Any operation inside a company can generate costs, and the recruitment process is no exception. When hiring new employees, the company will have both external and internal costs as a consequence.

These values are what business owners and managers call the cost-per-hire. It is a vital part of any business that wants more precise control over the recruiting process and how much needs to be destined for this particular operation.

In this article, we will show you the tricks to make the perfect tool for any business owner or hiring manager looking for better control of hiring costs. Follow each step carefully to ensure the best results out of the document.

Before we explain how you can effectively create your template for recruiting costs, some essential considerations need to be clarified. Like what this document is and the main effects they can have on job boards, for example.

If you don’t know what the cost-per-hire template is, don’t worry. Here is a quick explanation:

The cost-per-hire or template for recruiting costs is a document that, as previously mentioned, helps hiring managers and business owners to understand better how much a recruitment costs. Understanding this data is vital for numerous reasons.

One of them is that by understanding these costs, the company can plan strategies to make the entire process less expensive. Another reason for calculating cost-per-hire is that it is easier for budget planning in the future.

With this cost in mind, human resource management can better redirect resources to this part of the business. The more organized the process gets, the better you’ll be able to control organizational costs.

Although there are numerous factors that can have an impact when calculating cost-per-hire, like relocation expenses and development costs, the calculation is very simple. To do it, you will only need three main pieces of information: Internal recruiting costs, external recruiting costs, and the total number of hires.

After gathering all this data, you just need to sum the costs and divide by the number of hires. The final formula for calculating CpH will look like this:

CpH = (internal recruiting costs + external recruiting costs) / total number of hires

Besides the formula for calculating cost-per-hire, there are other pieces of information you can take note of for better understanding and tracking those costs. They directly impact the hire data gathered, and planning strategies involving this information can be the perfect way to lower costs.

Here are some of the most commonly featured categories:

Internal Costs

The internal costs can be both directly and indirectly related to the new employee. It is important to list all the costs in this category to ensure the company is not losing money for reasons other than the recruitment cost.

Some of the most common internal costs are:

Compliance Costs

Compliance costs are those related to the monitoring process and evaluation of the documentation. The recruitment costs in this part of the process are usually associated with processing documents, like ID and bank account for payments. Still, you can also find other types of expenses during the process.

Administrative Costs

Administrative costs also have a massive impact on the hiring process. They are usually attached to the support of recruitment.

These costs can regard items like rent, equipment, and furniture. Its value can be different depending on the type of company and job you are hiring for.

Development Costs

Another common cost type when making internal and external hires is your development or training costs. As the name suggests, they regard the task of upskilling the staff and expanding their abilities. It is common, especially in IT companies and organizations that demand special training.

Recruitment and Benefits

Of course, you also need to worry about the employee’s salary and the benefits you need to guarantee, depending on your business type. Most companies focus on the wage they have to pay for talent acquisition and forget the other values.

You must remember that when hiring a new employee, you won’t pay just the salary but bonuses and benefits as well. It is vital to calculate these values to ensure the company can afford these costs without any problems.

External Costs

Along with the internal costs, you also need to consider the external ones when calculating cost-per-hire. These costs regard expenses that are not related directly to the internal functions of the company.

Here are the most common external costs that recruitment efforts can generate:

Marketing Costs

Many people get surprised when they hear that the recruiting process can generate considerable expenses when it comes to marketing. These efforts become even more necessary when dealing with a small business looking for a new employee.

The job vacancy must be shared in the correct channels to reach the desired public, and the company must do the right strategy to make the offer look attractive. All these details generate marketing expenses.

Background Check

Any company that wants to avoid problems in the future must run a background check before hiring any new employee. This is one of the most common types of external expense and will ensure the candidate not only has the required education but also look for criminal records and other information that might concern the company.

Technological Expenses

Technologies, like an applicant tracking system, also generate expenses for the company during the hiring process. Along with this, you will also have the infrastructure to process requests and many other features that require specialized technology.

These tools can increase the performance of the recruitment process but are also one of the first ones to be cut off when on a low recruitment budget. The reason for them being so expensive is that they are usually attached to third-party expenses since the company is not the software owner.

Travel Expenses

Sometimes your cost-per-hire can get higher because of travel expenses. When it is required that the candidate travels for any reason, the company should pay for these expenses.

Everything must be counted from the flight to the hote. If your company doesn’t require this kind of action, you don’t need to add these costs to the template.

Signing Bonus

Many companies have the tradition of offering signing bonuses to new employees during the hiring process. In these cases, once the new employee signs the contract, they will receive a monetary bonus for joining the company. This is also an external expense and should be featured in the template if your company does it.

Total Number of Hires

The last main item of the cost-per-hire template is the total number of hired employees of your company. Once you have this number, you can use the previously mentioned formula.

The final result of this equation is your total cost-per-hire. With this number, you can calculate how much of the company's money needs to be destined for the recruitment function. Moreover, you’ll also be able to better manage the onboarding costs and plan new strategies to lower the cost for new hires.

When it comes to the creation of a cost-per-hire template, you can find tons of tools available. From known software to specialized programs, each one has its own tools and features.

Among all the programs available, we highly recommend using Microsoft Excel for this task. The software not only has the best tool set available but is also an industry standard. This means that you won’t need extra programs for other business tasks you might have.

If you don’t have a Microsoft Office activation key, you can find one at RoyalCDKeys for a considerably lower price. This way, you get access to all features and automation and still save money from the hiring process.

If you don’t want to create your template from scratch, there is no problem. Here are some examples you can download and edit using Excel to better fit your needs.

Don’t forget to choose a template that reflects your objectives and the type of company you have. This will help to achieve more expressive results when calculating your cost-per-hire.

Here are some examples:

Template #1

Simple cost-per-hire template. Features the main categories for precise calculation and can be used by businesses of all types and sizes.

Get this template

Template #2

Cost-per-hire template with separate expenses. Features a division of the categories by type for better visualization of each expense.

Get this template

Every hiring manager and business owner should understand their cost-per-hire and the main elements responsible for reaching that specific value. This measure can help in numerous aspects of the business, including planning new strategies.

For this value to be calculated precisely, most managers use the cost-per-hire formula and create a template for listing all the internal and external costs. That gives them complete control over all details regarding the process, including interview costs, recruiting cost rate, and many other vital data.

Now that you know everything you need, it is time to build your cost-per-hire document. Follow these steps correctly to ensure a document that is effective and positively impacts your company.