Cost per hire is the total cost of filling a role divided by the number of people you hired: (internal costs + external costs) divided by the number of hires. Internal costs are mainly your own and your team's time. External costs include job posts, platform subscriptions, tests and advice. For remote roles, add interviews across time zones and any trial period. To bring the figure down, write a clear post, filter early, shortlist from pre-tested talent and, on Agency or Pro, search the pool. DonutJobs has no per-hire fee, no placement fee and no commission on wages, and the Free plan costs $0.
Want to lower your cost per hire?Create your free DonutJobs account and start with pre-tested talent.
The Formula
Cost per hire = (internal costs + external costs) divided by number of hires
Pick a period, such as a quarter or the length of one search, and add up every cost of hiring in that period. Divide by the number of people who actually started. If you spent time on a search that ended without a hire, that cost still counts, so include it.
What to Include
Internal costs
- Your time: hours spent writing the post, reading applications, interviewing, testing and onboarding, multiplied by what an hour of your time is worth to the business
- Team time: hours spent by anyone else who helps, such as a team lead or a salesperson on a trial task
- Admin: setting up accounts, tools and access
External costs
- Platform costs: your subscription, plus any optional boost add-ons
- Assessment costs: paid tests or tools, and any paid trial time
- Advice costs: agreement templates and any adviser time for the arrangement
- Payment setup: account fees and first-payment transfer costs
- Tools and equipment: new licences or seats the new hire needs
- Referral rewards: if you pay for introductions
Remote-specific costs
- Interviews scheduled outside your normal hours because of time zones
- Onboarding that happens on screen rather than side by side
- Extra security setup, such as password managers and access controls
A Worked Structure
Use letters for your own numbers. Let T be the hours you and your team spend on the search, V the value of an hour of your time, P the platform and post costs, A the assessment costs, C the advice costs and S the setup costs. Let N be the number of hires.
- Internal costs = T x V
- External costs = P + A + C + S
- Cost per hire = (T x V + P + A + C + S) divided by N
Platform example: take the subscription cost for your term and divide it by the number of hires you make during that term. On the Agency plan with a 6 month term, that is six monthly payments of $55 divided by your hires. On the Pro plan with a 6 month term, it is six monthly payments of $166. The Free plan costs $0 for your first post. The more hires you make while you are subscribed, the lower the platform part of your cost per hire becomes, and there is no per-hire fee on top.
Cost per Hire Alongside Quality
A low cost per hire works best alongside a strong hire who stays. Track these next to it:
- Time to hire: how many days from posting to a signed offer
- Quality of hire: how the person performs after 30, 60 and 90 days
- Early turnover: how many hires leave within the first three months
- Offer acceptance: how many offers are accepted
The real aim is a low cost per good hire who stays.
Eight Ways to Bring It Down
1. Write a clearer job post
A specific post attracts better-matched applicants and reduces time spent reading unsuitable ones. Include hours, time zone, duties, tools and how you will measure success.
2. Filter early at the application stage
Ask must-have questions at the application stage, such as hours, tools and experience, so unsuitable applicants drop out before they use your time. The Formbuilder on Agency and Pro supports knockout questions.
3. Shortlist from pre-tested talent
When candidates already have test results on their profile, you spend less time on basic checks. DonutJobs profiles show results from an internet and hardware audit, an English communication test, a live typing speed test and a recorded voice sample, so you can read internet speed, English level, typing speed and voice tone at a glance.
4. Go beyond your applicants with Agency or Pro
Searching a pool by skills and test scores can find a match sooner than waiting for applications. On Agency and Pro, Magic Search and Swipe lets you filter by skills and test scores and swipe through candidates, and Agency adds unlimited talent-pool outreach.
5. Automate the busywork
Use pipeline stages, bulk actions and automations for repeated tasks such as sending the same message to a group of candidates. Paid plans include the ATS and an AI Workflow Builder, and our guide on how DonutJobs uses AI to speed up hiring explains how it works alongside the tests on profiles.
6. Use short, structured tests
A 30 to 45 minute practical task, scored with a rubric, reduces interview time. Our guide on what candidate test scores tell you shows how to read the profile scores alongside your own.
7. Shorten the time to hire
Every extra week of an open role is work that is not getting done. DonutJobs reports an average of about 48 hours from search to signed offer, and your own timing depends on how quickly you review and decide.
8. Keep good people longer
The cheapest hire is the one you do not need to make again. Clear expectations, fair schedules and regular feedback help people stay, which reduces the number of searches you run. Our guide to recruitment agencies versus self-service hiring platforms describes the other routes, and DonutJobs managed VA in 80 hour and 160 hour monthly packages is a route that covers hours without a search of your own.
Put the Savings Into Practice on DonutJobs
Here is a lean hiring flow that targets the biggest cost lines.
- Create your free account and post one clear role with hours, time zone, duties, tools and success measures.
- On Agency or Pro, add knockout questions so unsuitable applicants drop out before they use your time.
- On Agency or Pro, search the pool with Magic Search and Swipe, and use unlimited talent-pool outreach (Agency) to approach candidates directly.
- Send a short, scored task, and on paid plans use the ATS for notes, stages and bulk actions.
- Track your cost per hire for this search using the formula above, and compare it with your last channel.
Practical Use Cases
A founder making a first hire can use the formula to see the real cost of a search, including their own time. An agency hiring several people a year can compare the cost per hire across channels. A business with high turnover can use the formula to put a figure on how much replacing people costs.
Common Mistakes
A common mistake is leaving out your own time, which makes cost per hire look lower than it is. Another is comparing a single search with an annual average. A third is treating the lowest number as the best, when a slightly higher cost can buy a much better hire. Be consistent about what you include and over what period, so that comparisons are fair. This article is general information.
FAQ
How do I calculate cost per hire?
Add your internal costs, mainly time, to your external costs, such as platform and advice, and divide by the number of hires.
Should I include my own time?
Yes. Multiply the hours you spend on the search by what an hour of your time is worth to the business.
What is a good cost per hire?
It depends on the role and your business, so compare your own figures over time and across channels.
Does DonutJobs charge per hire?
No. There is no per-hire fee, no placement fee and no commission on wages. You pay a plan, which can be the Free plan, and you pay your hire directly.
How can I lower cost per hire quickly?
Write a clear job post, add knockout questions on Agency or Pro, shortlist from pre-tested profiles and cut the time between steps.
You can only improve what you measure. Work out your cost per hire once, keep the method consistent and use it to choose where to spend your time.
Start with pre-tested talent and tools that cut screening time. Create your free DonutJobs account, compare plans or browse the talent pool.