Cost Per Hire: The Formula, SHRM Benchmarks, and the Agency Side
The formula, SHRM's average and median explained, and how agency recruiters use both when a client compares their fee
Cost per hire is what an organization spends on recruiting in a period, divided by the hires it made in that period. Your placement fee can sit inside that number as an external cost. When a client compares your fee with their cost per hire, it helps to know what went into their math and whether the comparison is like for like.
Key takeaways
- The formula adds a period's internal and external recruiting costs and divides by every hire made in that period.
- SHRM publishes both a median and a much higher average, so always ask which one a client means.
- An agency fee is the price of one search, while the client's metric spreads all recruiting spend across all hires.
- Tracking your own cost per placement by client shows which searches need a different scope or price.
What is cost per hire?
It's an average: how much an organization spends to make one hire. SHRM's HR glossary defines it as the internal, external, direct, and indirect costs of filling a vacancy.
Those costs can include:
- Agency fees: what the employer pays third-party recruiters and search firms.
- Advertising: job boards and recruitment ads.
- Recruiting team: recruiter pay, benefits, and training.
- Technology: applicant tracking and sourcing tools.
- Candidate costs: referral bonuses, travel, and relocation.
The number is only useful when costs and hires cover the same period and use the same method.
The cost-per-hire formula
The formula has three parts, all measured over one period.
Cost per hire = (internal recruiting costs + external recruiting costs) ÷ total hires
The math is simple, but the hard part is deciding what goes in each bucket, and SHRM's standard lets organizations choose which cost types to include.
| Part | What it covers | Where your fee lands |
|---|---|---|
| Internal costs | Recruiter pay and benefits plus recruiting systems and training | Not here |
| External costs | Agency fees plus ads and job fairs and candidate travel | Here as a third-party fee |
| Total hires | Every hire made in the same period | Your placement is one of them |
Because two companies can count different costs, their cost-per-hire numbers aren't always comparable. Before you compare anything, ask which lines they included.
How to calculate it for one quarter
Pick one period, then run four steps.
1. Use the same period, such as a quarter, for both costs and hires.
2. Total the internal recruiting costs for that period.
3. Total the external costs, including every agency fee paid.
4. Divide the combined total by the number of hires in the same period.
Here's a hypothetical company that makes 12 hires in one quarter, one of them through an agency.
| Quarter (example) | Without the agency fee | With one agency fee |
|---|---|---|
| Internal costs | $18,000 | $18,000 |
| External costs before agency fees | $10,000 | $10,000 |
| Agency placement fee | $0 | $30,000 |
| Total spend | $28,000 | $58,000 |
| Hires | 12 | 12 |
| Per-hire result | $2,333 | $4,833 |
Source: formula from SHRM's cost-per-hire standard. All amounts are hypothetical.
One placement more than doubled the company's number, even though the agency filled one role out of 12. That's the jump a talent acquisition lead sees, so run the with-and-without version before your next fee call.
Average cost per hire: SHRM's median and average
SHRM publishes two different numbers, and both are accurate. The 2025 SHRM benchmarking release reports a $5,475 average for nonexecutive hires and $35,879 for executive hires, from 2,371 members. The 2025 benchmarking report puts the medians at $1,200 and $10,625.
| SHRM data | Median | Average |
|---|---|---|
| 2025 nonexecutive | $1,200 | $5,475 |
| 2025 executive | $10,625 | $35,879 |
| 2021 nonexecutive | $1,244 | $4,683 |
Source: SHRM's 2025 release, 2025 report, and 2021 Talent Access data.
The $4,700 figure you'll still see quoted is older. SHRM's 2021 benchmark data showed a nonexecutive average of $4,683 against a median of $1,244. So it wasn't wrong, just an average from 2021 data, and the 2025 average is higher.
What affects cost per hire
No single number fits every organization or every role. These five factors move it the most.
- Seniority: SHRM's 2025 executive median is almost nine times the nonexecutive one, so blended numbers hide big gaps by level.
- Industry: SHRM's 2021 technical services data put the median at $2,500 and the average at $6,464, from 89 organizations.
- Hiring volume: a company making hundreds of hires spreads its fixed costs, like software and recruiter salaries, much thinner.
- Recruiting model: in-house teams, agencies, retained search, and outsourced recruiting all cost differently.
- Measurement method: one company may count more internal costs than another, which raises its number without making it less efficient.
For tech roles, the technical services row is the closest industry match SHRM publishes. It's older data from a small sample, so keep that in mind if you use it.
Check where an agency fee fits before you compare costs
An agency fee is one external cost inside the client's number. In a 2022 SHRM interview, a recruitment research firm's CEO put contingency fees at 20% to 25% of total compensation. She put retained search at 30% to 35%. On a hypothetical $160,000 package, a 20% to 25% contingency fee comes to $32,000 to $40,000, using those SHRM ranges.
That fee is far above any company-wide average, but the two numbers measure different things.
The client's average spreads all recruiting spend across every hire, including referrals, inbound applicants, and roles their own team filled cheaply. Your fee is the price of one search for one hard role. The fair comparison is what the client spent on similar roles, not their blended average.
Cut the sourcing hours behind each placement
Book a demoHow to use cost per hire in a fee conversation
When a client quotes a benchmark against your fee, start with the benchmark, not the fee. Ask these questions:
- Average or median: which one is it, and from which year?
- Role mix: does it blend executive, nonexecutive, and entry-level hires?
- Cost lines: which internal and external costs are included, and are agency fees already in it?
- Similar roles: what did the client's last two comparable hires cost, and how long were those seats open?
You aren't trying to prove their number wrong, only checking whether it answers the question on the table.
If you're pricing a senior engineering search, a blended cost across sales, support, and admin hires tells you little. The client's own history on similar roles tells you much more.
Track your own cost per placement by client
Run the same math on your own desk: your recruiting costs for one client, divided by placements for that client. Count your hours, sourcing tools, job ads, and outreach time.
Say two clients both pay a 20% contingency fee. One fills from a small candidate pool, while the other needs three times the sourcing hours and submittals per placement. The fee is the same, but the economics aren't, so scope or price the second client's next search differently.
Compare clients on the same fee model. Retained and contingency searches spread cost and risk differently, so mixing them distorts the picture.
Check what a search will cost you before you quote it
Before your next quote, ask the client what comparable hires cost them, not just their company-wide number. Then pull your own cost per placement for that client and role type, and price the search around both.
Quote the next search knowing what it will cost you
Book a demoFrequently asked questions
Is a lower cost per hire always better?
No. A low number can mean an efficient process, or it can reflect easier roles, high volume, or fewer costs counted. Read it next to time to fill, where SHRM's 2026 data puts the nonexecutive median at 39 calendar days.
How often should you calculate it?
Quarterly is a good default, since it gives you enough hires to see a pattern. Whatever period you pick, use it for both costs and hires.
What does a client mean by cost of hire?
Sometimes they mean what one specific hire cost. The standard metric averages all costs across all hires in a period. Ask which one they mean before comparing it to your fee.
Should hiring-manager time count as a recruiting cost?
SHRM's standard examples don't include it, so a client who adds it will report a higher number than the benchmark, so ask before you compare.
About the author
Founder & CEO of Rotto, building tools that help tech recruiters source better candidates, faster.
