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Gather Your Inputs
First, identify and gather all the necessary costs and the number of hires. This includes recruiting costs such as agency fees, job board postings, and any other expenses related to finding and hiring new employees. Onboarding costs include training, equipment, and any other expenses associated with integrating new hires into your team. Lost productivity costs are those incurred due to the time existing employees spend on training new hires instead of performing their regular duties.
Calculate Total Recruiting Costs
Add up all the recruiting costs. For example, if you spent $1,000 on job board postings, $2,000 on agency fees, and $500 on travel for interviews, your total recruiting costs would be $3,500.
Calculate Total Onboarding Costs
Sum up all the onboarding costs. If you spent $800 on training materials, $1,200 on equipment, and $1,000 on software licenses for new hires, your total onboarding costs would be $3,000.
Calculate Total Lost Productivity Costs
Estimate the lost productivity costs. If two existing employees spent 40 hours each at $25/hour training new hires, the lost productivity cost would be 2 employees * 40 hours * $25/hour = $2,000.
Apply the Formula
Plug the totals into the cost per hire formula. Using the example numbers: Total recruiting costs = $3,500, Total onboarding costs = $3,000, Total lost productivity costs = $2,000, and assuming 5 new hires, the calculation would be $3,500 + $3,000 + $2,000 = $8,500. Then, $8,500 / 5 hires = $1,700 per hire.
Avoid Common Pitfalls and Consider Using a Calculator
Common mistakes to avoid include forgetting to account for all costs, such as lost productivity, and not updating your numbers regularly. For convenience and accuracy, consider using a cost per hire calculator, especially when dealing with a large number of hires or complex cost structures. These calculators can simplify the process and provide a quick overview of your hiring costs.
Introduction to Cost Per Hire Calculation
The cost per hire (CPH) is a crucial metric for businesses to understand the financial impact of their recruitment processes. It encompasses various costs, including recruiting, onboarding, and lost productivity. In this guide, we will walk through the steps to calculate the cost per hire manually.
Understanding the Formula
The formula for calculating the cost per hire is: [ CPH = rac{Total\ Recruiting\ Costs + Total\ Onboarding\ Costs + Total\ Lost\ Productivity\ Costs}{Number\ of\ Hires} ]
Prerequisites
Before proceeding with the calculation, ensure you have the following information:
- Total recruiting costs (agency fees, job board postings, etc.)
- Total onboarding costs (training, equipment, etc.)
- Total lost productivity costs (time spent by existing employees on training new hires, etc.)
- Number of hires