Most teams can tell you their salary budget. Very few can tell you what it costs to hire one person. Without that number, it is hard to know whether your hiring process is cheap, slow or both.
This guide gives you the formula, a worked example in rupees, and the hidden costs people forget.
The cost per hire formula
Cost per hire = (Internal costs + External costs) ÷ Number of hires
Use one period, such as a month or a quarter, and count the hires made in that period.
What counts as internal costs
- Recruiter and HR salaries, based on the share of time spent on hiring
- Hiring manager and interviewer time
- Referral bonuses
- Recruiting tools and software
- Candidate assessment costs
- Employer branding and campus drives
What counts as external costs
- Job portal and job ad spend
- Agency or consultant fees
- Background verification
- Travel and relocation for candidates
- Recruitment events and fairs
A worked example (illustrative numbers)
A company hires 5 people in a month.
| Cost | Amount (₹) |
|---|---|
| Recruiter time spent on hiring | 90,000 |
| Job portal and ads | 25,000 |
| Recruiting tools | 10,000 |
| Referral bonuses | 15,000 |
| Agency fee (one hire) | 60,000 |
| Total | 2,00,000 |
Cost per hire = ₹2,00,000 ÷ 5 = ₹40,000
Your numbers will differ. What matters is that you write them down once and track them every month.
The costs most teams forget
- Interviewer time. Every interview takes a manager away from their job. A manager's hour is not free.
- Time spent on candidates who never get hired. Most screening calls do not lead to a shortlist. That time is a real cost.
- No-shows and reschedules. Each missed interview costs the interviewer's time and restarts the clock.
- Vacancy cost. Every extra day a role stays open costs you in missed work or overtime.
- Bad hires. A hire who leaves in three months means you pay for the whole process again.
How the cost of screening adds up
Screening is usually the largest hidden cost, because it takes recruiter time for every applicant, not only for the person you hire.
Here's a rough way to see it. Checking one resume by hand takes about 3 minutes, a phone screen about 15 and a first-round interview about 30. That's close to 50 minutes of recruiter time for every candidate who goes through all three, and most of them won't be hired.
With AI screening, the cost moves from recruiter hours to the tool. On HRFY.ai every step uses credits. A resume check is 30 credits, a phone screening call is 50, an AI interview is 150 and cheat detection is 20, so one candidate taken through all four uses 250 credits. Plans start at ₹4,000 a month for 2,000 credits (₹3,333 a month if you pay yearly), and each credit gets cheaper on the bigger plans. All prices are before 18% GST.
Whether that saves you money depends on what your recruiters cost and how many people you screen. That's why the calculator asks for your own numbers and doesn't give everyone the same answer.
6 ways to lower your cost per hire
- Write clear criteria before you source. Fewer wrong profiles means fewer wasted calls.
- Screen faster. Use a two-pass resume method or AI to avoid reading every resume for minutes.
- Automate first-round calls. Repeat questions such as notice period and expected salary do not need a recruiter's time.
- Cut no-shows. Let candidates pick their own time, and remind them on WhatsApp.
- Use referrals. They cost less and tend to stay longer.
- Track the number every month. What you track gets better.
Cost per hire and time to hire go together
Cost per hire tells you what a hire costs. Time to hire tells you how long it takes. Watch both. A process that is cheap but takes 45 days loses good candidates to faster employers, and a fast process that is expensive burns budget. Slow screening usually drives both numbers up, because every extra day means more recruiter time, more reschedules and more candidates lost.
Where to start this week
- Write down last month's hiring costs using the table above, even roughly.
- Count hires made in the month and work out your cost per hire.
- Ask each recruiter how many hours they spent on screening calls last week.
- Put those numbers into the calculator and compare.
Try it with your own numbers
Enter hires per month, average days to hire and recruiter cost into our free calculator, and see your estimated cost per hire in about 30 seconds.