Cost per hire stops at the offer. The first twelve months keep costing you well past it, in employer costs, onboarding and the productivity you do not get while someone is still learning the job. Every number on this page is calculated in your browser and never leaves your device.
Ramp months and productivity during ramp are your estimates, not measurements, and they drive this figure more than any other input. Nothing on this page supplies them for you, because no published figure fits your roles. Ask the managers who ran the last three hires in this job and use what they tell you, then record the assumption next to the result so the number can be defended a year from now.
This values the productivity you do not get at what you are paying for it. If the role produces revenue directly the real loss is larger than this figure. If the role is entirely overhead, salary is the right basis.
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Formula used
Employer Costs = Base Salary × Employer Tax Rate + Benefits Cost
Direct Cost = Recruiting + Base Salary + Signing Bonus + Employer Costs + Relocation + Equipment + Onboarding
Ramp Productivity Loss = ( Base Salary ÷ 12 ) × Ramp Months × ( 1 − Average Productivity During Ramp )
First Year Total = Direct Cost + Ramp Productivity Loss
Multiple of Base Salary = First Year Total ÷ Base Salary
Percent fields are entered as percentages, so 9.2 in the tax rate field means 9.2 percent. Signing bonus, relocation, equipment and onboarding are optional and are treated as zero when left blank. The employer tax rate is applied to base salary only, not to the signing bonus. The ramp loss values the shortfall at base salary, prorated across the months you entered.
Cost per hire and first year cost answer different questions and are routinely quoted as though they were the same number. Cost per hire is a recruiting efficiency measure. This is a budgeting number, and it is the one to bring when someone asks whether a vacancy is cheaper than a hire.
Run this next to your cost of turnover figure. A first year cost that approaches or exceeds the cost of losing an experienced person tells you where the money should go, and it is rarely into faster hiring.
Recruiting spend is the smallest part of most of these figures. Stopping at the offer leaves out employer costs, onboarding and the entire ramp period, and it produces a number your finance partner will not recognize as the cost of the hire.
Skipping the ramp does not make it free. It understates the total badly, often by more than every one time cost combined. An estimate you can source from the managers who ran the last few hires is defensible. A silent zero is not.
A rate that covers only the employer share of Social Security and Medicare leaves out federal and state unemployment insurance, which is a real employer cost and varies by state and by your own experience rating. Build the blended rate from what your organization actually pays.
A signing bonus is compensation paid to the employee, not a cost of running the search. Putting it in the recruiting line inflates cost per hire and hides the money from the compensation picture where it belongs.
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