3 Easy Ways to Reduce Cost-Per-Hire

Nowadays, it seems everything has a hidden price. Whether it be in the form of hidden banking fees or an inconvenient “convenience” fee, there seems to be no avoiding it. Even in the hiring and recruiting process there are costs that sneak up on you. That’s why we’ve broken down exactly what cost-per- hire is — plus three easy ways to reduce it.

What is cost-per-hire?

We define cost-per-hire as the combined cost of all your recruitment spend across vacancies. This combined cost is a broad term, but it can be split into two different categories: internal and external.

Internal costs consist of your recruitment team’s fixed annual cost and your interviewing cost. Broken down, these are the recruitment team’s salary and the cost to actually conduct interviews. On the other hand, external costs consist of job board ads, recruitment agency fees, assessment tools and any prospecting.

For an accurate cost-per-hire ratio, add your external and internal costs, divide them by first year annual compensation plus benefits of the vacant position and multiply by 100%. For a more favourable ratio you’ll want to lower these external and internal costs, here’s how.


Three ways to reduce cost-per-hire:

1. Monitor recruitment cost

Monitoring recruitment cost will be a valuable way to reduce cost-per-hire. Knowing which positions generally cost more to fill will help you trim their cost-per-hire in the future. This knowledge will also help you plan for higher costing vacancies.

For example, let’s say hiring for a sales position historically costs more than hiring for one in marketing. With this data you’ll be able to assess previous circumstances and trim costs where possible.

An Applicant Tracking System, or ATS, can help monitor and reduce cost-per-hire based on position. Further, it can help you prevent traditionally high-cost mistakes.

2. Optimise internal vs. external efforts

More often than not, outsourcing to recruitment agencies will be the largest factor in high cost-per-hire ratios. Recruitment agency fees can be astronomical and not always provide the best-fit applicants for your company’s culture. If you’re hiring in large volume, recruitment agencies can cost up to 3x the price of online recruitment software.

However, if you are using external agencies, manage them with an ATS. This way, you can get rid of the agencies that aren’t providing and optimise spend toward those that are.

3. Reallocate advertising spend

Ineffective advertising spend can chew up your recruiting budget quickly. Monitor which adverts are bringing you quality candidates and which aren’t. Spending money on sponsored job board postings should provide ROI. If you’re not seeing return in the form of quality candidates and ultimately in vacancies filled, then stop using those job boards.

Reallocating advertising spend to quality, candidate-producing areas will reduce the cost-per-hire ratio. With the right adverts come the best candidates and the best candidates the most valuable employees.


With proper cost monitoring, optimising internal and external efforts and reallocating ineffective advertising spend, you’ll reduce your cost-per-hire. Stop costing your organisation when hiring for certain positions by monitoring advert spend. Use only external agencies that provide quality candidates and optimise your advert placement with an ATS.

To learn more about how Applicant Tracking Systems can help you reduce cost-per-hire, download our free guide!


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