Cost Per Hire: How to Reduce Your Company’s Recruitment Expenses
- Vinod Chavan
- Aug 8
- 4 min read
Hiring new employees is essential for business growth, but it often comes with a hefty price tag. From job advertisements and recruiter fees to background checks and onboarding costs, the cost per hire can significantly impact your company’s bottom line.
In today’s competitive job market, companies are looking for smarter ways to reduce recruitment expenses without compromising on talent quality. In this blog, we’ll break down what cost per hire means, why it matters, and actionable strategies to help you reduce it while still attracting the right candidates.
What Is Cost Per Hire?
Cost per hire is a recruitment metric that calculates the average expense incurred to hire a new employee. This includes both internal costs (recruiter salaries, time spent by HR, onboarding) and external costs (job ads, agency fees, background checks, etc.).
Formula:
Cost per Hire = (Internal Costs + External Costs) / Total Number of Hires
Understanding and monitoring this metric allows businesses to manage budgets, improve recruitment ROI, and optimize hiring strategies.
Also Read: How to Reduce Time to Hire?
Why Reducing Cost Per Hire Matters
High recruitment expenses can drain valuable resources and delay business growth. Here’s why cutting the cost per hire is critical:
Improves profitability: Lower recruitment costs mean more funds for operations, training, or innovation.
Boosts efficiency: Streamlining the hiring process enhances productivity.
Strengthens your employer brand: A well-managed process improves candidate experience, helping you attract top talent cost-effectively.
Also Read: How to Hire the Right Candidate
10 Smart Ways to Lower Your Cost Per Hire
Let’s explore proven ways to lower recruitment costs while maintaining quality:
1. Refine Your Job Listings
Well-targeted job ads attract better candidates faster.
Be specific with job titles and responsibilities.
Use keywords to boost visibility on job boards and Google.
Highlight your company culture and benefits.
This minimizes time wasted on irrelevant applications.
2. Use an Employee Referral Program
Referral hires tend to cost less and perform better.
Offer incentives for referrals.
Promote the program internally.
Reward quality hires, not just leads.
Referrals also shorten time, to-fill and reduce advertising costs.
3. Use Recruitment Automation Tools
Automating repetitive tasks helps HR teams work more efficiently.
Use ATS (Applicant Tracking Systems) to manage candidates.
Automate resume screening, interview scheduling, and follow-ups.
Track hiring stages and time-to-hire metrics easily.
Less manual effort = lower internal costs.
4. Tap into Outsourced Recruitment Services
Partnering with a recruitment agency or Recruitment Process Outsourcing (RPO) provider like Sundus can help you cut costs associated with internal HR operations.
Outsourcing Benefits:
Access to pre-vetted candidate pools.
Expertise in niche hiring.
Faster placements with reduced overhead.
We offer tailored recruitment outsourcing solutions that help companies in the UAE and Saudi Arabia optimize their hiring budget while finding top-tier talent.
5. Build a Long-Term Talent Pipeline
Stop hiring reactively. Start building a future-ready talent pool.
Keep a database of qualified past applicants.
Engage with passive candidates via LinkedIn or email.
Run talent engagement campaigns and keep your brand top-of-mind.
This reduces the cost and effort needed when vacancies open up.
6. Focus on Employer Branding
A great brand attracts talent organically.
Show your culture on social media.
Encourage employees to share their experiences.
Maintain strong Glassdoor and Indeed ratings.
Candidates who already want to work for you cost less to convert.
7. Improve Interview Efficiency
Overly long interview cycles can increase costs and delay hiring.
Use structured interviews and consistent scorecards.
Limit rounds to essential decision-makers.
Make faster decisions with real-time feedback.
Efficiency improves candidate experience and lowers time-related costs.
8. Track and Analyze Recruitment Metrics
You can’t improve what you don’t measure. Track your cost per hire, time to hire, source of hire, and quality of hire.
Benefits of data-driven hiring:
Identifies high-cost sources that don’t deliver.
Reveals bottlenecks in your process.
Helps make better strategic decisions.
9. Reduce Time-to-Hire
The longer a role stays open, the more it costs.
Set clear hiring timelines.
Use pre-screening surveys or video interviews.
Maintain a short list of standby candidates.
Time saved = money saved.
10. Outsource Non-Core Hiring Functions
Not every role needs a full-time hire. Consider staff outsourcing for roles like admin, IT support, or payroll processing.
This allows your team to focus on core business functions while the outsourcing company efficiently manages the rest, at a significantly lower cost
Case Study Example: Cutting Hiring Costs Through Outsourcing
A tech startup in Dubai was spending over AED 20,000 per hire due to slow sourcing and limited in-house HR capacity. By outsourcing their recruitment process, they reduced cost per hire by 40% and time-to-hire by 50%.
Key outcomes:
Faster access to qualified candidates
Lower internal HR workload
Improved consistency in hiring quality
This shift helped them scale efficiently while keeping recruitment costs under control.
Final Thoughts
Reducing your company’s cost per hire isn’t just about spending less; it’s about spending smarter. With the right strategies in place, from optimizing job ads and leveraging referrals to outsourcing and automation, you can streamline recruitment, attract quality talent, and improve long-term hiring outcomes.
Cut Hiring Costs with Sundus
Looking to hire smarter? Sundus offers cost-effective recruitment and staffing solutions across the UAE and Saudi Arabia.
Contact us today to reduce your cost per hire.
Frequently Asked Questions
What is the cost per hire in recruitment?
Cost per hire is a metric that calculates the total amount a company spends to hire a new employee, including both internal and external costs.
Why is it important to reduce the cost per hire?
Reducing your cost per hire improves profitability, streamlines HR operations, and ensures better ROI from your recruitment process.
How can outsourcing recruitment reduce hiring costs?
Recruitment outsourcing reduces internal HR burden, shortens time-to-hire, and provides access to pre-screened candidates, cutting overall hiring costs.
What’s the best way to lower recruitment expenses without losing quality?
Use strategies like employee referrals, automation tools, and partnering with a recruitment agency like Sundus for cost-effective hiring solutions.
Can small businesses benefit from reducing the cost per hire?
Absolutely. Cost-effective recruitment helps small businesses grow faster by freeing up resources for other strategic priorities.
