4 Reasons Employers Should Track Their Cost Per Hire
Cost per hire increases dramatically in markets where top professional talent is scarce. According to SHRM, cost per hire is financial investments include advertising agency fees, employee referrals, travel cost of applicants and staff, relocation costs, and recruiter pay and benefits. This metric is calculated as the sum of these costs divided by the number of hires. The HR Departments are judged for the quality of talent they recruit and retain. Now more than ever, this is an important metric to understand and track.
- Metric to check effectiveness of internal recruiting staff. According to SHRM, costs per hire for large organizations increase by 39% over smaller organizations. This is an important fact to consider when growing a company. The most important reason is that large companies hire internal full-time recruiters. A cost per hire metric is a great way to check the effectiveness of your internal recruiters.
- Ensure that you are using staffing firms efficiently. According to INC Magazine, 90% of Fortune 500 Companies use staffing firms to fill open positions. We find that many clients utilize too many staffing firms at the same time. In some cases, large companies use 30+ different staffing firms. It often makes sense to forge an exclusive relationship with the best firm in the market and ask for better rates. This will decrease you cost per hire on temporary positions.
- Cost per hire will add significantly to turnover costs. Many companies do not effective track turnover costs. These costs typically range from 2 times to 4 times an employee’s annual salary, but a precise number can be difficult to find. Cost per hire is much easier to track. Management will be more willing to invest in a retention strategy if they are able to concretely see how much it costs to refill a position.
- Making sure that you have costs equal or lower than competitors. Employee wages are the number one cost for the majority of organizations. Making sure that you are market competitive will ensure that you can compete in the market for your product or service.