal costs in the standard. Leaving them out understates your true cost per hire.
Expecting it to show full hiring cost
The standard stops at day one. It excludes the new hire's salary, onboarding, post-hire training, ramp-up productivity loss, and the cost of the vacancy. Do not present cost per hire as the total financial impact of a hire.
Chasing an outdated benchmark
The $4,129 average is from FY2015 data collected in 2016. It varies by industry and role. Using it as a hard target today can push you toward the wrong decisions.
Counting components inconsistently
If you include interviewer time one quarter and drop it the next, your trend is broken. Pick a fixed set of components and keep it stable so period-to-period comparisons hold.
Frequently asked questions
What is the cost per hire formula?
Cost per Hire = (Total Internal Recruiting Costs + Total External Recruiting Costs) / Total Number of Hires in a given time period. This is the ANSI/SHRM 06001.2012 standard formula. You add your internal recruiting costs and external recruiting costs together, then divide by how many people you hired in that period. SHRM created the standard and ANSI approved it in 2012 to make recruiting costs comparable across organizations.
What counts as an external recruiting cost?
External costs are payments to outside vendors or individuals during recruiting. They include job advertising and job board fees, third-party recruiter and agency fees, job fairs and campus recruiting, signing bonuses, candidate travel reimbursement, background checks and drug screening, relocation packages, employee referral rewards, and recruiting technology or ATS subscriptions. These usually appear as invoices, which makes them easier to total than internal costs.
What is a good cost per hire number?
There is no single good number, because cost per hire varies by industry, role, and company. A SHRM benchmarking report found a US average of $4,129, but that reflects fiscal year 2015 data collected in 2016, so treat it as historical context. Your own trend over time is more useful than any national average. Always balance a low cost against quality of hire.
Does cost per hire include the new employee's salary?
No. Under the ANSI/SHRM standard, cost per hire covers the recruiting cost to get an employee to day one. It excludes post-hire expenses like the new employee's salary, onboarding and post-hire training, lost productivity during ramp-up, and the cost of the vacancy itself. So cost per hire alone does not show the full economic impact of a hire.
How can I reduce cost per hire?
Employee referrals are a leading lever. Referral hires take less time to fill (about 29 days versus 39 days for other sources) and cut sourcing and agency spend. Internal mobility, meaning promoting from within, avoids external recruiting costs entirely. A stronger employer brand, better direct sourcing, and less reliance on third-party agency fees also help. Protect candidate quality as you cut, since cheap hires can cost more later.
Why does cost per hire need other metrics alongside it?
Cost per hire is an efficiency metric, not a quality one. AIHR notes it must always be balanced against quality of hire, because a very low cost can signal you are sacrificing candidate quality. The metric also ignores time to fill and lost productivity on its own. Read it together with quality of hire and time to fill so you see the full picture, not just the spend.
The bottom line
Cost per hire is a clear, useful number. Add your internal and external recruiting costs, divide by the number of hires, and you get the average cost to fill a role. The ANSI/SHRM standard keeps the method consistent so your results stay comparable over time. To lower it, lean on referrals and internal mobility and reduce agency spend, while watching that quality does not slip.
Remember its limits. Cost per hire is one of several recruiting metrics, not the whole story. It measures efficiency, not quality of hire, time to fill, or lost productivity, and it stops at day one. Read it next to those other measures. On the operational side, small internal time savings add up, and a tool that speeds up CV formatting, such as RefineCV, trims a little recruiter time, one minor internal cost among many in the formula.
Trim a small internal cost
Recruiter time is one of the internal costs in the formula. RefineCV formats candidate CVs into your branded template fast. Try it free with 10 CVs, no credit card.
Related reading: recruitment metrics that matter most and time to hire vs time to fill.
Sources
- Integral Recruiting Design (citing ANSI/SHRM 06001.2012) (Accessed 2026): The ANSI/SHRM 06001.2012 standard formula is (Total Internal Recruiting Costs + Total External Recruiting Costs) / Total Number of Hires, developed by SHRM and approved by ANSI in 2012 for a shared, comparable methodology.
- AIHR, Cost per Hire (summarising the ANSI/SHRM standard) (Accessed 2026): External recruiting costs include job ads and job board fees, third-party recruiter and agency fees, job fairs and campus recruiting, signing bonuses, candidate travel, background checks and drug screening, relocation, referral rewards, and recruiting technology/ATS subscriptions.
- AIHR and Integral Recruiting Design (summarising the ANSI/SHRM standard) (Accessed 2026): Internal recruiting costs include fully loaded compensation for recruiters and the TA team, sourcing time, referral program administration, recruiter training, recruiting overhead, and internal recruiting technology; hiring manager and interviewer time is an optional inclusion.
- SHRM, Human Capital Benchmarking Report (2016 (FY2015 data)): SHRM's Human Capital Benchmarking Report found an average US cost per hire of $4,129, reflecting fiscal year 2015 data collected in 2016 from 2,048 members; the same report found average time to fill was 42 days.
- AIHR, Cost per Hire (Accessed 2026): Cost per hire is an efficiency metric that does not capture quality of hire; AIHR notes it must be balanced against quality of hire, since a very low cost may signal sacrificed quality while investing more upfront often improves retention.
- Integral Recruiting Design (citing the ANSI/SHRM standard scope) (Accessed 2026): Under the ANSI/SHRM standard, cost per hire covers recruiting to day one but excludes post-hire expenses such as the new employee's salary, onboarding, post-hire training, ramp-up productivity loss, and the cost of the vacancy.
- ERIN (employee referral platform) (Accessed 2026): Employee referrals reduce cost per hire: referral hires take less time to fill (about 29 days versus 39 days for other sources) and cut sourcing and agency spend, while internal mobility avoids external recruiting costs entirely.