How to Reduce Your Average Cost Per Hire

Recruiting top talent is no small feat—and it’s certainly not cheap. Every time a company brings a new employee on board, it incurs a series of expenses that together make up the cost per hire. From job postings and recruitment tools to interview time and onboarding, these expenses can quickly add up. For businesses looking to scale efficiently, controlling the cost per hire is a critical priority.

But here’s the good news: reducing your average cost per hire doesn’t mean compromising on candidate quality. With the right strategies, you can optimize your hiring process to be both cost-effective and impactful.

Let’s explore how to make that happen.

Understanding Cost Per Hire

Cost per hire is a standard HR metric that calculates the average expense incurred in hiring a new employee. This figure includes both internal and external recruitment costs such as:

• Salaries of HR and recruiting staff
• Recruitment marketing and job board fees
• Background checks and assessments
• Travel and relocation expenses
• Technology tools and applicant tracking systems
• Onboarding and training costs

The formula is straightforward:

Cost Per Hire = (Total Internal + External Hiring Costs) ÷ Number of Hires

Reducing this number means identifying waste, improving processes, and investing smarter—not necessarily spending less.

Why Reducing Cost Per Hire Matters

• Maximize ROI: Every dollar saved on hiring can be reinvested in other growth areas.
• Improve efficiency: A lean recruitment strategy often leads to quicker time-to-fill.
• Attract better talent: When resources are used wisely, companies can afford to focus on higher-quality hires.
• Support scalability: Lower hiring costs make it easier to grow your workforce as your business expands.

Proven Strategies to Reduce Cost Per Hire

1. Leverage Employee Referrals

One of the most effective ways to reduce cost per hire is by building a strong employee referral program. Referred candidates often:

• Cost less to acquire
• Get hired faster
• Stay longer

Encourage referrals with modest incentives like cash bonuses, extra vacation days, or public recognition. This approach taps into your existing talent network without the high price tag of job boards or agencies.

2. Optimize Job Postings and Career Pages

Well-written, targeted job descriptions help attract the right candidates quickly, reducing time and effort. Ensure that:

• Job postings are keyword-optimized for SEO
• Career pages reflect company culture and values
• Application processes are mobile-friendly and fast

Example: Companies with optimized career sites see up to 50% more qualified applicants, reducing reliance on paid advertising channels (Source).

3. Use Free and Low-Cost Recruiting Channels

Instead of pouring money into premium job boards, explore:

• LinkedIn posts and networking
• Social media channels
• University job fairs
• Community groups or niche forums

Free tools like Google for Jobs or even your company blog can also improve visibility at zero cost.

4. Invest in Recruitment Automation Tools

While there's an upfront cost, applicant tracking systems (ATS), resume screeners, and scheduling software can drastically reduce manual work, thereby lowering internal hiring costs.

Tools like Greenhouse, Lever, or Workable can automate repetitive tasks, streamline communications, and reduce time-to-hire.

5. Build a Talent Pipeline

Don’t start from scratch every time there’s a vacancy. Maintaining a pipeline of engaged, pre-qualified candidates shortens hiring cycles and reduces expenses.

Tactics include:

• Hosting informational interviews
• Nurturing silver-medalist candidates
• Engaging with past applicants via email

6. Improve Interview-to-Hire Ratios

If you’re interviewing 10 people to hire one, something’s off. Improve this ratio by:

• Pre-screening effectively
• Using structured interview guides
• Aligning hiring managers on candidate profiles

Fewer interviews per hire means less time and money spent.

7. Monitor and Adjust Recruiting Metrics

Data-driven decisions are key. Regularly review recruiting KPIs such as:

• Time to fill
• Source of hire
• Interview-to-offer ratios
• Offer acceptance rate

With these insights, you can cut underperforming channels and double down on what works. The U.S. Office of Personnel Management recommends structured data tracking to help reduce federal hiring inefficiencies (Source).

Bonus: What NOT to Do

Avoid cutting corners in ways that may backfire:

• Don’t skip background checks to save money.
• Don’t settle for poor-fit hires—bad hires are costly.
• Don’t ignore candidate experience. A bad reputation will drive up sourcing costs long-term.

Conclusion: Smarter Hiring Starts with Strategy

Reducing your cost per hire doesn’t require a massive overhaul—it’s about working smarter. By refining your processes, leveraging low-cost channels, and keeping a pulse on recruiting data, you can lower hiring expenses while still securing top-tier talent.

The result? A hiring engine that’s lean, effective, and scalable for the future.

Call to Action

Want to start cutting your cost per hire today? Begin by auditing your current recruiting channels and identifying quick wins. Need help choosing the right recruitment tools or building a referral strategy? Reach out to an HR consultant or explore automation solutions that align with your budget.

FAQ: Reducing Cost Per Hire

1. What is considered a good cost per hire?
It varies by industry, but a good benchmark is around $4,000 per hire. However, tech and executive roles often cost more.

2. Can cost per hire be reduced without affecting quality?
Yes. Strategies like referrals, automation, and better screening can lower costs while maintaining (or even improving) candidate quality.

3. How can small businesses reduce cost per hire?
Use free channels, build a talent pipeline, and rely on your personal network or referrals instead of expensive agencies.

4. Are recruitment agencies worth the cost?
They can be valuable for hard-to-fill roles but often drive up the cost per hire. Use them selectively.

5. How often should cost per hire be measured?
Quarterly is a good frequency to track progress and make timely adjustments to your hiring strategy.