Why Your Cost Per Hire Is Higher Than It Should Be (And How to Fix It)

It’s essential to hire the right people to drive your businesses towards success. However, the recruitment process can often be overly expensive. Many organisations are often surprised to find that their cost per hire is more than expected, eating into budgets and slowing growth.

Understanding why these costs rise – and knowing how to address them – can save time, money, and resources. In this blog, we’ll explore the common factors driving up cost per hire and show how Automated Analytics can help you recruit more efficiently and effectively.

Understanding cost per hire

Cost per hire is the total expense of recruiting a new employee. It’s calculated by combining all of the internal and external recruitment costs. This includes advertising, agency fees, employee referrals, recruiter salaries, onboarding, and training. Essentially, it’s a measure of how much your organisation invests to bring new talent on board.

It’s important to know your cost per hire, because it will directly impact your bottom line, as well as how efficient your hiring process is. If costs are higher than expected, it could indicate there are inefficiencies in your recruitment process, such as lengthy hiring times or an over-reliance on expensive agencies.

By understanding this metric, you can pinpoint where resources are being overspent, optimise your recruitment strategy, and ensure your hiring investment delivers the best return.

Common factors that drive up cost per hire

There are a number of issues that can cause your cost per hire to climb higher than necessary. By recognising these common factors, you can take steps to reduce expenses and improve hiring efficiency.

Inefficient recruitment processes

Lengthy or disorganised hiring workflows can quickly inflate costs. When there are delays in screening, multiple interview rounds, or unclear responsibilities among hiring managers, this can all add time and expense to the process, which will increase the overall cost per hire.

Poor candidate quality or fit

If you hire candidates who are not well-suited for the role, it can lead to early turnover, which itself results in additional recruitment cycles and extra training costs. It’s essential to ensure there’s a strong match between candidate skills, experience, and company culture so you can keep control of expenses.

High employee turnover

When an organisation has frequent departures, they’ll have to constantly recruit and train replacements, which drives costs up. Reducing turnover through better onboarding, employee engagement, and career development can help to lower the overall cost per hire over time.

Over-reliance on external agencies

Using recruitment agencies can be necessary, but being too dependent can often result in high fees. It’s essential to balance internal recruitment efforts with selective agency use to help manage expenses more effectively.

Lack of data tracking and analytics

Without accurate data on hiring processes, it’s difficult to identify inefficiencies or areas for improvement. Organisations that utilise talent tracking metrics and use analytics can pinpoint where costs are being increased and make informed decisions to reduce spending.

How to identify hidden recruitment costs

Many organisations focus on obvious expenses such as agency fees or job board advertising, but hidden costs can quietly inflate your cost per hire.

Time spent by hiring managers

The hours hiring managers dedicate to reviewing applications, conducting interviews, and coordinating with teams represent a significant cost. Although this time isn’t always tracked, it has a real impact on overall hiring expenses and productivity.

Onboarding and training expenses

Bringing a new employee up to speed involves more than just initial paperwork. Training programmes and supervision all carry costs that should be factored into your cost per hire calculations so you can get a true picture of recruitment investment.

Advertising and technology fees

Job postings, recruitment software, applicant tracking systems, and other tools support hiring efforts, but they all come at a cost. Even small recurring fees across multiple platforms can add up, so it’s important to account for these when you evaluate the efficiency of your recruitment process.

Ways to reduce your cost per hire

Reducing your cost per hire requires a combination of process improvements, smarter use of technology, and investment in people. Here are some of the most effective strategies:

• Streamline your recruitment process: Aim to simplify workflows, reduce unnecessary interview stages, and clearly define responsibilities amongst the hiring team. A faster, more efficient process will lower administrative costs and also keep top candidates engaged.
• Invest in employer branding: A strong employer brand helps to organically attract better candidates, which can reduce reliance on expensive job boards or recruitment agencies. Aim to highlight company culture, career growth opportunities, and employee success stories to help improve the quality of applicants.
• Utilise recruitment analytics and automation: Leveraging data and automation tools will help to identify bottlenecks, track key metrics, and optimise the channels you source talent from. Automated candidate screening and scheduling can also save significant time and reduce manual errors.
• Enhance candidate experience: Aim to provide clear communication, timely feedback, and a smooth application process. This will encourage the top talent to accept offers quickly, reducing the risk of losing candidates to competitors and the resulting cost of repeated searches.
• Focus on retention and internal mobility: Promoting from within and supporting career development will lower turnover and decrease the need for external hiring. Aim to invest in employee engagement and training to ensure that hires stay longer, which will spread recruitment costs over a longer period.

The role of Automated Analytics in reducing your cost per hire

Automated Analytics provides businesses with tailored solutions to manage recruitment more efficiently, helping lower cost per hire while improving hiring outcomes.

Tracking key recruitment metrics in real time

Automated Analytics allows organisations to monitor metrics such as time-to-hire, source of hire, and candidate drop-off rates in real time. This gives hiring teams immediate insights into performance, which helps to prevent delays and unnecessary expenses.

Identifying bottlenecks and inefficiencies

Our platform highlights stages in the recruitment process where resources are being wasted or workflows are slowing down. By pinpointing these inefficiencies, businesses can streamline operations and reduce recruitment costs.

Data-driven decision-making for smarter hiring

With Automated Analytics, decisions are backed by accurate data rather than intuition. Organisations can optimise sourcing channels, allocate resources effectively, and make hiring choices that improve candidate quality while lowering overall costs.

Take control of your recruitment costs with Automated Analytics. Contact us today for more information or book a free demo.