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E-commerce Cost Per Hire
employmentThe total cost of filling a job vacancy, including advertising, recruiter fees, interview time, onboarding, and any signing bonuses or relocation expenses.
Definition
Cost per hire captures all expenses associated with finding, hiring, and onboarding a new employee. It includes direct costs like job board fees, recruiter commissions (typically 15-25% of first-year salary), background checks, and skills assessments. It also includes indirect costs like the time hiring managers and interviewers spend away from their primary work, and the opportunity cost of an unfilled position.
According to SHRM research, the average cost per hire in the US is approximately $4,700, but this varies enormously. Entry-level roles might cost $2,000-$5,000 to fill. Mid-level professional roles cost $10,000-$25,000. Senior executive positions filled through retained search firms can cost $50,000-$100,000+. Technical roles in competitive markets often require significant sourcing investment.
Understanding cost per hire has strategic implications. If hiring a single engineer costs $30,000 and that engineer churns within 6 months, the company lost $30,000 in recruitment plus months of onboarding investment. This underscores why retention is often more cost-effective than recruitment. It also informs the build-vs-outsource decision: sometimes contracting work is cheaper than the recruitment cost of a full-time hire.
Formula
Cost Per Hire = (Total Internal Recruiting Costs + Total External Recruiting Costs) / Total Number of Hires Example
A company makes 12 hires in a quarter. Internal costs (recruiter salary allocation, interviewer time): $28,000. External costs (job boards: $8,000, agency fee for 2 hires: $30,000, background checks: $1,200): $39,200. Cost per hire = $67,200 / 12 = $5,600.
Related Terms
Employer Cost
employmentThe true total cost to a company of employing one person, including salary, payroll taxes, benefits, equipment, office space, and all overhead allocated per employee.
Total Compensation
employmentThe complete value of everything an employee receives in exchange for their work, including base salary, bonuses, equity, benefits, retirement contributions, and any other perks.
Benefits Rate
employmentThe percentage of an employee's salary that the employer spends on benefits such as health insurance, retirement contributions, paid time off, and other non-wage compensation.
Payroll Tax
employmentTaxes levied on employers and employees based on wages paid. In the US, this primarily includes Social Security (6.2%) and Medicare (1.45%) taxes, paid by both employer and employee.
Put It Into Practice
Use these calculators to apply cost per hire to your own numbers.
Employee Cost Calculator
Calculate the true cost of an employee beyond just their salary.
Open calculator →Contractor vs Employee Calculator
Compare the true cost of hiring a contractor vs a full-time employee.
Open calculator →Revenue Per Employee Calculator
Measure your team productivity by calculating revenue and profit per employee against industry benchmarks.
Open calculator →