Quick answer: Cost per hire = (internal recruiting costs + external recruiting costs) ÷ number of hires in the same period. The Society for Human Resource Management (SHRM) reported in April 2022 that the average US cost per hire was nearly $4,700. Salary and benefits of the new hire are not included. Most small teams undercount it because they leave out the biggest cost: their own time.
What is the cost per hire formula?
Cost per hire is total recruiting spend divided by total hires, for one period.
Cost per hire = (Internal costs + External costs) / Total hiresThis is the structure used in the ANSI/SHRM cost per hire standard published in 2012. The point of the standard was to make companies count the same things so numbers could be compared.
Pick a period long enough to have several hires. A quarter works for most small teams. A month with one hire gives you a number that means very little.
What counts as internal and external costs?
Internal costs are what you spend inside the company. External costs are what you pay to outside parties.
| Internal costs | External costs |
|---|---|
| Recruiter or HR time spent on hiring | Job board ads and sponsored posts |
| Hiring manager and interviewer time | Recruitment agency fees |
| Applicant tracking system (ATS) and other recruiting software | Background checks and reference services |
| Employee referral bonuses | Assessment and testing tools |
| Recruiting events you run yourself | Candidate travel and relocation |
| Employer branding work for hiring | Career fair fees |
What doesn’t count:
- The new hire’s salary, benefits and equity
- Onboarding and training after the start date
- General company marketing that isn’t about hiring
How do you count your team’s time?
Use hours times a loaded hourly cost. This is the line most small companies skip, and it’s usually the biggest one.
- Estimate hours per hire for each person involved. Screening, scheduling, interviewing, debriefs, offer calls.
- Multiply by their hourly cost. Salary divided by working hours is fine. You don’t need payroll precision.
- Add it to internal costs.
If nobody has a dedicated recruiter, this is founder and manager time. It’s still real cost. An hour a founder spends reading CVs is an hour not spent on sales or product.
Worked example
Here’s an example for a 40-person company over one quarter. The numbers are made up for illustration.
Hires in the quarter: 4
Internal costs
| Item | Calculation | Cost |
|---|---|---|
| Hiring manager time | 4 hires × 15 hours × $60 | $3,600 |
| Interviewer time | 4 hires × 8 hours × $50 | $1,600 |
| Founder final interviews | 4 hires × 2 hours × $100 | $800 |
| ATS subscription | 3 months × €80 (about $90) | $270 |
| Referral bonus | 1 × $1,000 | $1,000 |
| Internal total | $7,270 |
External costs
| Item | Cost |
|---|---|
| Sponsored job posts | $1,200 |
| Background checks | 4 × $50 = $200 |
| External total | $1,400 |
Cost per hire = ($7,270 + $1,400) / 4 = $2,168
Notice where the money went. Software was about 3% of the total. People’s time was about 69%. That’s normal for small teams, and it’s why cutting hours per hire usually saves more than cutting tool spend.
What is the average cost per hire?
SHRM’s figure of nearly $4,700, from benchmarking data reported in April 2022, is still the most quoted US number. Treat it as a reference point, not a target.
SHRM’s 2026 recruiting benchmarking, based on data from over 4,600 organizations, says non-executive cost per hire has stayed relatively stable while executive cost per hire increased substantially. SHRM doesn’t publish the full figures outside its member reports.
Why the average is a weak target for you:
- It mixes companies that use agencies for every role with companies that use none.
- It mixes executive and non-executive roles unless you look at the split.
- Many companies don’t count internal time consistently, so their reported numbers are low.
Compare yourself with yourself. Cost per hire this quarter vs last quarter, and engineering hires vs support hires.
How do you lower cost per hire?
Go after the biggest line first. For most small teams that’s time, then agencies.
- Cut screening time. Reading every CV by hand is the largest time sink. AI scoring or clear screening questions can cut it down without skipping anyone.
- Stop scheduling by email. Back-and-forth over interview slots eats hours per hire. Self-scheduling links fix it.
- Fix your job ad before paying to boost it. A weak ad gets more applicants who don’t fit, which costs more screening time. See how long a job description should be.
- Use referrals properly. A referral bonus is often cheaper than an agency fee. See employee referral programs for small teams.
- Reuse past candidates. Strong runners-up from the last search cost nothing to contact if they agreed to it.
- Shorten time to hire. A long process means more interview rounds, more reschedules and more candidates lost to faster offers. See 5 ways to reduce time to hire.
Can an ATS calculate cost per hire for you?
Partly. Be careful with any tool that claims to do it fully. An ATS knows hires, sources and timelines. It doesn’t know your agency invoices or what a manager’s hour costs.
Canvider’s analytics show hires in a period, time to hire, offer acceptance rate and which sources produced hires. It doesn’t track spending. The practical setup is to export analytics to Excel and combine it with your cost data there. That gives you cost per hire and cost per hire by source, which tells you which channels are actually worth paying for.
One metric isn’t enough
Cost per hire rewards cheap hiring, not good hiring. Pair it with time to hire and some measure of whether hires worked out. For the wider set, read recruiting metrics beyond time to hire.
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Frequently asked questions
How do you calculate cost per hire?
Add up all internal recruiting costs (recruiter and interviewer time, tools, referral bonuses) and all external costs (job ads, agency fees, background checks, travel) for a period. Divide the total by the number of hires made in that same period.
What is the average cost per hire?
The Society for Human Resource Management (SHRM) reported in April 2022 that the average cost per hire in the US was nearly $4,700. SHRM's 2026 benchmarking says non-executive costs have stayed relatively stable while executive cost per hire rose substantially. Your own number matters more than the average.
Is salary included in cost per hire?
No. The new hire's salary and benefits are not part of cost per hire. It measures what it cost to find and hire the person, not what it costs to employ them.
What is a good cost per hire for a small business?
There's no universal good number. A small business that hires mostly through its own careers page and referrals can run far below the SHRM average, while one that uses agencies for senior roles can run far above it. Track the trend and split it by role type rather than chasing a benchmark.