cost per hire

Cost Per Hire vs. Time to Hire: Understanding the Key Differences

The key focus of HR leaders across different companies is to attract, hire, and retain top talent, which directly contributes to business productivity. 

However, assessing the success ratio of these efforts demands evaluation of certain critical metrics, such as cost-per-hire and time-to-hire. In order to obtain a proper balance between filling a position faster while maintaining budget efficiency, assessing these two metrics and bringing them under control is paramount!

So, to help you better understand the gravity of these metrics, let’s learn about them in brief and determine how they differ from one another. 

Definition to Cost-Per-Hire and Time-to-Hire

Before diving deeper into the potential differences between cost-per-hire and time-to-hire metrics, it’s important that you know what they mean and what stats they uncover. 

1. Cost-Per-Hire

It is a common recruitment metric that unveils the average amount of business money being spent on each new person onboarded into your organization. Globally, the average cost-per-hire is around $4700, which varies depending on the role, industry, and location. This cost metric includes all the internal and external expenses associated with the overall recruitment process, which includes:

Internal Costs

  • Salaries of recruiters
  • Recruitment training
  • Internal system or tool costs
  • Interview time
  • Employee referral programs
  • Overhead or administrative costs. 

External Costs

  • Sourcing & recruitment advertisement expenses.
  • Screening and onboarding costs. 
  • Referral bonuses
  • Marketing costs
  • Recruitment software or ATS fees.
  • Agency fees (If any)
  • Background checks
  • Relocation expenses of new hires.
  • Technology costs. 

2. Time-to-Hire

On the contrary, time-to-hire is a common metric that measures the total number of days it took for a candidate to accept the offer letter from the time he/she applied for the role. The average time-to-hire for recruitment processes falls between 30 to 40 days. In simple words, the time-to-hire metric can help you retrieve information about two of your crucial recruiting processes, which include:

  • Efficiency of Recruitment

This metric will measure the speed at which your recruitment team processes a candidate profile, including initial assessment, interviews, and offer letter acceptance. A longer time-to-hire stat indicates that your recruitment process is inefficient and slow, with some avoidable bottlenecks. 

  • Overall Candidate Experience

Time-to-hire also indicates the overall candidate experience! It means a candidate would possibly have a good hiring experience if the hiring processes of a company end within a couple of weeks instead of months. Faster time-to-hire implies satisfactory candidate experience, which enhances brand reputation. 

Differences Between Cost Per Hire and Time to Hire

Now that you know the core purpose of cost per hire and time to hire metrics, it is evident that assessing both is crucial for achieving recruitment efficiency in your organization. However, to help you better understand the efficacy of these two metrics on separate fronts, here are some differences between them for you to count on:

1. Evaluation Parameters

Time-to-hire metric showcases the speed and efficiency of your overall recruitment process, and helps identify potential issues that might be adversely affecting the same. For instance, issues like extensive decision-making time, frequent interview delays, slow screening, and other such bottlenecks can be identified and resolved with this metric.

Cost-per-hire, on the other hand, helps your HR and management team understand the financial effectiveness of your hiring strategies. It also helps you pinpoint if your recruitment processes are aligning with your budget expectations. This way, you can determine if your recruitment approach is financially sustainable and what can be done to improve it. 

2. Ultimate Goal of Assessment

With time-to-hire, your recruitment team will be able to reduce the potential delays caused by screening, interviewing, or onboarding a candidate. Thus, it will not eventually boost the overall candidate experience. Beyond that, when you can achieve faster hiring or a lower average time-to-hire stat, it will reduce the chances of you losing a top talent. 

On the contrary, the cost-per-hire metric will help you optimize your recruitment spending without hurting the quality of hire. It means you will be able to look for areas where the spending can be minimized, while continuing to attract, hire, and retain top talent. However, at the same time, lower cost-per-hire will indicate higher ROi on your recruitment efforts. 

3. Business Impact

A longer time-to-hire will imply that your vacant roles will stay unfilled for a longer span of time, which will eventually trigger productivity loss. If you work on improving this metric and achieve a shorter time-to-hire, you will be able to quickly fill your team with top talent, ensuring proper functionality and faster project deliveries. 

On the other hand, a higher cost-per-hire implies an adverse impact on the HR budget, as specified by the company, which in the long run affects the business’s profitability. However, when you lower the cost-per-hire, it would imply that you are using your resources more efficiently, without compromising on the quality of people you hire. 

4. Calculation Formula

For calculating time-to-hire for a particular role or employee, you must use the formula:

Time to Hire = Day of Offer Acceptance – Day of Application

However, if you want an average time-to-hire for all the roles you have filled within an assessment period, just add the individual stats and divide by the total number of roles you hired for. 

(Time-to-hire for Role A + Time-to-hire for Role B + …) / Total Number of Roles Hired

Similarly, calculating the cost-per-hire is also easier, as you just need to take the internal and external costing variables into account. The formula will be:

Cost Per Hire = (Internal Recruitment Costs + External Recruitment Costs) / Total Number of Hires

5. Influencing Factors

There are varying factors that influence the time-to-hire and cost-per-hire metrics, which better explain the differences between them. They include:

Time-to-Hire

  • Steps involved in the overall recruitment process.
  • Quality of candidates
  • Industry or job type
  • Candidate assessment methods

Cost-Per-Hire

  • Industry
  • Location
  • Company size
  • Job type
  • Recruitment process

6. Monitoring Frequency

The time-to-hire metric must be evaluated continuously, because any form of delay that’s avoidable will adversely affect the hiring efficiency. Thus, it will cause the candidate’s experience quotient to drop. Therefore, continuous monitoring of the time-to-hire metric will ensure the delays are visible and urgently addressed. 

On the other hand, the cost-per-hire metric can typically be assessed either annually or quarterly. It is because most of the internal and external hiring costs will accumulate over time, and monthly numbers might mislead the HR leaders. Moreover, most of the costs involved in recruitment, such as agency fees, ad spends, subscriptions, and others, are either monthly or annual. Thus, daily or continual analysis might not be feasible for this metric. 

How to Improve Your Time to Hire and Cost Per Hire in Your Recruitment Strategy?

Here are some of the ways that you can adopt to improve your time-to-hire and cost-per-hire metrics to improve your company’s recruitment efficiency:

1. Cost Per Hire

  • Optimize the Overall Hiring Process

The fastest way to reduce your cost per hire is to optimize your overall hiring process. For that, you can improve your job descriptions, implement structured candidate screening, use one-way video interviews, and streamline recruitment workflows. 

  • Use Internal Resources

Utilize the efficacy of your current team over hiring third-party agencies! Prioritize referrals that come in from your existing employees and review the pipeline of past applicants who didn’t make the cut for just a few points. This way, you will be minimizing external spending and boosting overall engagement and retention. 

  • Use Skill-Based Hiring Platforms

Leverage the potential of platforms that offer skill-based assessments to evaluate the competencies of candidates. Using skills as the first point of assessing candidates often saves a lot of time and cost on their multiple interview rounds or detailed screening. Moreover, using skill-based assessments in hiring will also prevent you from making a bad hire, which will save you on the cost of replacing one in the long run. 

2. Time to Hire

  • Keep a Track of Different Hiring Stages

In order to improve your time-to-hire stat, you ought to keep a tab on all the stages of recruitment your company adheres to. An ATS software can easily store all data associated with it, but you can also do it with a simple Excel sheet. Review the insights stored for a couple of candidates to determine if there were any potential delays that could have been avoided. 

  • Determine a Specified Speed for Each Stage

For every stage in your recruitment process, you must identify and determine the maximum number of days you want to spend on it. This way, your hiring team will have the deadline in mind in order to be fast as well as efficient in screening, interviewing, and onboarding the candidates for specific roles. 

  • Drive Your Focus on Highly Qualified Candidates

Use smart hiring tools and skill-based assessments in the early stage of recruitment to filter highly qualified candidates from average ones. This way, you can speed up your overall hiring process by focusing on fewer and better applicants for the role(s). 

Let Ducknowl Help You Boost Your Recruitment Efficiency!

At Ducknowl, we bring together a comprehensive suite of recruitment solutions to not just help you be smarter at hiring people, but also be efficient with the speed and cost associated with it. 

From automated resume screening to conducting skill-based assessments, we have software solutions for every aspect of quality recruitment. As a result, you can navigate through all the hiring stages faster, boosting your time-to-hire. Alongside that, we also save you the hassle of subscribing to different recruitment tools from varying vendors and integrate them all from one single source. 

For instance, you don’t have to integrate skill-assessment software from one provider and seek a one-way interview tool from another. At Ducknowl, we offer you smart resume screening, one-way interviews, video job descriptions, skill assessments, cognitive assessments, personality assessments, and other such tools, all under one roof. 

So, if you want to boost your recruitment efficiency at a budget-efficient cost, Ducknowl brings to you a one-stop solution. Feel free to request a demo for your desired tools or all of them! 

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