What Does Cost per Hire Mean?
Cost per hire (CPH) is the total cost of acquiring a new employee. This calculation is often a key performance metric for human resources departments and managers as it measures the cost of recruitment and the return on investment derived from recruitment activities. Cost per hire is a standard accepted by the American National Standards Institute.
WorkplaceTesting Explains Cost per Hire
Cost per hire is a way of measuring the cost to recruit, hire, and train a new employee. Many organizations use the cost per hire (CPH) calculation created by a group of HR professionals with the backing of Society for Human Resource Management. The American National Standards Institute later approved the formula and accepted it as a standard.
CPH = (External Costs) + (Internal Costs) / Total Number of Hires in a Time Period
Each of the formula's variables are clearly defined by the standard so that companies can easily plug in the correct numbers for their organization. All recruitment expenses incurred externally by the organization are classified as external costs. All recruitment expenses incurred internally, such as the cost of trainers and administration staff, are classified as internal costs. The total number of hires in a time period is the sum of all recruited staff members during the specified time.