How to Calculate ROI on Hiring

Hiring top talent is one of the most significant investments a business can make—but how do you know if it's actually paying off? Enter ROI on hiring. Just like any other business expense, recruitment needs to be evaluated for its return. Calculating the ROI on hiring can help you optimize your recruitment process, justify hiring budgets, and align your hiring strategy with broader business goals.

In this guide, we’ll break down what ROI on hiring really means, how to calculate it, and how to improve it—without getting lost in spreadsheets or HR jargon.

Why ROI on Hiring Matters

When you invest in hiring, you're not just paying a salary—you’re also covering recruiting costs, onboarding, training, and more. If those hires don’t perform or stay long-term, that investment can quickly become a loss. By measuring ROI on hiring, you can:

• Assess hiring effectiveness
• Identify high-performing recruitment channels
• Justify spend to stakeholders or CFOs
• Make data-driven workforce planning decisions

In short, ROI on hiring isn’t just an HR metric—it’s a business imperative.

What Is ROI on Hiring?

Return on Investment (ROI) on hiring measures the financial return a company gets from investing in recruiting and onboarding a new employee. It helps you understand if the money spent on hiring is actually generating value.

The basic formula for ROI on hiring is:

ROI (%) = [(Employee Value – Hiring Cost) / Hiring Cost] x 100

Let’s define the terms:

• Employee Value: The revenue or measurable output generated by the employee in a given period.
• Hiring Cost: The total cost of recruiting, onboarding, and training the employee.

Step-by-Step: How to Calculate ROI on Hiring

1. Calculate Hiring Costs

Start by adding up all the direct and indirect expenses involved in bringing a new employee on board:

• Job advertising fees
• Recruiter or agency fees
• Internal HR time and salaries
• Interview costs (travel, accommodations, lost productivity)
• Background checks
• Onboarding and training expenses
• Tools and software used in recruitment

📝 Example: If you spend $3,000 on job ads, $2,000 in recruiter time, and $5,000 in onboarding and training, your total hiring cost is $10,000.

2. Determine Employee Value

This step is a bit more nuanced. You can evaluate employee value in several ways:

• Revenue Generated: Especially useful for sales or revenue-producing roles.
• Cost Savings: How much money they help the company save.
• Productivity Gains: Improvements in team output, customer service, or innovation.

📝 Example: A new salesperson brings in $100,000 in sales in their first year.

3. Plug Into the ROI Formula

Using our previous numbers:

• Employee Value = $100,000
• Hiring Cost = $10,000

ROI = [($100,000 - $10,000) / $10,000] x 100 = 900%

That means for every dollar you spent on hiring, you earned $9 in return—a strong ROI on hiring.

Tips to Maximize ROI on Hiring

Hiring ROI isn’t just about cost—it’s also about quality and retention. Here are some ways to improve both:

✅ Hire for Cultural Fit

Employees who align with your values are more likely to perform and stay longer.

✅ Streamline Your Hiring Process

Reduce time-to-hire by automating parts of the process, like using applicant tracking systems or skills assessments.

✅ Invest in Onboarding

According to SHRM, effective onboarding can improve retention by 82% and productivity by over 70% [source].

✅ Track Performance Metrics

Monitor employee KPIs early on. This gives you tangible data to support ROI tracking.

✅ Use Data-Driven Hiring Tools

AI-powered hiring platforms can help you predict job fit and future performance with greater accuracy [source].

Common Pitfalls When Calculating ROI on Hiring

• Focusing only on short-term gains: ROI should be tracked over at least 12–18 months.
• Ignoring hidden costs: Time lost to poor performance or bad hires adds up.
• Underestimating training: Ongoing development affects employee output—and your ROI.

Real-World Example: Sales Hire

Let’s say a tech company hires a new salesperson. They spend $15,000 on hiring, including recruiter fees and onboarding. In the first year, the rep brings in $150,000 in new business.

ROI = [($150,000 - $15,000) / $15,000] x 100 = 900%

But if that employee leaves after six months, only bringing in $75,000, the ROI drops to:

ROI = [($75,000 - $15,000) / $15,000] x 100 = 400%

Still positive, but not as impactful. That’s why retention matters just as much as recruitment.

Key Metrics to Track Alongside ROI

• Cost per hire
• Time to productivity
• Retention rate
• Quality of hire
• Revenue per employee

These KPIs, when tracked together, give a 360° view of your hiring ROI and overall talent strategy health.

Conclusion: Make Every Hire Count

Calculating the ROI on hiring isn’t just a smart move—it’s essential for any business aiming to grow strategically. By evaluating hiring costs against employee performance and impact, companies can refine their recruitment processes, improve quality of hire, and ultimately drive more value from their workforce investments.

Whether you're a startup founder or an HR executive, using ROI on hiring as a guiding metric can lead to more thoughtful, data-backed decisions.

Ready to start measuring the ROI on hiring in your organization? Begin by auditing your current hiring costs and tracking employee performance from day one. A smarter hiring strategy starts with smarter data.

FAQ: ROI on Hiring

Q1: What is a good ROI on hiring?
A: While it varies by industry, a strong ROI is typically 300% or higher, meaning a $3 return for every $1 spent.

Q2: How long should you track ROI on a new hire?
A: At least 12 to 18 months to account for onboarding and ramp-up time.

Q3: Can ROI on hiring apply to non-revenue roles?
A: Yes. Use metrics like cost savings, efficiency improvements, or project completion rate to determine employee value.

Q4: Is it worth hiring even if the ROI is low?
A: Not always. Low ROI could signal poor hiring decisions, misalignment, or high turnover. Always investigate the cause.

Q5: What tools can help track hiring ROI?
A: Tools like BambooHR, Workday, or Greenhouse can help track cost, performance, and retention data.