Recruitment is getting expensive, fast. Between rising candidate expectations and internal inefficiencies, your hiring process might be costing you more than you think. But the real question is: how much of that cost is invisible?
In the UAE, private companies with over 50 employees are now required to increase Emiratisation by 2% each year. Without efficient systems in place, this can quickly drive up hiring costs, especially for skilled roles.
And it's not just compliance that strains your budget. Hidden inefficiencies like unfilled roles, unclear budgets, and wasted spend on poor channels can quietly inflate your costs. So, how to reduce the cost of hiring without cutting corners?
This blog gives you the answers. Learn practical tips to reduce cost per hire and boost recruitment ROI, without compromising on quality.
TL;DR
- Cost per hire is the average amount spent to fill one job position.
- Calculate it by dividing total hiring costs by the number of hires made.
- Cost per hire matters because it directly affects your recruitment budget and ROI.
- Automating tasks like sourcing and screening can lower hiring costs significantly.
- Tracking your spend helps reduce the cost per hire and improve decision-making.
What Is Cost per Hire?
Cost per hire is one of the most important recruitment metrics to track. It tells you how much money, on average, it takes to fill a single position in your organization.
This includes all the costs you incur to source, attract, interview, and onboard a new employee. It could be a combination of internal efforts, like the time your HR team or hiring managers spend on recruitment tasks. You also need to consider external costs, such as job ads, recruiter fees, and background checks.
The goal isn’t always to bring this number down drastically. Some roles will naturally cost more to hire for. Instead, you want to ensure that your hiring spend is optimized, without compromising on candidate quality.
When you understand how much each hire actually costs, you’re in a better position to allocate resources smartly. It also shows which tools and hiring channels deliver better results and where to reduce unnecessary spending.
What Costs Are Included in Recruitment?
When calculating cost per hire, it’s important to account for both direct and indirect recruitment expenses. These costs vary based on the complexity of the role and the recruitment methods you use.
Here are some of the most common components of recruitment costs:
- Job advertising: Costs related to posting on job boards, LinkedIn promotions, or traditional ads. These include paid listings and boosting reach to attract qualified candidates faster.
- Agency fees: Payments made to recruitment or staffing agencies, including contingent or retained services, especially when hiring for hard-to-fill or urgent roles.
- Screening expenses: Covers background checks, reference checks, and using tools like applicant tracking systems to sort and manage applications efficiently.
- Interview costs: Includes candidate travel, team time spent on interviews, and any associated hospitality or logistics expenses.
- Onboarding costs: Expenses for new hire setup, like training materials, software access, equipment, and HR time dedicated to orientation.
Know More: Cost Effective Recruitment Strategies for Remote Hiring
How to Calculate Cost per Hire?
Before you look at how to reduce the cost of hiring, you need to measure it accurately. Here’s a quick breakdown of how it’s calculated.
The Cost per Hire Formula is:
(Internal Hiring Costs + External Hiring Costs) ÷ Number of Hires
- Internal costs include recruiter salaries, interviewers' time, and internal tools used.
- External costs include agency fees, job ads, screening tools, and onboarding expenses.
Let’s say you spent AED 100,000 on recruitment activities in one quarter and hired 10 employees. Your cost per hire would be AED 10,000.
What to Track?
You’ll need to gather accurate data across:
- Job ad platforms and sourcing tools
- Interview and screening tools
- ATS or recruitment software costs
- Time spent by hiring managers and the HR team
- Offer, onboarding, and training resources
The more precise your tracking, the clearer your recruitment ROI becomes. Once you know what’s driving up your cost per hire, it becomes easier to fix.
Why Does Reducing Recruitment Costs Matter?
Recruitment isn't just about filling a seat; it’s a strategic function that impacts your overall business performance. High recruitment costs can eat into your profit margins, especially when hiring at scale.
According to recent data, HR teams spend around $401 per employee annually on recruitment alone. If you're consistently spending too much to make each hire, you're likely overspending on processes that could be streamlined. In many cases, companies can reduce the cost per hire without sacrificing quality, just by improving efficiency and decision-making.
More importantly, reducing hiring costs frees up budget that can be redirected to other people functions, such as training, engagement, or retention. You get to do more with less while building a workforce that meets your needs.
Know More: Free Recruiting Tools to Use in 2024
How To Reduce Cost per Hire?
High recruitment costs can often be traced back to inefficiencies in the process. Here are some effective ways to reduce the cost per hire while still hiring high-quality candidates.
1. Use an Applicant Tracking System (ATS)
A good ATS centralises your entire hiring workflow, from sourcing to onboarding.
It helps reduce repetitive admin work, improves collaboration, and tracks candidate progress in real time. With less time wasted, your team can focus on high-impact tasks.
If you're wondering how to reduce the cost of hiring, investing in the right ATS is a great place to start. It pays off in reduced manual hours and faster time to hire.
2. Automate Routine Recruitment Tasks
Manual tasks like resume screening, scheduling interviews, and sending follow-up emails consume both time and budget.
Recruitment automation tools allow you to streamline these steps. For example, auto-screening tools can shortlist candidates based on your preset criteria, saving your team hours of effort.
This not only reduces workload, but also improves speed and consistency, especially when you’re hiring at volume.
3. Improve Your Job Descriptions
Poorly written job descriptions attract the wrong applicants, leading to wasted effort and increased hiring time.
Be specific about responsibilities, must-have skills, and what success looks like in the role. This filters out unqualified applicants early and helps you attract candidates who are actually a fit.
The more aligned your job description is with the role, the less time you’ll spend filtering irrelevant applications.
4. Build a Talent Pipeline
Not every hire has to start from scratch. A well-maintained talent pool lets you reach out to previously screened candidates the moment a relevant role opens.
Use your ATS or CRM to segment and nurture these candidates. Stay connected with newsletters, updates, or even light-touch engagement campaigns.
Over time, this reduces sourcing costs and shortens time to hire significantly.
5. Strengthen Your Employee Referral Program
Employee referrals are often one of the most cost-effective hiring channels.
Your team already understands your company culture and the kind of people who’ll thrive there. Encourage them to refer candidates by offering small incentives or recognition.
This helps you tap into a warm talent pool with minimal sourcing cost, and often leads to better retention too.
6. Switch to Video Interviews
For early-stage interviews, video calls are far more efficient than in-person meetings. They cut down on travel costs, simplify scheduling, and allow quicker turnarounds.
You can also standardise questions or pre-record them, which makes it easier to compare candidates fairly.
Just make sure the final stage still includes a personal touch, especially for senior roles.
7. Use Social Media and Owned Channels
Instead of relying solely on paid job ads, build your presence on platforms like LinkedIn, Instagram, or industry-specific groups.
Share open roles, behind-the-scenes posts, and thought leadership content. This increases your employer brand visibility and brings in passive candidates, without a large budget.
Over time, this organic reach can reduce how much you spend on job boards and paid sourcing.
8. Outsource Only When Necessary
Third-party recruiters and agencies can be expensive. While they’re valuable for niche or urgent roles, using them for every hire adds up.
Review your usage regularly and consider handling common roles in-house. This helps you reduce the cost per hire by building internal capability and reducing dependency on external vendors.Conclusion
Controlling recruitment costs starts with visibility. Once you understand where your hiring budget goes, it becomes easier to streamline efforts, eliminate waste, and focus on what truly drives ROI. Whether it’s investing in better tools or tightening your hiring funnel, every small improvement adds up.
TidyHire helps you reduce the cost per hire by simplifying the tasks that slow you down. From automated outreach to built-in tracking, our product RIA gives your team the edge to hire smarter, not harder. Try the free demo and see how effortless recruitment can be.
FAQ’s
1. How to save recruitment costs?
You can lower recruitment costs by improving your hiring process, using referrals, and automating time-consuming tasks. Focus on what works and avoid wasting time on channels that don’t deliver. Try tools like TidyHire’s RIA, which automate sourcing and follow-ups so you hire faster without overspending.
2. What is the KPI cost per hire?
Cost per hire is a key metric that shows how much you spend to fill one position. It includes things like recruiter time, job ads, and onboarding expenses. Tracking this helps you see if your hiring process is cost-effective.
3. What is the importance of cost per hire?
Knowing your cost per hire helps you manage your recruitment budget better. It shows where your money is going and helps you make smarter decisions. You can also use it to compare performance across departments or hiring periods.
4. What are the factors of cost per hire?
Cost per hire includes all the things you spend on while hiring. This covers job ads, recruiter salaries, agency fees, interview costs, background checks, and onboarding tools. Each part adds to the final cost.
5. Which staffing strategy helps reduce labour costs?
Mixing full-time, part-time, and freelance workers can help lower overall hiring costs. You can also use employee referrals and automation to fill roles faster and more efficiently.
