The true cost of recruitment: A comprehensive guide for talent acquisition leaders

Despite their best efforts, many companies’ recruitment costs aren’t adding up. Many of their true expenses fly under the radar.

As a talent acquisition leader, you know understanding your recruiting expenses isn’t just about pleasing the finance department. Your main objective is showing how your strategic input and your team’s efforts add measurable value to the company.

Want to know your actual hiring costs— and how to lower them? Use this guide to uncover hidden expenses, calculate what you’re really spending per hire, and find better ways of reducing the cost of recruitment while increasing its success.

Understanding the full spectrum of recruitment costs

Chances are, not all of your recruitment expenses are ending up in your quarterly reports. Let’s explore the direct, indirect, and hidden costs of hiring new employees.

Direct costs

Direct costs of recruitment are the easiest to identify and track. Typically clear and quantifiable, these tangible expenses include:

• Advertising expenses: Costs from posting open roles on platforms like Glassdoor, Indeed, LinkedIn, and industry-specific job boards.
• Job board fees: Any subscription and pre-post fees spent on posting premium job listings or boosting their visibility.
• Recruitment agency fees: Payments incurred when third-party recruiters are hired to source, screen, and interview candidates. These fees are typically a percentage of the new hire’s salary.
• Applicant tracking system (ATS) costs: Expenditure on applicant tracking systems (ATS) your team uses to manage applications, including any costs for setup, subscription fees, and user support.

Indirect costs

The indirect costs of recruitment take into account how open roles affect a company holistically. These costs often tally up quickly:

• Time spent by HR and hiring managers: Measured value of the hours that your talent acquisition team spends screening CVs, interviewing applicants, and making hiring decisions.
• Lost productivity during vacancy periods: The money your company loses when roles stay empty. Forbes reported that unfilled positions can cost companies $4,129 on average over 42 days, with revenue-generating roles costing $7,000-$10,000 per month.
• Onboarding and training expenses: Costs associated with getting new hires up to speed, including any skills training, mentoring, and reduced productivity during their first 2-6 months on the job.

Hidden costs

Often overlooked in recruitment are the hidden costs. When you’re assessing your recruiting practices and expenditure, make sure to keep in mind:

• Opportunity costs of unfilled positions: Empty roles at a company, especially in sales positions, can decrease revenue by 5% or more according to Forbes. If these vacancies occur at a leadership level, they also hinder key projects, strategic decision-making, and company-wide initiatives.
• Impact on team morale and productivity: Job vacancies can negatively affect your current employees—especially if the hiring process drags on, a key role remains unfilled, or a team is chronically understaffed. These stressors can lead to burnout, decreased engagement, and even potential turnover.
• Potential costs of bad hires: The U.S. Department of Labor found that a bad hire can amount to 30% of their first-year earnings, but it’s possible this figure is actually closer to $240,000 to $850,000 per hire, as reported by Business.com. Poorly performing staff lead to unhappy coworkers, lost clients, and even company liability for damages if their mistakes or misdeeds have broader consequences.

Calculating your true cost per hire

Cost per hire (CPH) is a popular recruitment metric that calculates how much you’re spending to hire new employees.

To measure your CPH, the Society for Human Resource Management (SHRM) suggests companies use this formula:

Cost per hire = (total internal costs + total external costs) / number of hires

It takes into account both internal costs (i.e., paying for office space, recruiter salaries, and staff training) and external ones (i.e., recruiting expenditure on third-party services, technology, marketing, and advertising). 

Taking this holistic approach gives you the most accurate CPH possible.

By tracking CPH, talent acquisition leaders gain a clearer understanding of true recruitment costs and make data-driven decisions that better serve the bottom line.

Industry benchmarks for recruitment costs

Before trying to reduce your cost per hire, there’s one thing you should know: this metric varies dramatically across industries.

CPH is often influenced by these factors, as well:

• Company size
• Geographic location
• Seniority level
• Remote or on-site work
• Relocation costs

With the above in mind, let’s take a look at average costs of hiring new employees for different industries. This benchmarking data was compiled by SHRM:

Like it or not, some roles are more expensive to fill than others. Using this table can help you decide if your CPH is within reasonable limits—or if current recruiting practices need a closer look.

The impact of technology on recruitment costs

AI and automation in recruitment

Adding artificial intelligence (AI) to your recruiting workflows can streamline screenings and reduce time-to-hire. Ultimately, it can lower the long-term cost of your company’s hiring efforts.

Using an AI-powered ATS, like iCIMS offers, helps identify the most promising applicants by scanning hundreds of resumes in seconds. Based on your best-fit criteria, the solution automates candidate comparison, ranking, and job matching, so your recruiters find the best candidates in less time.

iCIMS AI also helps recruiters balance personalization with automation. Leverage the technology to:

• Attract and source candidates: Use AI to optimize job descriptions and create tailored email templates for recruiters.
• Engage interested candidates: Answer FAQs through an AI-powered recruitment chatbot, help job seekers find the right roles with smart search, and match candidates’ resumes to the best positions for their unique skills.
• Re-engage internal talent: Automate talent rediscovery and remarketing efforts for promising past applicants to lessen your reliance on job posts and external recruiters.

Balancing technology investments with cost savings

Keep in mind: investing in new recruitment solutions only saves money if you choose the right ones.

To maximize the ROI, look for hiring tools that will directly alleviate pain points for your recruiters—such as time-consuming screening pipelines, overflowing inboxes, or dried-up talent pools.

Vacant roles are costly to a company; the longer they stay unfilled, the more pressure it places on the talent acquisition team. Prioritize solutions that reduce time-to-hire and improve the quality of hires while enabling recruiters to build personal connections with candidates.

Strategies to optimize recruitment costs without sacrificing quality

Enhancing employer branding

Strong employer branding makes it easier to attract top talent—and saves you money in the process. When candidates already see you as a great place to work, they’re more likely to seek out your job postings, reducing the need for expensive ads or headhunting services.

Effective employer branding highlights your company culture, values, and employee experiences in an authentic, engaging way. Tools like employee video testimonial software can help you create impactful people-first content with minimal effort.

Remember to be intentional about where you share your brand story. Promote it across high-visibility channels like your careers page, social media platforms, and professional networks to reach the right candidates.

Implementing employee referral programs

When done right, employee referral programs can be one of the most cost-effective ways to hire top talent.

Your current team already understands your company culture and what it takes to succeed. That makes them well equipped to recommend candidates who are not only qualified, but also likely to thrive in your environment.

To set your referral program up for success, start by creating an internal job board where employees can easily view open roles. Offer meaningful incentives for successful referrals, and be sure to recognize employees who participate. Showing appreciation goes a long way—and you never know who’s in their network!

Optimizing job descriptions and targeting

A job description won’t get you very far if the wrong candidates are finding it and applying.

For the best applicant pool possible, take time to create job ads that accurately reflect the open role, along with the qualities needed to thrive in it. Partner with the hiring manager and any other stakeholders to ensure these items are well articulated:

• Job title
• Role summary with key responsibilities
• Work location (on-site, hybrid, or remote)
• Expected schedule (full-time, part-time, permanent, contract)
• Required skills, education, and experience
• Development opportunities
• Company overview and values

With an effective job description in hand, it’s time to maximize your recruitment marketing opportunities via data-driven targeting. Prioritize platforms where your ideal applicants spend time, and try A/B testing for job titles and descriptions to see which ads generate the best results.

Long-term ROI of strategic recruitment investments

When you invest strategically in recruitment, it pays off in the long run.

High-quality recruitment processes that improve candidate experience, look for cultural fit, and prioritize potential for growth can lead to:

• Increased employee retention
• Higher team productivity
• Lower long-term training and replacement costs
• Better company performance as a whole

Adapting recruitment strategies to market conditions

Hiring can be especially difficult when the market isn’t in your favor. Whether you’re facing economic pressures, talent shortages, or budget constraints, here are a few strategies to help you stay on track:

• Economic downturns: Recommend shifting focus toward internal promotions, contract-based hiring, and targeted recruiting for only the most critical roles. This helps maintain agility while keeping costs in check.
• Talent shortages: Invest in upskilling and internal training programs to build the capabilities you need from within. At the same time, consider remote or hybrid roles to expand your talent pool beyond geographic limits.
• Limited budget flexibility: Adjust your approach based on the role’s strategic value, market demand, and candidate availability. Not every hire requires the same level of investment—prioritize accordingly.

Lowering the cost of recruitment

To reduce recruiting costs without sacrificing talent quality, you need a clear view of where your budget is going—and what’s driving results. Without that insight, it’s easy to spend more and achieve less.

By mapping out your expenses, optimizing your strategy, and equipping your team with the right tech, recruitment becomes a cost-efficient engine for growth—not a financial drain.

Audit your current spend, benchmark it against industry standards, and prioritize changes that improve both cost-efficiency and candidate quality. With the right focus, you’ll attract top talent without breaking the budget.

Want to explore how iCIMS supports smarter, more efficient hiring? Connect with us for a demo.