The cost of recruitment is usually quoted as an agency fee and is mostly made of things that never appear on an invoice: the time of everybody who interviewed, the vacancy itself, and the cost of a hire who leaves within a year. Counting only the invoice understates it substantially and points improvement efforts at the wrong place.
The costs that appear on an invoice
Agency fees, advertising, assessment and background checks, and any referral bonus. These are visible, easy to compare and usually the smaller half. They are also the ones most often targeted for reduction, which is why recruitment cost programmes frequently deliver less than expected while making the process slower.
The costs that do not
Interviewer time, which for a panel process across several rounds is substantial at senior salaries. The cost of the vacancy itself, in work not done or covered by others. And the cost of a bad hire, which dwarfs everything else and is affected far more by the quality of selection than by what was spent on sourcing.
Why cost per hire misleads
It moves with the mix of roles and channels rather than with how well recruitment is run. A quarter of senior hires through agencies will look worse than a quarter of junior hires through referrals, regardless of anybody's performance. Use it as a budget figure and judge the function on time to response, offer acceptance and early leaver rates.
Questions people ask about cost of recruitment
What is a typical cost per hire?
It varies so widely by role, seniority and channel that a general figure is not useful. Calculate your own by role family.
Are agencies worth the fee?
For scarce roles frequently yes, and the comparison should include the cost of the vacancy staying open rather than only the fee.
How do we reduce recruitment cost?
Usually by reducing time to hire and early attrition rather than by squeezing fees. Both are within your control.