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How to calculate cost-per-hire for interns and entry-level employees

Posted August 28, 2020 by

On the surface, it sounds like a simple question: how do I calculate my cost-per-hire? Quite literally, you do so by dividing your costs into the number of hires.

The number of hires isn’t too controversial. Few employers are going to differ as to how to define that, although I’ve seen some tweaks such as one of our employer customers who only counts someone as a “hire” if they remain with the company for X days. That’s not likely to be an issue for employers who are hiring for professional positions, but can be quite a big difference for employers who are hiring for high turnover roles such as retail, hospitality, or other hourly roles.

What does generate controversy is what to include in the cost numerator. I’ve seen some employers only include out-of-pocket costs charged to their department such as advertising and career fairs. Other employers will also include costs their organizations may regard as overhead such as travel. More and more employers do what we recommend: include ALL costs including staff time, travel, advertising, shipping of booths, swag, dinners with professors, assessments, background checks, etc.

The difference between cherry picking only some costs and correctly including ALL costs is substantial. According to the National Association of Colleges and Employers, when employers do not include staff costs their mean, cost-per-hire average $1,533. When staff costs are included, that rises to $6,110.

The NACE survey was conducted in 2018, so well before the advent of the COVID-19 pandemic. NACE also examined the issue of cost-per-hire in 2014 and found a far lower cost-per-hire for interns and entry-level hires: $3,582.

How does the average cost-per-hire of $6,110 compare to what employer customers of College Recruiter are seeing? Anecdotally, the customers who share with us those numbers typically are seeing costs per hire as low as $75 (high volume, unskilled, part-time, warehouse jobs) to about $2,000 (diverse, software engineers). Why is it so much cheaper to hire on-line than on-campus? Two primary reasons: (1) it takes far less staff time to advertise jobs on-line than travel to a bunch of campuses and (2) there are no travel expenses when advertising on-line but usually are when marketing them on-campus.

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Posted in Advice for Employers and Recruiters | Tagged