Recruiting & Hiring Expense per Employee

Recruiting & Hiring Expense per Employee

KPI Details

Recruiting & Hiring Expense per Employee measures the cost of attracting and screening new team members on a per employee basis (i.e., average cost per employee). Not to be confused with Cost per Hire, this metric monitors the company's spending on these functions relative to the size of the company itself (not per new hire). Attracting and retaining high quality talent it vital to the success of nearly any business, therefore recruiting and hiring expense typically consumes a relatively large portion (in some cases, 25% or more) of the total HR budget, particularly in industries that rely highly-skilled knowledge workers to gain a competitive advantage (e.g., financial services, high-tech, pharmaceuticals, etc.). There are, however, many factors that can increase the cost of recruiting and hiring, including high turnover rates, low employee satisfaction, unproductive recruiting staff, cumbersome screening processes, and inefficient use of third-party recruiting channels (e.g., poorly allocated spending on job postings, third-party vendors, etc.).

KPI Definition

The total recruiting and hiring expense incurred divided by the total number of employees working for the organization over the same period of time. Recruiting and hiring expenses typically includes labor, third-party recruiter fees, job advertising costs, technology costs, travel costs, and other overhead related to attracting, screening and onboarding new employees.

KPI Best Practices

• Promote employees from within the company
• Ability to effectively identify and recruit the right talent for job openings (low Time to Fill)
• Clear descriptions of open positions in advertisements and job postings
• Adopt pre-screening assessments to eliminate unqualified candidates

KPI Calculation Instructions Recruiting & Hiring Expense per Employee?

Two values are used to calculate this KPI: (1) the total cost of recruiting and hiring, and (2) the average number of company-wide employees working for the organization over the same period of time. The total cost of recruiting and hiring typically includes the cost of labor (salaries/wages, benefits and commissions or bonuses), third-party vendor fees and technology related to job requisition marketing (i.e., posting jobs on LinkedIn, Monster, etc.), employee screening (i.e., interviews, background checks, etc.), travel expenses for candidates and any related third-party recruiter fees. New employee sign-on bonuses, referral fees and relocation costs should not be included in the numerator for this calculation. When calculating this value for a calendar year (or month, quarter, etc.), the average number of employees working for the organization during that time period should be used in the denominator for this calculation (i.e., the number of employees at start of period, plus the number at the end of the period, divided by 2).

KPI Formula :

Total Recruiting & Hiring Expense / Total Number of Employees