The formula
Cost per hire = (total external costs + total internal costs) ÷ number of hires in the period. The definition comes from the ANSI/SHRM standard and is worth sticking to so your numbers stay comparable year on year.
Run it quarterly and segment it by role family. A blended company-wide figure hides the fact that one engineering hire can cost more than ten support hires.
Costs teams forget to include
External spend is easy to capture because it arrives as an invoice. Internal cost is where most models understate reality.
- Hiring manager and interviewer hours, priced at loaded salary
- Recruiter and coordinator time per requisition, not per hire
- Job board, ATS, assessment and background-check licences apportioned per hire
- Referral bonuses, relocation and sign-on payments
- The cost of a vacancy left open — lost output while the seat is empty
Realistic benchmarks
UK mid-market figures usually land between £3,000 and £6,000 for volume roles and £8,000 to £20,000 for specialist and leadership hires, driven almost entirely by whether an agency was involved.
If your agency dependency is above roughly 40 per cent of hires, agency fees will dominate the number and no amount of process efficiency will offset them.
The levers that move it
In order of impact: reduce agency dependency, raise the conversion rate of referred candidates, shorten the interview process, and improve offer-acceptance rate. Sourcing volume is usually the least effective lever.
Frequently asked questions
- What is the standard cost-per-hire formula?
- Total external costs plus total internal costs, divided by the number of hires made in the same period.
- What is a good cost per hire?
- It depends on role type. UK volume roles commonly sit between £3,000 and £6,000, while specialist and leadership hires typically run from £8,000 to £20,000.
- Should referral bonuses count in cost per hire?
- Yes. Any payment made to secure the hire — referral bonus, sign-on, relocation — belongs in the calculation.