How to Calculate Your Recruitment Costs (with Examples)

How can we reduce recruitment costs? It’s the question every company wants an answer to.

Calculating how much you’re exactly spending on hiring new employees is not easy. Recruitment costs vary widely and there are hidden ones that many teams simply overlook. To accurately calculate your recruitment budget and have a chance at cutting costs, you’ll need to understand everything that goes into it.

Use this guide to calculate your hiring expenses and secure top talent while staying within budget. I’ll break down recruitment costs by category, add formulas so you can calculate your expenses and share real-life examples.

Quick links:
What are recruitment costs?
What's included in recruitment costs
Calculate your recruitment costs (examples included)
Hidden cost of recruiting

What are recruitment costs?

Recruitment costs are the sum of all expenses associated with your recruitment process, including attracting talent, sourcing, interviewing and testing candidates, and hiring new employees.

Some of these costs are tied directly to filling a vacancy while others are indirect costs, like yearly subscriptions for applicant tracking systems and other recruitment tools. Recruitment costs will vary depending on your recruitment strategy, industry and role.

What to include in recruitment costs

To determine your expenses, look into these main factors.

Recruiter cost: Salary or fee

Your biggest recruitment expense is the professional responsible for hiring. The cost will differ based on whether this is an in-house recruiter or an external partner.

• In-house recruiter salary
  For in-house recruiters (or HR employees responsible for recruiting), the main cost component is their salary. Add to it any employee benefits, training and equipment you provide.
  
  If they’re full-time employees, factor in hidden costs including onboarding time, sick leave and paid days off. This is called a productivity loss and it can amount to 30% per year.
  
• Recruitment agency or freelance recruiter fee
  For external recruiters, the cost is their fee. Fees of external recruiters vary by country, industry and role. They also vary by pricing model. The most common ones are contingency, retainer, and hourly fee.

Additional recruitment costs

There are many costs associated with recruitment and these are the most common ones. 

It’s important to note that these are costs primarily associated with in-house recruitment. Most external recruiters include all costs in their fees. For example, you likely won’t need to pay for job board postings if you hire an agency, unless it’s part of your employer branding strategy.

• Recruitment tools
  Any tools you might use in your hiring process. This could include applicant tracking systems (ATS), skill assessment platforms, or video interviewing.
• Employee referral fees
  Applicable for all businesses that have developed an employee referral program.
• Job boards
  If you want your job to be visible on popular and niche job boards, you need a budget for it.
• Social media ads
  Ads are a popular way to attract more candidates.
• Events and career fairs 
  If your hiring strategy relies on job fairs or other events, this is a big one.
• Miscellaneous costs
  Any remaining costs such as relocation budget, administrative and legal costs.
• Employer branding
  Although not typically covered in recruitment cost breakdowns, employer branding could include the cost of marketing campaigns to establish your brand.

How to calculate your recruitment costs

Let’s go over the steps together. I’ll include a real example to make it easier. It’s the calculation we’ve done for one of Relancer’s clients.

💡Example: Let’s imagine an Estonian company. They’re expanding operations to Central Europe next year so their team is looking to hire abroad.

1) Estimate your hiring needs

Start by defining your hiring needs for the upcoming period (e.g. quarterly or yearly). First, determine how many roles you’ll need to fill in each department. Once you have a clearer picture, calculate turnover to factor in replacements. 

💡Example: For our Estonian company, we’ve estimated that we need to hire 10 employees in the next year. To keep it simple, let’s say we have to fill 10 developer roles. 

2) Estimate your recruiter cost

Your costs will depend on your hiring strategy and whether you’re keeping recruiting in-house or outsourcing it. 

Let’s calculate costs for both an in-house recruiter and an external recruitment partner. Follow this template to calculate which option works best for your budget.

Option 1: In-house recruiter cost

Costs that you should include:

• Annual salary fund + benefits
• Equipment and training cost

💡Example: For our example, the costs are:

• The average annual salary fund is €48,800
• The average equipment and training costs are €3,500

This results in the following cost breakdown:
In-house recruiter cost (avg)= €48,800 + €3,500 = €52,300

The annual cost of the in-house recruiter is approximately €52,300.

This is the cost for the recruiter only, but if you’re hiring in-house you have to factor in additional in-house recruitment costs (discussed above) that apply to you.

Option 2: External recruiter cost

Your cost here is the agency fee or freelancer fee. The fees vary based on location, type of role, number of roles and pricing models.

There are three main fee models in recruitment:

• Hourly fee - you pay the recruiter per hour of work.
• Retainer fee - an upfront payment to secure dedicated recruitment services, often paid in installments as the process progresses.
• Contingency or success fee - you pay a % of the new employee’s annual salary if the recruiter finds the candidate.

Here are fee ranges by geographical region so you can estimate yours.

For Contingency or Retainer model, the fee is your fee per hire. For an Hourly fee, multiply the hourly rate by the estimated time it will take to fill a role to calculate the fee per hire. To calculate the external recruiter cost, simply multiply the f per hire by the number of roles.

💡Example: In our example, it went like this:

• Fee of a senior recruiter in Poland (hourly fee) = €50/h
• Average time spent per hire: 50 h
• External recruiter fee per hire = €50/h × 50 h = €2,500

Total external recruiter cost for 10 roles = €2,500 × 10 = €25,000

3) Estimate additional recruitment costs

Your additional recruitment costs will depend on your hiring strategy and whether you’re keeping recruiting in-house or outsourcing it. 

Let’s calculate costs for both an in-house approach and an external approach. Follow this template to calculate which option works best for your budget.

1. Recruitment tools

Tools like an Applicant Tracking System (ATS) and a LinkedIn Recruiter Lite license to streamline the hiring process.

Estimated cost: €4,350 per year

2. Employee referral fees

If you have an employee referral program, successful referrals often come with bonuses. 3 roles are filled through referrals with a €500 bonus per hire.

Estimated cost: €1,500

3. Job Boards

Posting job ads on platforms like LinkedIn or niche developer job boards can help you reach the right audience. The cost per post is approximately €300.

Estimated cost: €3,000

4. Social media ads

Running paid ads on platforms like LinkedIn or Instagram can boost visibility for your roles.

Estimated cost: €2,000 for the year

5. Events and career fairs

• Attending or sponsoring job fairs to meet candidates in person is a valuable but costly strategy. We'll budget for two events with a cost of €1,500 each.
• Estimated cost: €3,000

6. Miscellaneous costs

• These could include relocation budgets (€1,000 per hire for two hires) and administrative/legal expenses (€500).
• Estimated cost: €2,500

7. Employer branding

• Building your brand as a great place to work is often overlooked but becoming increasingly important, especially for millennial and gen Z hires.
• Estimated cost: €5,000

💡Example: Let’s break down additional recruitment costs for a company planning to hire 10 developers over the next.

Option 1: In-house recruiting

An in-house team needs tools and resources to reach suitable candidates. In our example, the company posted 10 roles on job boards and participated in 2 recruitment events. They ended up filling 3 roles via employee referrals and relocating two candidates from another county. 

The total for additional recruitment costs for the in-house recruiting is approximately €16,350.

Option 2: External recruiting

If the company chooses to outsource recruitment to a partner, most additional recruitment costs are no longer necessary. Let’s say the team still decided to post all 10 roles on job boards for employer branding and expects to relocate 2 candidates from another country.    

The total for additional recruitment costs for the external recruiting is approximately €5,500.

4) Calculate your total recruitment costs

To estimate your total recruitment cost, simply add your recruiter cost (from step 2) to your additional cost (from step 3).

Option 1: In-house recruiter cost + additional costs

Total cost = €52,300+€16,350 = €68,650

The total cost for an in-house recruiter + additional recruitment costs comes to €68,650 for 10 roles.

Option 2: External recruiter cost + additional costs

Total cost = €25,000+€5,500 = €30,500

The total cost for an external recruiter + additional recruitment costs comes to €30,500 for 10 roles.

This is your final recruitment cost for the entire year, or the period you chose. 

5) Calculate your cost per hire

Your annual recruitment costs are great for planning your budget. However, it is also useful to calculate your cost per hire. It will help you understand how much you’re spending to fill a single role and will come in handy if you need to make any adjustments to your budget.

Cost per hire, or CPH, is a metric used to determine how much it costs your company to fill one role. According to SHRM, the average cost per hire is $4700 per employee but in reality, this cost can be much higher, especially for executive or highly specialized roles. For executive hires, the average cost can be around $15,000.

To get your own cost per hire, divide your total cost (from step 4) by your number of hires (from step 1).

💡Example: If we’re planning to hire for 10 roles, the cost per hire would be:

1. In-house recruitment CPH
   Divide the total cost by your estimated number of roles.
   €68,650 ÷ 10 = €6,865 per hire
   
2. External recruitment CPH
   Divide the total cost by your estimated number of roles.
   €30,500 ÷ 10 = €3,050 per hire

CPH allows you to get a clear picture of how much it costs your organization to hire each new employee and can help you identify areas where you can reduce costs

Should you choose an in-house recruiter or an external recruiter?

If you followed the previous steps, you now know which option is more cost-effective for your situation.

💡Example: For our example, hiring an external recruiter would be more affordable. However, your results could be different. Plug your numbers into the formulas to get your cost.

The general rule is to get external help if you have a few vacancies (e.g., 10 in a year). When you have a large number of hires (e.g., more than 30 in a year), hiring in-house could be a better option.

Don’t forget that there’s a limit to how many roles a single in-house recruiter can fill. The limit typically varies depending on the complexity of the roles:

• High-volume roles: 8–15 positions per month
• Mid-level roles: 4–8 positions per month
• Specialized or senior-level roles: 1–3 positions per month

If your hiring needs exceed these limits, you might need additional recruitment support.

Besides the cost, there are a few other factors to consider:

• How soon you need to start recruiting
  External recruiters can start recruiting soon after you decide to collaborate with them. In-house recruiters have to go through onboarding first.
• Which roles you need to fill
  In-house recruiters are generalists who can fill a variety of positions. External recruiters often specialize in a certain location or industry, becoming experts for niche or hard-to-fill roles.
• Your company culture
  In-house recruiters are a part of the company so they take the win when it comes to knowing the best team fit and culture fit.

Learn more: Recruiting: When to use external help and when to expand your in-house team?

Hidden cost of recruiting

When we talk about recruitment costs, we usually mean monetary costs. However, there are other “costs” we need to take into account when it comes to recruiting.

Time spent on recruiting

Hiring is time-consuming. Whoever’s responsible for it is going to spend a huge chunk of their time on recruitment tasks. If recruitment is not their primary objective, they’ll have way less time for their core non-recruitment tasks.

Productivity loss

A productivity loss is a loss in output of the company due to employees’ days off, sick days, training, onboarding and all the days when work is on hold. These days typically account for around 30% of productivity loss. The output isn’t the same every month but the salaries are, so there is a 30% loss per year.

Cost of getting a bad hire

While you should always aim to lower your costs, don’t cut expenses which could sacrifice your quality of hire. Trying to save on recruitment will cost you more in the long run.

Wrapping up

Recruitment costs are an essential part of your hiring strategy, and understanding them is the first step to making smarter decisions. However, keep in mind that the costs will vary and use your calculations as estimates. The number of roles, difficulty of the roles and even size of your company can influence the costs.

One last tip. While it’s important to stay cost-conscious, don’t undermine the value that experienced recruiters can bring in attracting top talent to your team. While it might seem costly at first, working with great recruiter(s) pays off in the long run.

If you’re looking for recruiters, check out our database of top recruiters for your country.