Tuesday, December 2, 2008

What to Include in a Cost Per Hire Calculation

I have been asked several times over the last few weeks about calculating cost per hire. In particular, what items to include in the calculation. I have seen many companies calculate this metric in many ways. My advice is to make sure you include everything that impacts the new hire and be consistent with your formula.

I think it is very hard to compare apples to apples when looking at this number. Many people include managers time for interviews, some do not. Some people include training costs, others do not. Here are the items I recommend:
  • Salaries including benefits (recruiters)
  • Salaries including benefits (managers)
  • Travel, lodging and related expenses
  • Contract recruiter or search firm fees
  • Advertisements
  • Job fairs
  • College recruitment
  • Employee referral award
  • Screening (background checks, pre-employment testing)
  • Training new employee
  • RAMP UP Costs (New hires time to get to efficiency)
I believe it is important to look at cost per hire by job category. Here are a few suggestions:
  1. Hourly
  2. Leadership
  3. College graduates
  4. Professionals
This metric is a great way to show efficiency in the recruiting area. It is easy to derive and you can definitely start measuring tomorrow!

If you would like an excel file that contains these fields with formulas please email me and I will send it to you.
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