Cost per Hire: The Formula, UK Averages and How to Cut It (2026)

Cost per hire is the total amount you spend on recruiting in a period divided by the number of people you hired in that period: cost per hire = (external costs + internal costs) / number of hires. External costs are what you pay to outsiders (agency fees, job boards, ads, assessment tools, background checks). Internal costs are your own people's time (recruiters, hiring managers, interview panels) plus the share of recruiting software and employer branding you pay for anyway. Most UK small and mid-sized employers land somewhere between £3,000 and £6,000 per hire once internal time is counted honestly; a single agency placement on a £40,000 salary can cost £6,000 to £10,000 on its own. If you only want the number, the free cost-per-hire calculator does the arithmetic for you.

The cost per hire formula

The formula most HR teams use is the one in the SHRM/ANSI cost-per-hire standard:

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

Use the same time window for both sides of the sum. A quarter or a full year works best; a single month is too noisy because one agency invoice can double the figure.

External costs (money that leaves the business)

• Recruitment agency and headhunter fees
• Job board postings and sponsored ads (Indeed, LinkedIn, Totaljobs, niche boards)
• Careers site and employer branding spend
• Assessment, psychometric and coding-test tools
• Background, right-to-work and reference checks
• Candidate travel and interview expenses
• Recruitment events and university fairs
• Referral bonuses paid to staff

Internal costs (your own time and tools)

• Recruiter and HR salaries, pro-rated for the time spent on recruiting
• Hiring manager time spent screening CVs and interviewing
• Interview panel time (every person in every round)
• Recruiting software: ATS, scheduling, CV screening tools
• Onboarding admin up to the start date

Internal costs are the part most teams leave out, and it is usually the biggest part for teams that do not use agencies. A hiring manager on £60,000 who spends 12 hours screening and interviewing for one role has quietly added roughly £450 of salary cost before anyone else is counted.

A worked example

A 40-person UK company hires 10 people in a year.

Cost	Amount
Agency fees (2 placements at 20% of £45,000)	£18,000
Job boards and ads	£4,000
Background and right-to-work checks	£500
Recruiter time (0.3 of a £38,000 salary, plus on-costs)	£14,000
Hiring manager and panel time (about 25 hours per hire at £35/hour)	£8,750
Recruiting software	£2,400
Total	£47,650

Cost per hire = £47,650 / 10 hires = £4,765.

Two things stand out. First, two agency placements are almost 40% of the whole year's spend. Second, internal time (£22,750) is bigger than every external line except the agencies. That is typical.

What UK employers typically spend

Published figures vary a lot because companies count different things. Treat the ranges below as orientation, not targets.

Hiring route	Typical cost per hire
Direct hire, entry-level or hourly roles	£500 to £2,000
Direct hire, professional roles	£2,500 to £6,000
Agency placement (15% to 25% of first-year salary)	£5,000 to £15,000
Executive search (25% to 35% of salary)	£20,000 and up

The most useful benchmark is your own number from last year. Track it per role family (engineering, sales, operations) rather than one company-wide figure, otherwise a single senior hire hides everything else.

Cost per hire vs cost of a bad hire

Cost per hire measures what it took to get someone through the door. It does not measure what happens if the hire does not work out. A bad hire costs the recruiting spend again, plus lost output, management time and the team disruption while the seat is empty or filled by the wrong person. That is why cutting cost per hire by lowering the bar is a false saving. The goal is to remove waste from the process, not quality checks.

Where the money is usually wasted

1. Agency fees on roles you could fill directly. Agencies earn their fee on hard-to-fill or confidential roles. On roles that attract 100+ applicants from a single job post, the problem is usually screening capacity, not reach.
2. Manual CV screening. At around 4 minutes per CV, a role with 150 applicants costs 10 hours of someone's time before the first interview. That time is a real internal cost even though nobody invoices it.
3. Interview rounds that repeat each other. Every extra round adds panel hours to every candidate who reaches it.
4. Slow processes. Strong candidates accept other offers, so you pay to re-run the search. Our guide to reducing time to hire covers the six biggest delays.
5. Unclear job descriptions. A vague advert attracts more unsuitable applicants, which inflates screening time. See how to write a job description that screens well.

How to reduce cost per hire without lowering the bar

• Fix screening capacity first. AI CV screening cuts the per-CV review from minutes to seconds and gives you a ranked shortlist with the reasoning shown. It is the cheapest change with the biggest internal-time saving. The complete guide to AI CV screening explains how it works and where it does not fit.
• Use agencies selectively. Keep them for the roles that genuinely need them and fill high-volume roles directly.
• Re-engage past candidates. Strong runners-up from the last search are the cheapest source you have.
• Pay for referrals. A referral bonus is usually a fraction of an agency fee and referred hires tend to stay longer.
• Cut duplicate interview rounds and agree the salary band before the role opens so offers go out quickly.

Calculate yours

Plug your own numbers into the cost-per-hire calculator: roles per year, CVs per role, recruiter cost, agency fees and job-board spend. It shows your current cost per hire and what it would be with AI screening handling the first pass. If you want to see the screening side on your own CVs, try SwiftShortlist free on one live role.