In a private-equity portfolio company, the pressure to manage OpEx and drive efficiency is constant. For the CHRO, that means every decision must be supported by data—especially in Talent Acquisition. And while there are dozens of recruiting metrics you can track, one KPI rises above the rest for PE-backed environments:
Cost per hire.
How much are you truly spending to bring one person into the organization?
Is it $5,000? $10,000? More?
If you don’t know your cost per hire—or you aren’t tracking it year over year—you’re missing one of the clearest indicators of TA efficiency, operational discipline, and ROI inside your HR organization. In a PE environment, where speed and efficiency directly impact EBITDA, this metric becomes essential.
Below is a simple, clear breakdown of how to calculate cost per hire and what needs to be included.
What Cost Per Hire Actually Measures
Cost per hire is the total cost of all recruiting activities divided by the number of hires made during a specific period. Monitoring this metric helps CHROs evaluate the efficiency of the Talent Acquisition function, identify overspending, and understand which levers can be adjusted without hurting hiring quality.
Step-by-Step: How to Calculate Cost Per Hire
1. Add All Direct Hiring Costs
These are the obvious, outward-facing recruiting expenses:
- Job Advertising & Recruitment Marketing
Job boards, sponsored listings, social ads, recruitment marketing campaigns. - Agency & Search Firm Fees
Any fees paid to external recruiters or headhunters. - Employee Referral Bonuses
Paid incentives for successful internal referrals. - Recruiting Technology
ATS subscriptions, sourcing tools, assessment tools, etc.
2. Add All Indirect Hiring Costs
These often get overlooked but matter significantly—especially for PE-backed companies tracking labor allocation:
- Internal Recruiter Compensation
The share of salaries and benefits for your in-house recruiting team. - Hiring Manager Time
The cost of interview hours, debriefs, and coordination—converted into dollars. - Training & Onboarding Costs
Orientation materials, trainers, onboarding time, equipment, etc. - Background Checks & Screening
Drug tests, background checks, credential verifications. - Travel & Relocation
Candidate travel, interview travel, relocation packages.
3. Calculate Total Hiring Costs
Add all direct and indirect costs from above to get your total hiring spend for the period.
4. Determine the Number of Hires
Count all successful hires in the period you’re analyzing (monthly, quarterly, yearly).
5. Apply the Cost Per Hire Formula
Cost per Hire = Total Hiring Costs ÷ Number of Hires
Example: Cost Per Hire in Action
A company incurred the following annual recruiting expenses:
- Job ads: $5,000
- Search firm fees: $10,000
- Referral bonuses: $3,000
- Recruiting software: $2,000
- Internal recruiter salaries: $500,000
- Hiring manager time: $20,000
- Training & onboarding: $10,000
- Background checks: $1,000
- Travel & relocation: $5,000
Total hiring cost = $606,000
The organization made 120 hires that year.
Cost per hire = $606,000 ÷ 120 = $5,050
This single number quickly tells a CHRO whether the hiring process is becoming more efficient year over year—and where to investigate further.
Why This KPI Matters So Much in a PE Portfolio Company
Private equity environments demand speed, efficiency, and financial discipline. Cost per hire helps CHROs:
- Identify inefficiencies inside TA
- Evaluate ROI on recruitment channels
- Determine whether headcount planning aligns with budget
- Justify or eliminate vendors
- Reduce unnecessary spend without sacrificing quality
- Communicate performance clearly to PE partners and CEOs
When your cost per hire decreases—but quality stays high—you’re building a more efficient, scalable talent engine.
