COST

PER
PER
HIRE
HIRE
 Cost- benefit
Track recruitment process
analysis

SIGNIFICANCE
OF
COST PER HIRE

Recruitment
HR budgeting
Process effectiveness
 Cost- benefit
Track recruitment process
analysis

1. Track recruitment process

We follow a procedure to recruit employees. However sometimes the process

goes dismay at times in documentation or tracking of the candidates. But when
we are into calculating cost per hire we have to adamantly keep record of the
process as it will lead to the calculation of the cost of the recruitment system
of the HR department. Any deviation in adherence to the process will effect
the overall cost of the recruitment process.

2.Cost Benefit analysis

To calculate the overall cost of a hire we have to keep record and also
calculate the aspects involved in the hire which bears cost. Thus during
evaluation in the later stage we can analyze which aspect in the recruitment
is involving more costs to the system. Thus accordingly we take actions in
the aspects which is bearing more cost to the system

Recruitment
HR budgeting
Process effectiveness
 Cost- benefit
Track recruitment process
analysis

3.Recruitment Process Effectiveness

Hiring costs represent a significant portion of HR expenditures, particularly
when the effects of turnover are considered. For example we can analyse
the sources which involves this turnover. It is always wise to watch costs
and have a program of continuous improvement, ensuring that the money
we are spending are on the things that make sense and pay off. It is
important to measure what works and doesn't work as rigorously as we can

4.HR Budgeting

After a few months of cost per hire analysis the HR department will be in
a position to be more realistic in the figures required for recruitment and
thus leading to a more specific budget for the department and work on
other areas of the department.

Recruitment
HR budgeting
Process effectiveness
 Cost- benefit
Track recruitment process
analysis

Procedure
For
Tracking to calculate CPH
Calculating cost per hire is to be from the very first day of the recruitment
procedure. Thus a tracker in Excel format has to be prepared for easy
calculation with the headings to discussed in the following slides with its
importance and usage

Recruitment
HR budgeting
Process effectiveness
 Cost- benefit
Track recruitment process
analysis

Candidates Name
The candidates name column should include only those candidates who has
been short listed by the Head for interview, otherwise it will be huge data
base.
In a different sheet all the candidates who have been contacted for the
requirement whether interested or not, whether short listed or not to find
out how many candidates were contacted for the position

Position
In the next column the position for which recruitment is done should be
maintained. It will help to analyze which position has incurred how much
cost in hiring. Rigorous actions can be taken to cut down on the expenses
in the areas which has incurred cost for the position.

Recruitment
HR budgeting
Process effectiveness
 Cost- benefit
Track recruitment process
analysis

Mode of Sourcing
Mode of sourcing is an important aspect for calculating cost as this decides
on the internal and external cost like Employee referral and job sites and
advertising, consultancy and campus advertising for candidates
respectively. This will enable us to compare and decide which involves
more cost and decide the best source for the system.

Infrastructure Cost
At the onset what does infrastructure cost include? It includes the cost
which are not easy to track but also incurs a huge cost like the telephone
cost. It is not easy to track telephone cost as it will involve a huge amount
of time but it does incur cost. Thus calculating the average amount of calls
made to a candidate ranging from sourcing call to call made till joining is
done on the basis of minutes and the rates charged for the same. A chart is
prepared which is included accordingly during the cost calculation of the
hire.

Recruitment
HR budgeting
Process effectiveness
 Cost- benefit
Track recruitment process

Internal Recruiters Cost

analysis

The most important and complicated part is to calculate recruiter’s efforts in

terms of money. The recruiters effort is turned to cost in the following way.
Firstly we need to work on the number of days a recruiter works on to
complete a position. To calculate the days we firstly need to calculate how
many hours in a day we put into recruitment. For Example we put 2 hours per
day in recruitment.
Then we have to multiply the hours with the working days. For example: 26
days * 2 hours = 52 hours(=2 days)/ month. Thus recruitment for a position has
to end in 52 hours i.e. 2 days. This will be the average no. of days
Then we have to calculate the average salary of the number of recruiters
involved in the position. If 2 recruiters are involved in closing a position
with Rs5000 and Rs12000 salary respectively, then the average salary will
be 5000+12000/ 2 = Rs8500
Finally we have to put the number of days and average salary of recruiters
to the formula for calculating Internal Recruiters Cost i.e.
Salary of recruiters * Number of days / No. working days
Recruitment
Process effectiveness
8500 * 3 days / 26 = Rs. 980 per position HR budgeting
 Cost- benefit
Track recruitment process
analysis

Reimbursement Cost
In some positions we need to call the candidates from out station,
which will involve further cost like his travel cost and lodging cost
which is also included in the calculation of the cost of the hire

Relocation Cost

If we recruit an employee for a demographic region other than where he

is, we have to give relocation allowances to the concerned employee like
traveling cost including family, accommodation cost for a few days and
also shifting cost which easily bears a hefty amount to the recruitment
system

Recruitment
HR budgeting
Process effectiveness
 Cost- benefit
Track recruitment process
analysis

COST PER HIRE

Now to calculate the cost per hire we have to add up all the
cost and divide it by the number of hires in the pre-defined
time period i.e.
Mode of sourcing + relocation + recruiter’s salary +
reimbursement + infrastructure
Number of hires in the pre defined time

Recruitment
HR budgeting
Process effectiveness
 Cost- benefit

Analysis and Evaluation

Track recruitment process
analysis

At the initial few months the CPH tracker would seem to be just another
data entry with no value addition to the department. But the actual
analysis would come only after a few months of hiring. The CPH tracker
would reflect the following:
By default it would show the cost incurred in a hiring.
Besides that we can also analyze which source of recruitment is more
expensive.
We can also analyze which source brings in the stable manpower which
has the highest turnover.
It can also be taken in position wise showing which position's
recruitment is incurring higher cost.
We can also do the recruitment in the pre-defined time period. If the
position is not closed in that time we can analyze what are factors causing
the delay and lead us to take necessary actions to gear up the recruitment
procedure.

Recruitment
HR budgeting
Process effectiveness
 Cost- benefit
Track recruitment process
analysis

Conclusion

Thus it is not complex to calculate the CPH but it only requires

most systematic and focused tracking and the result will be
many from evaluating the system in figures, the effectiveness
of the procedures and also our future actions of budgeting

Recruitment
HR budgeting
Process effectiveness