Introduction

Cost-per-hire (CPH) is one of the most important and widely used metrics in talent acquisition. It measures the average cost to recruit and hire a new employee, providing insight into recruiting efficiency and budgeting needs. Organizations track CPH to forecast hiring expenditures and benchmark against industry averages (Recruiting Costs: Budget and Cost per Hire | Recruiting Metrics FAQ). According to recent surveys by the Society for Human Resource Management (SHRM), the average cost per hire for U.S. companies is around $4,000–$4,700 (Recruiting Costs: Budget and Cost per Hire | Recruiting Metrics FAQ) (Cost per Hire for U.S. Companies Rises to $4,700, New Survey Shows) (and about £6,125 in the UK, per CIPD data). This metric helps HR assess where recruiting dollars are spent and identify opportunities to improve the hiring process or reduce costs without sacrificing quality.

Standard Definition and Formula

A universally accepted basic formula for cost-per-hire has emerged:

Cost-Per-Hire = (Total Internal Recruiting Costs + Total External Recruiting Costs) ÷ Total Number of Hires (in the period) () (Calculating cost-per-hire metrics, demystified | Workable).

This formula was formally standardized in 2012 through a collaboration between SHRM and the American National Standards Institute (ANSI) (Calculating cost-per-hire metrics, demystified | Workable). The SHRM/ANSI standard defines CPH as “the mean average of total costs divided by the number of hires” (). In other words, it captures all the sourcing, recruiting, and staffing costs incurred to fill positions, averaged per hire (Understanding and Calculating Cost-Per-Hire | JobTarget). Both internal costs (within the organization) and external costs (paid to outside vendors) are included in the total.

Most authoritative sources echo this definition. For example, LinkedIn’s recruiting metrics guide defines CPH as the total spend associated with filling an open position (recruiter fees, advertisements, etc.) divided by the number of hires (). In essence, cost-per-hire is a straightforward average: how much money it takes on average to hire one person.

Comparison of Definitions from Key Sources

While the fundamental formula is consistent, different organizations and publications phrase the definition in their own words or emphasize different components. The table below compares definitions from several authoritative sources:

Key takeaway: Nearly all sources define CPH using the same core formula (internal + external costs per hire). The SHRM/ANSI definition is considered an industry standard baseline. Some sources, however, vary in whether they include certain costs (e.g. onboarding) – more on that below. There is no single universal authority that every organization follows to the letter, but the SHRM standard has largely harmonized the metric’s calculation across the HR field (Calculating cost-per-hire metrics, demystified | Workable). In practice, most definitions align closely, emphasizing that cost-per-hire captures all expenses required to hire one person.

Components Included in Cost-Per-Hire

A critical part of understanding CPH is knowing what cost elements are counted in the calculation. Generally, all expenses related to finding and bringing a new employee onboard (up to their start date) should be included (Understanding and Calculating Cost-Per-Hire | JobTarget) (The Cost of Recruitment | Insights | Talent Insight Group). The SHRM/ANSI standard explicitly delineates internal vs. external cost components to include () (). Below is a breakdown of typical components:

Internal Cost Components

Internal costs are the costs incurred within the organization’s own operations for hiring. These often include:

• Recruiting staff salaries and benefits: Compensation for in-house recruiters, talent acquisition team members, and coordinators (fully loaded cost) (Understanding and Calculating Cost-Per-Hire | JobTarget). This can also include prorated salaries of HR staff or hiring managers for time spent interviewing or recruiting (Recruitment statistics in the UK 2025 – The latest data).
• Recruiting department overhead: Office infrastructure costs allocated to recruiting activities (e.g. a share of office rent, utilities, recruiting team equipment) and compliance costs (e.g. internal HR compliance efforts for hiring) () (7 Talent Acquisition Metrics That Your CHRO Cares About | Human Capital Institute).
• Internal sourcing efforts: Costs of any internal referral programs (e.g. employee referral bonuses paid) or internal talent search efforts. Referral bonus payouts are a hiring cost and are included as internal if paid by the company (7 Talent Acquisition Metrics That Your CHRO Cares About | Human Capital Institute).
• Recruiter training & development: Money spent on training the recruitment team or improving hiring capabilities (workshops, recruiting certifications, etc.) (). While not directly tied to a single hire, these costs can be allocated across hires as part of internal recruiting investment.
• Hiring managers’ time (opportunity cost): Some organizations assign a monetary value to the hours that hiring managers or team interviewers spend on recruiting (by multiplying hours by an internal salary rate) (7 Talent Acquisition Metrics That Your CHRO Cares About | Human Capital Institute) (Calculating cost-per-hire metrics, demystified | Workable). Including this is optional – SHRM notes it can be done for completeness, though not all companies track it due to complexity (Calculating cost-per-hire metrics, demystified | Workable).

External Cost Components

External costs are expenses paid to outside parties or services during the hiring process. Common external cost factors include:

• Advertising & job marketing: Money spent on job postings, ads on job boards, social media campaigns, career fairs, employer branding events, and recruitment marketing materials () (7 Talent Acquisition Metrics That Your CHRO Cares About | Human Capital Institute).
• Third-party agency or recruiter fees: Payments to external recruiting agencies, headhunters, or RPO (Recruitment Process Outsourcing) providers used to source candidates (7 Talent Acquisition Metrics That Your CHRO Cares About | Human Capital Institute). For example, contingency search fees (often 15–25% of the hire’s salary) are a significant external cost when agencies are used.
• Candidate assessment and screening costs: Fees for background checks, drug tests, credit checks, or assessment tools (e.g. coding tests, psychological assessments) administered by external vendors (Recruiting Costs: Budget and Cost per Hire | Recruiting Metrics FAQ) (Understanding and Calculating Cost-Per-Hire | JobTarget).
• Candidate travel & interview expenses: Travel reimbursements or expenses paid for candidates to attend interviews (flights, hotels) (Understanding and Calculating Cost-Per-Hire | JobTarget). Also, any travel expenses for recruiters attending off-site recruiting events.
• Technology and recruiting software: The cost of recruiting systems and tools used in hiring. This can include applicant tracking system (ATS) software, recruitment analytics tools, and any external platforms or job board subscriptions (Understanding and Calculating Cost-Per-Hire | JobTarget) (Understanding and Calculating Cost-Per-Hire | JobTarget). (Note: Some sources categorize software as internal if it’s an in-house tool; but if it’s a licensed product or SaaS subscription, it’s an external cost to the vendor.)
• Relocation and signing bonuses: If the hire is given a sign-on bonus or relocation package, those payments are counted as part of cost-per-hire as well () (Understanding and Calculating Cost-Per-Hire | JobTarget). These are one-time costs directly related to accepting the job offer.
• Miscellaneous external services: Consulting services engaged for recruitment strategy, campus recruiting event costs, immigration/legal fees for work visas, etc., are also included when applicable () (7 Talent Acquisition Metrics That Your CHRO Cares About | Human Capital Institute).

In summary, any expense that contributes to attracting, processing, or securing a hire is typically in scope for CPH. The SHRM standard notes that cost-per-hire should encompass all sourcing, recruiting, and staffing costs up to the point of hire (). Notably, this does not include post-hire costs like the new employee’s salary, training after hire, or lost productivity during ramp-up () (The Cost of Recruitment | Insights | Talent Insight Group). In other words, CPH covers “all recruitment costs to get an employee to day 1” and excludes onboarding/orientation or training costs after the person starts (The Cost of Recruitment | Insights | Talent Insight Group).

(Recruitment statistics in the UK 2025 – The latest data) Average cost per hire can vary by country. For example, UK surveys (CIPD) show an average £6,125 per hire when factoring internal staff time and external fees (Recruitment statistics in the UK 2025 – The latest data). This visual from a 2024 report highlights the typical hiring cost in the UK.

Variations and Contextual Differences

Is there a universally agreed definition? In practice, the core formula is universally accepted, but the scope of included costs can vary slightly by organization or context. The SHRM/ANSI standard has gone a long way toward establishing a common approach, and most large organizations adhere to it or a very similar methodology (Calculating cost-per-hire metrics, demystified | Workable). Thus, we can say there is a widely agreed-upon definition in principle (CPH = total recruiting costs per hire). However, not every company implements it in exactly the same way. For example, some HR departments might exclude certain indirect costs (like hiring managers’ time) for simplicity, while others might include additional items (some include onboarding costs in CPH, though this is not standard) (Cost Per Hire: Definition, Formula, Plus Practical Calculations) (The Cost of Recruitment | Insights | Talent Insight Group). It’s important for organizations to document their CPH calculation method so that comparisons are apples-to-apples ().

Differences in Corporate vs. Agency vs. Contingent Hiring: The cost-per-hire metric is primarily used by corporate (in-house) HR teams, but its interpretation can differ in other hiring models:

• Corporate (In-House) Hiring: In a typical corporate setting, CPH includes all the internal HR costs and any outside spend to fill roles. For internal hiring teams, this metric is vital for budgeting and demonstrating recruiting efficiency to executives (). They will include recruiter salaries, job ads, referrals, etc. as described above. Internal teams might also calculate CPH by department or job level to see which roles are more expensive to fill (Key HR Metrics: Analyzing Your Cost Per Hire | Factorial). The SHRM standard’s “Cost-per-Hire, Internal (CPHI)” is meant for organizations to tailor and use internally with whichever cost factors apply to them ().
• Third-Party Agency Recruitment: When using external staffing or recruiting agencies, the hiring organization’s cost-per-hire will heavily reflect the agency fees. For example, if a recruiting agency charges 20% of a hired candidate’s salary as a fee, that fee (e.g. $20,000 on a $100k hire) is an external cost counted in CPH (How Much Do Staffing Agencies Charge? – All You Should Know). Companies often find that for senior or hard-to-fill roles, using an agency increases the cost-per-hire significantly (The Cost of Recruitment | Insights | Talent Insight Group). On the other hand, from the agency’s perspective, they might track their own “cost per placement” – i.e. their internal cost to fill a client’s req vs. the fee earned. An efficient agency aims to keep its internal cost per placement lower than the fee it charges (to maintain profit). Agencies typically incur costs in advertising, recruiter commissions, etc., similar to an internal team, but those are borne by the agency. The client company’s CPH simply sees the one-time fee. In sum, corporate HR’s CPH might be compared to an outsourced model’s CPH (cost of outsourcing = vendor fees); some studies note that recruitment process outsourcing (RPO) can provide a predictable cost-per-hire via fixed fees, whereas contingency agencies operate on a pay-per-hire model that can spike costs on each hire (RPO vs. Contingent Recruitment: Which One Should You Choose?) (RPO vs. Contingent Recruitment: Key Differences, Benefits, and Choosing …).
• Contingent Workforce (Temporary/Contract Hiring): Cost-per-hire for contingent workers can be defined differently because these workers are not permanent hires. Many companies engage contractors through staffing firms or a Vendor Management System (VMS), paying a markup on hourly rates rather than a one-time recruiting cost. In such cases, the “cost per hire” of a temp is often lower in terms of upfront recruiting expense (since the agency’s markup covers recruitment and is spread over time) (Cost Per Hire: What’s More Expensive, Contract or Permanent Labor?) (Cost Per Hire: What’s More Expensive, Contract or Permanent Labor?). However, if one calculates the total cost to bring a contractor on board, it might include onboarding and offboarding costs and any conversion fees if the contractor is later hired full-time. Some analyses find that contractors can be cost-effective when you account for the absence of benefits and lower separation costs – the overall cost difference isn’t as high as assumed when comparing to a permanent hire’s salary plus benefits (Cost Per Hire: What’s More Expensive, Contract or Permanent Labor?) (Cost Per Hire: What’s More Expensive, Contract or Permanent Labor?). That said, organizations typically use other metrics for contingent labor (like markup rates, or cost of contract labor as a percentage of workforce cost) rather than the traditional CPH used for permanent hires. If a company wanted to include contingent hires in a CPH metric, they would need to decide which costs to count (e.g. do they count the agency’s markup as “cost to hire” or treat it as ongoing labor cost?). In practice, CPH is most often referenced for full-time employee hires; for contingent workforce strategies, companies may look at cost-per-conversion (if temps convert to full-time) or compare the cost of using a contractor vs. hiring directly (Cost Per Hire: What’s More Expensive, Contract or Permanent Labor?) (Cost Per Hire: What’s More Expensive, Contract or Permanent Labor?). The key is that the formula can be applied, but the cost elements differ (e.g. no benefits or long-term costs for the contingent worker, but possibly higher hourly bill rates).

Direct vs. Comparable Cost-Per-Hire: One nuance from the SHRM/ANSI standard is the distinction between CPH Internal and CPH Comparable. CPH (Internal) is meant for an organization’s internal tracking and can include any cost factors that make sense for that company (). In contrast, CPH (Comparable) was defined as a more restricted version excluding certain one-time or exceptional costs, to allow benchmarking across organizations on a more equal basis (SHRM Group Circulating Standards for Cost Per Hire Metric) (Recruiting Costs: Budget and Cost per Hire | Recruiting Metrics FAQ). For example, SHRM’s “CPH Comparable (CPHC)” might exclude costs like a signing bonus or immigration legal fees (which not all companies incur for every hire), focusing only on common expenses like sourcing and advertising (Calculating cost-per-hire metrics, demystified | Workable). This way, companies can compare their CPH against industry averages knowing it’s defined similarly. If an organization is benchmarking externally (such as using Bersin by Deloitte’s Talent Acquisition Factbook or CIPD surveys), it’s important to ensure the definition of cost-per-hire matches the benchmark’s definition. Fortunately, most benchmarks (Bersin, CIPD, SHRM’s reports) use the standard formula with similar scope (What Bersin’s 2015 Talent Acquisition Factbook Tells Us … – LinkedIn) (Recruitment statistics in the UK 2025 – The latest data).

In summary, the definition of cost-per-hire is largely standardized: it is the average cost of recruiting a new employee, encompassing both internal and external expenses. Authoritative sources like SHRM, HCI, and CIPD all include advertising, recruiter salaries, agency/search fees, candidate expenses, and similar recruitment costs in this metric. There is broad agreement on core components (so a de facto universal definition), but differences arise in the fine print – such as whether to include onboarding or productivity loss (usually not included (The Cost of Recruitment | Insights | Talent Insight Group)), and how to handle special cases like contingent hires or executive search fees. The best practice is to follow a well-recognized standard (such as SHRM/ANSI’s formula) and to be explicit about what is included. By doing so, HR professionals can ensure their cost-per-hire calculations are credible, comparable, and valuable for decision-making () (Calculating cost-per-hire metrics, demystified | Workable).

References and Sources

• SHRM/ANSI Cost-per-Hire Standard (2012) – formal definition and formula () ().
• SHRM Human Capital Benchmarking Report – average CPH figures and methodology (Recruiting Costs: Budget and Cost per Hire | Recruiting Metrics FAQ) (Cost per Hire for U.S. Companies Rises to $4,700, New Survey Shows).
• Human Capital Institute (HCI) – talent metrics guides defining CPH and its components (7 Talent Acquisition Metrics That Your CHRO Cares About | Human Capital Institute) (Learn the Recruiting Metrics Used at High-Performing Organizations | Human Capital Institute).
• CIPD (Chartered Institute of Personnel and Development) – survey data on average “cost of filling a vacancy,” including typical cost components (Recruitment statistics in the UK 2025 – The latest data) (The Cost of Recruitment | Insights | Talent Insight Group).
• Bersin by Deloitte – Talent Acquisition Factbook (2015) providing industry CPH benchmarks (~$4k) (What Bersin’s 2015 Talent Acquisition Factbook Tells Us … – LinkedIn).
• Workable (2019 & 2023) – practitioner guides explaining CPH formula and the SHRM/ANSI standard’s influence (Calculating cost-per-hire metrics, demystified | Workable) (Calculating cost-per-hire metrics, demystified | Workable).
• JobTarget (2024) – overview citing SHRM’s definition and listing internal vs. external cost examples (Understanding and Calculating Cost-Per-Hire | JobTarget) (Understanding and Calculating Cost-Per-Hire | JobTarget).
• OnPay HR Insights (2025) – example including onboarding in CPH definition (illustrating definitional variance) (Cost Per Hire: Definition, Formula, Plus Practical Calculations).
• Staffing Industry Analysts / industry blogs – discussions on cost implications of RPO vs contingent hiring models (RPO vs. Contingent Recruitment: Which One Should You Choose?) (The Cost of Recruitment | Insights | Talent Insight Group).