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Hiring a new employee is often described as an investment. But many teams underestimate how much that investment really costs. Beyond job ads and recruiter fees, hiring comes with hidden time, productivity, and opportunity costs that quietly add up.
If you are scaling a team, replacing a role, or expanding into a new market, understanding the true cost of hiring helps you plan better, hire smarter, and avoid expensive missteps.
Cost per hire refers to the total amount of money a company spends to recruit and onboard a new employee. It goes far beyond job advertising fees and includes both direct and indirect expenses incurred throughout the recruitment process.
In simple terms: Cost per hire = all expenses related to attracting, selecting, hiring, and onboarding a new employee
These costs can vary widely depending on industry, role complexity, seniority level, and hiring methods.
Hiring costs are made up of several direct and indirect expenses that occur throughout the recruitment and onboarding process.
Advertising cost includes all expenses related to promoting job openings to attract candidates. This may involve posting jobs on online job boards, social media platforms, company career pages, or running paid recruitment campaigns.
The cost can increase depending on the competitiveness of the role, the platform used, and the duration of the job posting.
Agency fees are costs paid to third-party recruiters, headhunters, or staffing agencies. These fees are often calculated as a percentage of the hired employee’s annual salary.
While recruitment agencies can speed up the hiring process and provide access to specialized talent, they can significantly increase overall hiring cost if used frequently.
Internal HR time refers to the cost of hours spent by HR teams and hiring managers on recruitment activities. This includes sourcing candidates, screening resumes, conducting interviews, coordinating schedules, and negotiating offers.
Although not always visible as a direct expense, internal HR time represents a substantial indirect cost, especially for companies with lengthy hiring processes.
Background check costs cover verification activities such as employment history, education credentials, criminal records, and reference checks. Depending on company policy and regulatory requirements, these checks may be conducted internally or outsourced to third-party providers.
While necessary to reduce hiring risks, background checks add to the total cost per hire.
Onboarding costs include all expenses associated with integrating a new employee into the organization. This may involve orientation programs, training sessions, documentation, equipment setup, software licenses, and mentorship time.
Effective onboarding requires investment, but it plays a critical role in improving productivity and employee retention.
Relocation costs apply when a company hires candidates who need to move to a different city or country. These expenses can include moving allowances, temporary housing, travel costs, visa or immigration support, and family assistance.
Relocation is often necessary for senior or specialized roles, but it can significantly increase the overall hiring cost.
Cost per hire is calculated by dividing the total recruitment expenses by the number of employees hired within a specific period. This metric helps companies understand how much they actually spend to bring in each new employee and evaluate the efficiency of their recruitment process.
To calculate it accurately, organizations need to include both internal and external recruiting costs, as excluding either category can result in an incomplete picture of the true hiring expense.
The commonly used formula for cost per hire is: Cost per hire = (Internal Recruiting Costs + External Recruiting Costs) / Total Number of Hires.
Internal recruiting costs typically include expenses such as HR team salaries allocated to recruitment activities, interview time spent by hiring managers, recruitment software, and onboarding administration.
External recruiting costs cover job advertising, recruitment agency fees, background checks, career events, and relocation expenses.
Here’s how to optimize your hiring cost without compromising quality:
Streamlining the recruitment process helps reduce unnecessary time and costs. This can be done by creating clear job descriptions, narrowing candidate requirements, and simplifying interview stages. A shorter time-to-hire means fewer internal HR hours spent and less productivity loss from vacant roles.
A strong employer brand attracts more qualified candidates organically. When candidates actively seek out the company, reliance on paid job ads and recruitment agencies decreases, which directly lowers cost per hire. Employer branding also improves candidate quality and long-term retention.
Employee referrals are often faster and more cost-effective than external hiring channels. Referred candidates tend to have higher cultural fit and retention rates, helping companies reduce repeated hiring costs caused by turnover.
For companies hiring internationally, using an employer of record (EOR) can significantly optimize cost per hire. An EOR manages employment compliance, payroll, taxes, and local labor laws, removing the need to establish legal entities in new markets. This reduces administrative, legal, and recruitment costs while accelerating global hiring.
Not all hiring channels deliver the same results. By analyzing performance data from job boards, social media, agencies, and referrals, companies can focus on channels with the highest return on investment and eliminate underperforming ones.
Hiring costs represent the true financial impact of recruiting new employees, extending far beyond job ads and recruiter fees. By understanding its components, businesses can make more informed decisions and build sustainable teams.
This article is brought to you by Glints TalentHub. Leading companies are actively building their borderless teams in Southeast Asia, Taiwan, and beyond. However, the prospect of going borderless can be daunting due to complex regulations and cultural ambiguities. With Glints TalentHub, you’ll have a dedicated team of in-market legal, HR, and talent experts by your side at every step of the way.
Glints TalentHub offers an end-to-end, tech-enabled talent solution that encompasses talent acquisition, EOR, and talent development. We empower businesses to leverage the strengths of regional talent efficiently to build high-performing, cost-efficient teams.
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