Metrics That Matter: How Recruiting Cost Ratio is Calculated

How much you should spend on recruiting? Learn more about why recruiting cost ratio will matter in your business.
REMOTO WORKFORCE Team I Updated on - June 3, 2022

In business and HR management, there are a lot of metrics and numbers thrown around that matter. Gross profit margin, return on assets, and so on. However, there’s one recruitment metric in particular that is often overlooked: recruiting cost ratio.

This little-known figure measures how much your company spends on recruitment compared to the number of new hires made. It’s a valuable measure for assessing your company’s performance and identifying areas for improvement.

Keep reading to learn more about calculating recruiting cost ratio and find out why it matters for your business.


How to Calculate Recruitment Costs?

Recruitment costs can quickly add up, so it’s important to calculate them carefully. The first step is to determine the number of employees you need to hire. This will depend on factors like turnover rates, the skills required for the job, and the size of your company.

Once you have this number, you can estimate the cost of advertising, sourcing candidates, and interviewing through video. You’ll also need to consider factors, such as the cost of any training or orientation programs for new hires.

Finally, don’t forget to budget for things like background checks and reference checks. By taking the time to calculate these costs upfront, you can ensure that your recruitment process is as efficient and cost-effective as possible.

In this video, you can learn how to master recruitment. Mads Faurholt-Jorgensen will tell you how to hire the right people for your company.

If you need to use videos in your recruitment strategies, read our blog post.


What is the Recruiting Cost Ratio?

Recruiting cost ratio is a term used in business to describe the amount of money spent on recruiting divided by the number of new hires. In other words, it’s a way to measure how much it costs to fill a vacant position.

The recruiting cost ratio can be a useful metric for businesses to track, as it can help them identify ways to improve their hiring process and reduce their overall spending.

For example, if a company has a high recruiting cost ratio, they may want to consider investing in more efficient recruitment software or increasing their recruiting budget.

Although the recruiting cost ratio is not the only factor that should be considered when deciding about recruiting, it can be a helpful tool for businesses to use as they strive to improve their bottom line.

In estimating recruitment costs, business analysts and people operations coordinators can be of great help. Learn more about other significant positions for your business here.


Recruiting Cost Ratio vs. Cost Per Hire

Recruiting cost ratio is the average amount of money that a company spends on recruiting divided by the number of hires that they make. Cost per hire is simply the sum of all costs associated with recruiting divided by the total number of hires made.

While the cost per hire gives you a straightforward figure to work with, it doesn’t give you much insight into how effective your recruiting efforts are.

Instead, recruiting cost ratio provides a more holistic view of your recruiting efforts by considering both the money you’re spending and the number of hires you’re making. As a result, it’s a more useful metric for assessing the effectiveness of your recruiting strategy.


How to Calculate Recruiting Cost Ratio?

The Recruiting Cost Ratio is simply the cost of recruiting divided by the number of hires made — so, essentially, how much it costs you to fill a position.

This number can be useful in evaluating different recruiting strategies. Of course, there are other factors to consider as well when making hiring decisions, but the recruiting cost ratio is a helpful metric to keep in mind.


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