Understanding recruitment costs isn’t optional anymore. Every staffing agency needs to track cost per hire to stay competitive and profitable.
The average cost per hire jumped to $4,700 in 2025, according to SHRM data. That’s a 14% increase since 2019. For executive roles, you’re looking at $28,000 or more per placement.
These numbers matter because they directly impact your bottom line. But here’s the good news: with the right strategies and tools, you can significantly reduce these costs.
What is Cost Per Hire and Why It Matters?
Cost per hire (CPH) measures the average amount your agency spends to place one candidate successfully. It’s not just about salaries—it includes every dollar spent throughout the recruitment process.
Think of CPH as your recruitment efficiency score. A lower number means you’re placing candidates faster and more economically. A higher number signals inefficiencies that need immediate attention.
Most agencies struggle with hidden costs. Job board fees pile up. Agency subscriptions multiply. Manual processes consume countless hours. Before you know it, your cost per hire has doubled.
RecruitBPM’s unified ATS and CRM platform eliminates redundant tools and tracks every recruitment cost automatically. You see exactly where your money goes in real-time.
How to Calculate Cost Per Hire: The Standard Formula?
The Society for Human Resource Management provides the industry-standard formula:
Cost Per Hire = (Internal Costs + External Costs) / Total Number of Hires
Let’s break this down.
Internal recruiting costs include your team’s salaries, benefits, training programs, interview time, and internal software subscriptions. Don’t forget office overhead and compliance costs.
External recruiting costs cover job advertising, recruitment agency fees, background checks, assessment tools, candidate travel expenses, and relocation packages.
Here’s a practical example. Your agency spent $50,000 on internal costs and $30,000 on external costs last quarter. You placed 20 candidates. Your cost per hire is $4,000.
Most agencies miss critical expenses in their calculations. They forget to include HR staff time or overlook smaller software subscriptions. These omissions create false confidence in your numbers.
RecruitBPM’s built-in cost tracking captures every expense automatically. No more spreadsheets or guesswork. You get accurate CPH calculations without manual data entry.
What Staffing Agencies Should Expect?
Average cost per hire varies significantly by industry and role type. Understanding these benchmarks helps you evaluate your performance.
Here’s what the data shows for 2025:
The accommodation and food service industries average around $1,070 per hire. These high-volume, entry-level positions naturally cost less.
Manufacturing roles typically run $3,497 per hire.
Healthcare and social services average $4,770 per hire. The specialized skills and thorough vetting processes drive these costs higher.
Professional and technical services see the highest costs at $6,464 per hire. Competition for specialized talent pushes these numbers up.
Executive-level placements can exceed $28,000 due to extensive search processes, multiple interview rounds, and comprehensive assessment requirements.
RecruitBPM’s analytics dashboard compares your cost per hire against industry standards. You instantly see whether you’re above or below the benchmark, with actionable insights on improvement areas.
Hidden Costs Driving Up Your Cost Per Hire
Most staffing agencies focus on obvious expenses while missing the silent profit killers.
Recruitment agency fees represent 15-25% of a candidate’s first-year salary. For a $70,000 placement, that’s $10,500 to $17,500 per hire.
Job board subscriptions add up quickly. LinkedIn charges $5-$9 per click. Indeed costs $100-$300 monthly for sponsored listings. Multiply that across multiple platforms and specializations.
Background checks cost $30-$200 per candidate, depending on depth. Skills assessments add another $50-$150 per person evaluated.
Onboarding expenses range from $1,500 to $7,000 per hire. Training programs, equipment setup, and integration time all contribute.
Then there’s the invisible cost: recruiter time. Every hour spent on manual data entry, candidate tracking, or status updates represents lost productivity.
RecruitBPM consolidates your entire recruitment tech stack into one platform. You eliminate duplicate subscriptions and reduce technology costs by up to 40%.
How Recruitment Software Reduces Cost Per Hire?
AI-driven recruitment platforms deliver measurable cost reductions. Companies using modern ATS solutions report 35% lower cost per hire and 42% faster time to fill.
Automation handles resume screening, interview scheduling, and candidate communication. Your recruiters focus on relationship building instead of administrative tasks.
AI-powered candidate matching ranks applicants 4x faster than manual review. You identify top talent quickly and move them through your pipeline efficiently.
Centralized databases eliminate duplicate work. Multiple team members access the same candidate information simultaneously. No more version control issues or lost updates.
Analytics reveal which sourcing channels deliver the best ROI. You redirect budget from underperforming job boards to high-converting sources.
RecruitBPM’s AI automation reduces time-to-hire by 60%. Faster placements mean lower costs per hire and happier clients.
7 Proven Strategies to Lower Your Cost Per Hire
1. Build Strong Talent Pipelines
Maintain relationships with qualified candidates before you need them. When positions open, you pull from pre-vetted talent pools instead of starting from scratch.
2. Leverage Employee Referrals
Referred candidates cost less and stay longer. Offer $500 bonuses for successful referrals—far cheaper than agency fees.
3. Optimize Job Descriptions
Clear, concise postings attract qualified candidates while deterring poor fits. Job descriptions under 150 words generate more applications.
4. Use Video Interviews
Video screening cuts costs by 20% by eliminating travel and scheduling complications.
5. Strengthen Your Employer Brand
Companies with strong reputations attract organic applicants and reduce paid advertising dependency by 43%.
6. Focus on Retention
Every employee who stays is one less position to fill. High turnover inflates recruitment costs dramatically.
7. Implement Skills-Based Hiring
Pre-screened talent platforms reduce screening time and deliver better-fit candidates faster.
RecruitBPM enables all seven strategies within one unified platform. From talent community management to automated referral tracking, you execute proven cost-reduction tactics effortlessly.
The ROI of Investing in an ATS for Cost Reduction
Modern applicant tracking systems require investment upfront but deliver substantial returns.
Small to mid-sized agencies spend $6,000-$12,000 annually on ATS software. Enterprise solutions range from $20,000-$100,000, depending on scale.
But consider the savings. Companies using ATS cut hiring costs by an average of $7,000 per role. If you place 50 candidates annually, that’s $350,000 in savings.
Time savings compound these benefits. Recruiters handle 20% more candidates with the same effort. Your team’s productivity increases without adding headcount.
Quality improvements matter too. Better candidate matching reduces bad hires. Since poor placements cost nearly $17,000 each, avoiding just a few mistakes justifies your entire ATS investment.
RecruitBPM delivers measurable ROI within the first quarter. Our clients report average cost per hire reductions of 30-45% after implementation.
Common Cost Per Hire Mistakes Staffing Agencies Make
Many agencies sabotage their own efficiency without realizing it.
Over-reliance on external agencies for sourcing drains budgets unnecessarily. Building internal capabilities costs less in the long term.
Neglecting talent pipeline development forces you to start every search from zero. This reactive approach maximizes expenses.
Using multiple disconnected tools creates hidden costs. Your team wastes hours on data transfer and system switching.
Failing to track metrics means you can’t identify improvement opportunities. You’re flying blind with your recruitment budget.
Ignoring employee retention focuses all energy on filling positions rather than keeping them filled.
RecruitBPM prevents these costly mistakes with integrated workflow management, automated metric tracking, and predictive analytics.
Transform Your Recruitment Economics Today
Cost per hire isn’t just an HR metric—it’s a profitability indicator for staffing agencies. Every dollar saved on recruitment flows directly to your bottom line.
The staffing agencies winning in 2025 embrace technology-driven efficiency. They leverage AI automation, maintain robust talent pipelines, and track every cost meticulously.
You face a choice. Continue with manual processes and watch costs climb. Or implement modern recruitment platforms that deliver measurable cost reductions.
The numbers speak clearly. Modern ATS platforms reduce cost per hire by 30-45%. They cut time-to-hire by 60%. They free your recruiters to focus on high-value relationship building.
RecruitBPM combines ATS, CRM, and workflow automation in one AI-driven platform. You get end-to-end talent acquisition capabilities without juggling multiple tools.
Our clients place more candidates faster while spending less on recruitment. They track every metric that matters and optimize continuously based on real data.
Ready to transform your recruitment economics? Discover how RecruitBPM reduces your cost per hire while improving placement quality and speed.
