To streamline the processes in an organisation and have undisrupted flow, companies allot budgets for different departments and HR is the crucial one. Forecasting cost for a process like hiring an employee helps an organisation visualise on the idea of how this is going to impact and if the same aligns with the results they have been desiring for. To address this concern and simplify it, companies have pre designed salary slabs for varying positions which are formed by using Cost-per-hire or CPH or cost-to-hire calculator.
To best reap the results, you need planning and it starts frio understanding the requirements and how much money and efforts you are ready to put in and if you are clear about all this by leveraging tools like CPH, you are on the right path. In this guide, I will help you understand how to effectively use a cost-to-hire calculator and what are the inputs you need.
Cost To Hire & It’s Importance
Cost-to-hire is one of the most common yet crucial tools used for hiring and recruiting metrics. Cost per hire is used for the purposes related to recruiting talent and understanding the total cost of hiring the new employee by factoring in expenses like the recruitment process, equipment, travel costs, administrative costs and benefits.
Calculating cost to hire helps determine the average expenses a company would incur while hiring new employees. It holds extreme importance as it enables HR professionals and hiring managers to assess whether the recruitment efforts are optimized as per the budget.
Below are some key reasons why measuring cost per hire is important:
- Performance Evaluation
- Return on Investment (ROI) Analysis
- Cost Control
- Enhancing Recruitment Strategy
- Continuous Improvement
- Benchmarking against Industry Standards
Using A Cost To Hire Employee Calculator
Most of the tools you use today are smart because they are AI integrated and to address this a comprehensive calculator has been designed by different developers. To help hiring managers with accuracy and quicker results, different ways have been formed to use a cost per hire calculator. But the idea lies in understanding your needs and then choosing the right calculator for hiring cost.
After you have selected the right calculator, you can start inputting the relevant data to know your cost per hire. This data is mainly including the salary of the position, the cost of advertising, the cost of recruitment, and some more concerning details.
Below I have mentioned all these factors required for you to calculate cost to hire with a calculator;
Factors Required For Cost to Hire Calculator
- Internal Recruiting Costs
Internal recruiting costs are the expenses incurred by the organisation’s internal HR team, which mainly include;
- – Salaries and benefits of in-house recruiters
- – Marketing and advertising costs for job postings on different platforms
- – Interview costs (number of hours times hourly salary of interviewer or hiring manager)
- – Fixed costs such as workstation requirements
- External Recruiting Costs
External recruiting costs, as the terms suggest, are expenses incurred when seeking external assistance to fill vacancies, which mainly include;
- – Amount paid to external recruitment agencies
- – Costs of conducting background checks
- – Advertising costs & career fair / recruiting event costs
Also Read: Top 10 Talent Acquisition Jobs Available in Singapore (2024)
- Onboarding Costs
This section refers to the expenses related to settle-in a new employee into the organization, which mainly include;
- – Training and orientation expenses
- – Onboarding materials and resources
Conclusion
Using a cost-to-hire calculator is not a tough task and results can be obtained with accuracy, until you have got the data to input correctly. Some additional factors like cost to hire abroad might also sometimes be required to be included which varies from company to company and to different scale of designations. Make sure you factor in every possible factor and then create the expenses and then feed into the calculator you have selected.
