What is Cost Per Hire
Cost Per Hire (CPH) is a recruitment metric that quantifies the total expenses incurred to fill a job vacancy. It encompasses advertising costs, recruiter fees, and administrative expenses. CPH is vital for evaluating the efficiency of recruitment processes and budgeting HR activities effectively.
Key Features of Cost Per Hire
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Comprehensive Metric
CPH includes all recruitment-related expenses, from job postings to onboarding, offering a holistic view of hiring costs. -
Standardized Calculation
Organizations often use SHRM’s standard formula, dividing the total internal and external hiring costs by the number of hires.
Importance of Cost Per Hire in HR
CPH is crucial for HR professionals to assess and optimize recruitment strategies. By understanding CPH, companies can identify inefficiencies in their hiring process and make data-driven decisions to reduce expenses. For instance, a high CPH might prompt a company to explore alternative sourcing channels or improve their employer brand.
Related Terms
Comparison: Cost Per Hire vs. Time to Hire
While Cost Per Hire focuses on financial expenditure, Time to Hire measures the duration from the start of recruitment to an accepted offer. Both metrics inform recruitment efficiency but from different perspectives—financial vs. timeline.
Benefits of Cost Per Hire
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Budget Management
Provides insights for better budgeting by highlighting recruitment expenses. -
Efficiency Analysis
Helps identify cost-saving opportunities by pinpointing expensive stages in the hiring process. -
Benchmarking
Enables companies to compare their hiring costs against industry standards.
Best Practices for Cost Per Hire
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Regular Monitoring
Routinely track CPH to ensure ongoing recruitment efficiency and adapt strategies as needed. -
Detailed Expense Tracking
Maintain precise records of all recruitment-related expenses to enhance the accuracy of CPH calculations. -
Leverage Technology
Utilize recruitment software to automate data collection and analysis to reduce manual errors.
Frequently Asked Questions (FAQs) about Cost Per Hire
1. What is included in Cost Per Hire?
CPH encompasses all internal and external costs associated with the hiring process, including advertising, recruiter fees, and onboarding expenses.
2. How can companies reduce their Cost Per Hire?
By optimizing their recruitment channels, improving employer branding, and utilizing employee referrals, which are often more cost-effective.
3. Is a lower Cost Per Hire always better?
Not necessarily. While a lower CPH can indicate efficiency, it should not compromise the quality of hires, which may lead to higher turnover and additional costs in the long run.