Article: The formula for cost per hire

Talent Acquisition

The formula for cost per hire

Predicting a potential job candidate's reliability will help to reduce the turnover rate within the position
The formula for cost per hire

Author: Vinay Ravindran


Cutting costs without compromising the quality of their service or product is at the top of every business owners list. One way to do this is by reducing the CPH, (Cost Per Hire). The first step in doing so is figuring out how much is spent each time a position is filled. The formula for this equation is CPH = AF + AC + ERC + RE + TE + (TRAC * 0.1).

CPH = Cost Per Hire AC = Agency Fees AF = Advertising Costs ERC = Employee Referral Costs TE = Travel Expenses RE = Relocation Expenses TRAC = Total Recruiter and Administration Costs

Once you have the answer to your equation, you can then break down each section and look for areas where costs can be reduced.

Predictive Hiring Analytics

Using Predictive Analytics can help to determine some of the applicant’s characteristics. For instance, using targeted assessments can predict a person’s reliability and capabilities, helping you to more thoroughly screen applicants. Predicting a potential job candidate’s reliability will help to reduce the turnover rate within the position you have advertised. Job turnover rate is perhaps the biggest problem when it comes to the amount of money spent annually on the entire process of finding, hiring, and training potential employees. Reducing your turn over rate by even a small percentage annually can potentially save thousands of rupees each year. Predictive analytics will also help the company select the best areas for advertisement, to attract applicants with skill sets related to the posted position.

Online Applications and Online Screening

Also, opting to use an online application and screening process rather than paper allows for a more thorough application and reduces the amount of paper used. This is not only good for the companies’ bank account but is good for their reputation as well. Finding ways to reduce the use of natural resources helps promote an "eco-friendly” image for the company, which is great for business as well as the ecosystem.

Online and Over the Phone Interviews

Another way to reduce hiring costs while helping the ecosystem is to cut out some of the candidates travel. A way to do this is by using the telephone or internet for an initial interview before having the applicant drive to your location. This also allows you to get a peek at what they may be like on a more day to day basis more so than you would in an actual scheduled interview.

Talent Attraction through relationship building

Talent acquisition refers to the ongoing cycle of processes that are directly related to sourcing, attracting recruiting, and hiring or even job placement for employees. This includes some elements of employment branding, networking, and relationship building with potential job candidates. Put more simply, this is a way of increasing the possibilities of obtaining the most talented applicant to perform the job that you have advertised, thus increasing productivity, reducing man hours and setting higher standards for future applicants and possibly even current employees.

Vinay Ravindran is currently working with SG Analytics, spearheading the HR function of Hyderabad delivery center. You can follow him on Twitter @vinayravindran1

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Topics: Talent Acquisition, #TalentMinded

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