Data Visualization Table (End)
| Metric | Referral-Based Hiring | Traditional Hiring | Impact |
|---|---|---|---|
| Average Cost Per Hire | ~$2,400 | ~$4,700 | 49% Cost Savings |
| Time-to-Hire | 29 Days | 42 Days | 31% Faster |
| 2-Year Retention Rate | 85% | 60% | 25% Higher Retention |
| Quality of Hire Score | 8.5/10 | 7.0/10 | Improved Performance |
Cost per Hire (CPH)
Cost per hire (CPH) is what it costs you, on average, to recruit and land a new employee. It’s the total of recruiter salaries, agency fees, background-check services, and job postings, then divided by the number of people hired in each period.
Here’s where most companies get it wrong: they treat this metric like an accounting exercise. It’s not. CPH reveals whether your talent acquisition is running like a machine or bleeding cash quietly in the background.
Why Cost-Per-Hire (CPH) Matters
The average cost per hire in the United States sits around $4,700. Inflation and labor market tightness are pushing these numbers higher by the month. For a company hiring 150 people annually at that rate, you’re spending over $700,000 on recruitment alone. Think about that number in your next budget meeting.
Ignore CPH at your peril. A “cheap hire” turned bad hire can cost you up to 30% of that employee’s annual salary in turnover and lost productivity. The math gets worse the longer they stay and underperform. Cutting recruitment costs without sacrificing quality is possible, but most companies just don’t know where to look.
Where Cost-Per-Hire (CPH) Actually Gets Used
Tech and engineering sectors usually pay more. Specialized talent doesn’t come cheap. Executive search? Expect $28,000 per placement. Retail and hospitality? That CPH drops to roughly $2,700 because turnover is expected and the process moves faster.
Talent acquisition teams use this to optimize channels. Finance uses it for budgeting. Only problem: most companies blur the numbers by mixing entry-level hires with executive placements into one messy average.
What Makes CPH Actually Useful
Stop guessing. Employee referrals cost less than traditional job boards and deliver better retention. That’s not a marketing claim, that’s arithmetic. When you track CPH by recruitment source, you spot which channels waste money. When you segment by department and role level, you stop making decisions based on meaningless averages.
Benchmarking against the national CPH average of $4,700 tells you if you’re efficient or bloated. Most companies discover they’re both simultaneously efficient at some stages, wasteful at others.
How to Actually Reduce CPH Without Breaking Quality
- Use technology. Modern applicant-tracking systems capture soft costs like recruiter time. You can’t optimize what you don’t measure.
- Build referral programs. Not as a nice-to-have, but as your primary channel. Data shows these programs cut time-to-hire by 31% while cutting external advertising costs.
Real Example: How One Company Saved $288,000
A mid-sized industrial company found its traditional CPH was stuck at $4,800. They shifted strategy hard toward employee referrals—dropping CPH on those hires to $2,400 each. Across 200 annual hires, they saved approximately $288,000. Bonus: their new-hire retention rate jumped from 60% to 85%.
The Balance You Actually Need
Optimizing for cost alone kills quality. Quality without cost consciousness wastes shareholder money. The sweet spot? Track both CPH and quality-of-hire metrics. Use applicant-tracking systems and financial analytics software to see where you stand. Build a talent pipeline that scales without draining your budget. That’s the real goal.
FAQs
What should you include in Cost-Per-Hire (CPH)?
All costs from the moment you post a job through the day someone signs an offer letter. This includes recruiter salaries, job boards, agency fees, background checks, relocation. Skip onboarding costs like equipment, training, and ramp time. If you want the full picture, add CPH plus onboarding to see the real total investment per hire.
How is cost-per-hire (CPH) different from quality of hire?
Cost-Per-Hire measures speed and expense. Quality of hire measures performance and retention. You can drive CPH down to zero if you’re willing to hire people who quit in three months. That’s not progress. Track both or you’ll outsmart yourself into a disaster.
Is onboarding part of cost-per-hire (CPH)?
No. Onboarding is its own line for setup costs, training, and the productivity dip during ramp-up. CPH stops when the person walks through the door on day one. However, total cost of hire (CPH + Onboarding) provides a more holistic view of the investment required for a new employee.
