The Average Advertising Cost-per-Hire
IndustryView | 2014
Earlier this year, we published the early results of our advertising cost-per-hire survey. In our report, we analyzed data from 65 respondents in order to help determine what, on average, companies in North America are spending in advertising costs for each new hire they bring on.
Because this algorithm is somewhat recent, and most previous research into cost-per-hire takes into consideration both internal hiring costs (such as a recruiter’s salary) and external hiring costs (such as advertising), there is little data currently available on this metric. As such, we thought further insight would be especially useful for recruiters.
So, we now bring you the full results of the survey. After collecting feedback from a total of 130 respondents, we arrived at the following conclusions:
We compiled respondents’ total reported spend advertising open jobs, and the total number of reported hires over the past year. After doubling the number of respondents to the survey, we found that the average cost-per-hire across all business sizes went down significantly: from our original finding of $173 in advertising costs per new hire, to $86 per hire.
Approximately one-third of respondents reported spending less than $50 in advertising costs to recruit each new hire, while the vast majority of respondents (78 percent) spend less than $500.
Breaking these numbers down further, we found that the average cost of each new hire tends to decrease as the size of business increases. For instance, companies with 1-50 employees average $320 per new hire, while companies with more than 5,000 employees average around $40 per new hire.
The exception to this was businesses in the 1,001-2,500-employee range: Two companies reported spending an average of $850 and $1,077 per new hire, respectively, which increased the average for this business size.
We also averaged the advertising budget of recruiting departments according to business size. Generally, the larger the business, the larger the advertising budget.
The breakdown of advertising budgets—larger businesses spending significantly more—makes sense in light of the fact that larger businesses hire a much larger number of employees. For instance, companies with 1-50 employees hired, on average, 13 new employees over the course of the past year. Meanwhile, businesses with 10,001 employees or more averaged 2,181 new hires.
Almost 75 percent of respondents reported using job boards in order to advertise open positions at their companies. However, social networks were the second most popular means of advertising jobs.
Most of the respondents to our survey (67 percent) were representatives of small to mid-sized businesses with 250 employees or fewer.
First of all, businesses should be keeping track of cost-per-hire metrics. Many human resources (HR) experts and commentators have noted that HR deserves a seat at the C-suite table. Given that recruiting is one of HR’s most essential—and most expensive—functions, knowing their company’s cost-per-hire will be critical for recruiters and HR professionals wishing to demonstrate their business acumen and land that C-suite seat.
Secondly, small businesses in particular should be proactive when tracking hiring spend. As this study uncovered, when compared with larger businesses, companies with fewer than 50 employees are spending more, on average, for each new hire than businesses with 10 times that number. Since smaller companies or startups usually have much tighter budgets, bringing on the talent needed to grow, without breaking the bank, is critical for long-term success.
One way to do this may be to get creative with the use of social media—the second most used advertising method—to publicize job postings. After all, advertising open jobs through Facebook, Twitter or even Instagram can help businesses increase the reach of job postings, while significantly reducing the amount spent advertising open positions.
Finally, if a company is investing heavily in job boards as a source of applicants, keeping track of its advertising spend is even more crucial. Seventy-two percent of survey respondents were using job boards to promote open positions, but not all job boards are created equal. As such, companies need to be strategic about which job boards they do use.
Recent research by Software Advice shows that some boards are better for entry-level jobs, while others are best for mid- to senior-level positions. Recruiters need to take these factors—as well as the quantity and quality of the applicants they receive from each job board—into account, in addition to how much it costs.
While software is available to help recruiters track and report on recruiting metrics, recruiters themselves need to know how and why they’re reporting on these numbers. They need to be able to answer questions like: Which job boards are bringing in the most candidates, and which are bringing in the most new hires? They can then focus their spend on the highest-performing job boards to decrease their average cost-per-hire.
To conduct this survey, Software Advice partnered with leading professional association, The National Human Resources Association, and Research Now, an independent research firm. Between February and June 2014, 130 responses were collected. These responses were collected via social media and blog postings, as well as through email invites to recruiters and HR professionals in the U.S. and Canada.
Software Advice has no financial relationship with The National Human Resources Association or Research Now, and all responses were obtained in a fair and anonymous manner. If you would like more information about the study, please contact me at firstname.lastname@example.org.