The Average Cost To Hire an Employee in 2025

The cost of hiring an employee has never been a simple line item. Beyond compensation and benefits, employers must account for a range of direct and indirect expenses — from recruitment and screening to onboarding, training, and lost productivity. Hiring costs often climb in tight labor markets or when filling roles that demand niche expertise.

This guide examines how to determine hiring costs in 2025 and is designed to support smarter workforce planning not only this year, but as hiring practices and business needs continue to evolve. Whether you're planning headcount growth or refining your talent acquisition strategy, understanding the cost of hiring a new employee can support more accurate budgeting, improve hiring efficiency, and inform long-term workforce planning.

Understanding Cost Per Hire: The Metric You Need To Track

The cost per hire (CPH) metric gives employers a clearer picture of what it really takes to bring on new talent. By combining internal and external recruiting expenses, it provides a single, measurable figure that helps assess how efficiently a business is hiring.

The cost per hire formula is relatively simple — but the insights it yields can be game-changing. Hiring costs can look very different across industries and job types, but the formula gives employers a steady benchmark to evaluate and compare what they’re spending to fill positions.

Cost per hire (CPH) = (Total Internal Costs + Total External Costs) ÷ Total Number of Hires

Tracking this metric over time allows HR leaders to benchmark performance, identify areas for improvement, and make data-informed decisions about budget allocation.

How To Calculate Cost Per Hire

The Cost Per Hire (CPH) formula considers both internal and external hiring costs and then divides that total by the number of employees hired during a given period.

To walk through the process:

1. Add up internal costs: These may include in-house recruiters, time spent by managers on interviews, onboarding, and administrative support.
2. Add up external costs: Think job ads, recruiting agency fees, background checks, and relocation assistance.
3. Divide by the number of hires: Use only the actual count of new employees brought on during the period.

For example, if your total hiring expenses for the quarter are $75,000 and you hired 15 employees, your cost per hire is $5,000. This average can then be used to evaluate spending efficiency across departments, roles, or hiring channels.

A cost per hire calculator can make it easier to track these numbers over time and set up reliable benchmarks for future hiring.

Example 1: Accounting Firm

A small accounting firm fills 5 new positions over the course of a quarter. It spends $20,000 considering the time and effort spent by internal recruiters, internal interview time, and onboarding activities (internal costs), plus $5,000 on job board ads and background checks (external costs).

Cost per hire = ($20,000 + $5,000) ÷ 5 = $5,000 per hire

Example 2: Tech Startup

A growing tech startup hires 10 new engineers in a highly competitive market. It invests $40,000 in agency fees, sourcing tools, and relocation bonuses (external), and $30,000 in internal recruiter time and onboarding support.

Cost per hire = ($30,000 + $40,000) ÷ 10 = $7,000 per hire

Example 3: Retail Chain

A regional retail chain hires 25 seasonal employees ahead of the holiday rush. It spends $8,000 on job postings, hiring events, and screening tools (external), and another $4,000 in store manager time for interviews and onboarding (internal).

Cost per hire = ($4,000 + $8,000) ÷ 25 = $480 per hire

These examples highlight how cost per hire varies dramatically based on industry, hiring model, and role type — underscoring the importance of tailoring strategies to your business needs.

Want more ways to improve your hiring ROI? Explore other HR metrics that can affect your bottom line.

Average Cost To Hire an Employee in 2025: A Detailed Breakdown

In 2025, the average cost of hiring a new employee continues to vary based on role, industry, and hiring approach. But across most businesses, it’s clear that the true cost of hiring an employee extends well beyond just their pay. Employers must account for a mix of direct and indirect expenses — from recruitment tools and onboarding systems to lost productivity and management time.

Here’s a breakdown of common cost categories and estimated ranges to help you understand the average cost to hire an employee this year:

Key Factors Affecting the Cost To Hire Employees

The cost of hiring an employee is rarely one-size-fits-all. It’s influenced by a wide range of variables, from the nature of the role to how urgently it needs to be filled. Highly specialized positions, for example, often require more extensive sourcing efforts, higher advertising budgets, and greater time investments from recruiters and hiring managers.

Location can also play a significant role. In competitive labor markets or remote-unfriendly industries, the cost to hire an employee may increase due to higher compensation expectations, relocation help, or a limited talent pool. Similarly, the choice of recruitment channels — job boards, agencies, internal referrals — can dramatically affect both the cost and quality of candidates.

Companies that invest in efficient hiring processes and strong HR support tend to spend less and move faster when filling roles. When you understand what drives your hiring costs, it becomes easier to adjust, stay on budget, and attract the right people.

Commonly Overlooked Hiring and Onboarding Costs

While direct hiring expenses are easy to track, many businesses underestimate the hidden costs that surface after an offer is accepted. Onboarding activities — such as training, mentoring, and equipment setup — can quietly add up. In addition, time-to-productivity can vary widely depending on the role, which can affect team performance and business output.

Some commonly overlooked hiring and onboarding costs include:

• Training and orientation programs
• Equipment, software licenses, and workspace setup
• Benefits administration and compliance processing
• Manager and peer time spent on integration and support
• Lost productivity during the ramp-up period

Factoring in these indirect costs helps create a more realistic view of your total investment per hire — and where there may be room for improvement.

Methods To Reduce the Cost To Hire Employees

Reducing the cost to hire an employee doesn’t have to mean cutting corners — it starts with building a smarter, more efficient process. Leveraging AI-supported recruiting tools can save time on sourcing, screening, and initial outreach, allowing HR teams to focus on high-value tasks. Encouraging employee referrals is another cost-effective strategy that not only could reduce external advertising spending but also tends to result in faster, higher-quality hires.

Streamlining your recruitment workflow — from clearer job descriptions to more structured interviews — may also lower overhead and shorten time-to-hire. For growing companies, implementing creative recruiting strategies can help attract talent without relying on high agency fees or broad, expensive ad campaigns. The key is continuously evaluating what’s working — and optimizing along the way.

Sustainable hiring strategies depend on ongoing measurement, refinement, and alignment with broader business goals. Tracking your cost per hire consistently over time helps uncover patterns, identify bottlenecks, and spot opportunities to improve efficiency. It also allows you to benchmark performance across departments or hiring cycles.