Hiring new employees is one of the most important tasks for any business. But finding the right people can also be expensive. From job ads and interviews to onboarding and training, the costs add up quickly. In fact, the average cost per hire rose from $4,129 in 2019 to $4,700 in 2023, marking a 14% increase.
For small businesses or growing teams, these expenses can make a big impact on the budget. Even when hiring just a few people per year, it's easy to spend more than expected.
This article explores how to reduce recruitment costs by using recruiting tools for fast-paced environments and without cutting corners. We'll cover what counts as a recruitment cost, how to track spending, and which cost-effective hiring strategies can help save money in the long run.
Why reducing recruitment costs matters
Companies spend an average of over $4,000 to fill a single position, according to data from the Society for Human Resource Management. That number can increase depending on the role, the industry, and how long it takes to hire.
Recruitment costs affect a company's bottom line. High expenses during the hiring process reduce the resources available for other areas of the business.
For small businesses, every hire counts. A single expensive recruitment cycle can slow down growth or delay other important projects.
Many businesses don't track recruitment spending closely. Without clear data, it's hard to know where the money is going or how to make improvements.
What counts as a recruitment cost
Recruitment costs include both direct expenses and indirect time-related losses. These costs occur throughout the hiring process, from posting a job to onboarding a new employee.
Direct costs include job board fees, agency fees (typically 15-25% of first-year salary), advertising costs, applicant screening tools and platforms, and background checks.
Indirect costs include recruiter and hiring manager time, interview time from team members, onboarding expenses, and productivity loss during vacancy periods.
Understanding these costs is the first step to finding ways to reduce them. Many businesses focus only on direct costs, missing the bigger picture of where recruitment money actually goes.
How to calculate cost per hire
Cost per hire helps you understand how much you're spending on recruitment. The formula is simple:
Cost Per Hire = Total Recruitment Costs ÷ Number of Hires
For example, if a business spends $8,000 on recruitment in a quarter and hires two employees, the cost per hire is $4,000 per person.
To calculate your total recruitment costs, add up job board fees, staff time spent on recruitment, agency fees, advertising costs, video interview software, interview expenses, and onboarding materials.
According to industry benchmarks, the average cost per hire across industries is around $4,000-$5,000. This calculation gives you a baseline to measure improvements against.
Biggest recruitment cost drivers
Several factors commonly increase recruitment costs and lead to recruiting budget overruns. Identifying these can help focus your cost-reduction efforts.
1. Long time-to-hire increases costs through extended job postings, more staff time, and lost productivity.
2. High candidate drop-off means recruiters must start over with new applicants, doubling their work.
3. Overreliance on agencies results in significant fees, often 15-25% of the new hire's annual salary.
4. Inefficient interviews with multiple, unstructured rounds take up valuable staff time and delay decisions.
Breaking down these cost drivers helps target specific areas for improvement. Now let's look at strategies to address them.
9 cost-effective hiring strategies
These strategies are arranged from quickest to implement to most strategic. Each addresses common recruitment cost drivers.
1. Automate screening and assessments
Manual applicant screening takes hours and often misses qualified candidates buried in Easy Apply noise. One-way video interview software like Truffle can filter high-volume applications using AI candidate summaries and match analysis, helping you turn 500+ applications into shortlists in minutes.
Benefits include dramatic time savings (customers report going from hours of resume review to minutes of candidate evaluation), plus consistency by applying structured criteria to all applicants, and the ability to handle large volumes that would overwhelm solo recruiters.
Even lean businesses can deploy sophisticated screening automation. Truffle launches in 10 minutes with no sales calls required, starting at $99/month, unlike enterprise solutions costing $35K+ annually. The platform provides AI-powered insights while maintaining high completion rates through mobile-friendly audio/video options.
Human judgment remains essential for final hiring decisions, but automation handles the initial heavy lifting of identifying which candidates deserve your time.
2. Use a cost-effective hiring strategy with referrals
Employee referrals consistently rank as one of the most cost-effective hiring strategies. Current employees recommend people from their networks who they think would be a good fit.
A basic referral program includes clear instructions on how to refer candidates, a simple tracking system, and small rewards for successful hires.
Referrals typically have higher retention rates and shorter hiring times. They also reduce job advertising costs since candidates come through existing connections rather than paid channels.
3. Leverage internal talent mobility
Internal mobility means filling open positions with current employees. This approach reduces external hiring costs and shortens onboarding time since employees already understand the company culture.
To implement internal mobility, create a skills inventory of current employees, post job openings internally before external advertising, and develop clear paths for career progression.
Internal hires typically cost 50% less than external hires and reach full productivity faster.
4. Build talent pools
A talent pool is a database of potential candidates who have expressed interest in your company or have been identified as good fits for future roles.
Unlike a standard database, a talent pool is actively maintained through regular communication and relationship building.
To build an effective talent pool, save promising candidates from previous hiring rounds, collect contacts from networking events and career fairs, and stay in touch through occasional updates or newsletters.
When a position opens, you can tap this pre-qualified group instead of starting a new search from scratch.
5. Tap into pay-per-hire services
Traditional recruitment agencies charge regardless of results. Pay-per-hire services only charge when you actually hire someone.
This model works well for hard-to-fill positions, specialized roles, and one-time hiring needs.
The cost is often lower than traditional agency fees, and the risk is reduced since payment depends on successful placement.
6. Offer small but targeted incentives
Sometimes small, thoughtful incentives attract better candidates than higher salaries. These might include flexible working hours, professional development opportunities, extra vacation days, and remote work options.
These benefits often cost less than salary increases but can make your job offers more attractive to quality candidates.
7. Focus on employer brand for quality applicants
Your employer brand is how potential employees perceive your company. A strong brand attracts more qualified applicants without additional advertising.
Simple ways to improve your employer brand include updating your careers page with employee stories, responding to reviews on sites like Glassdoor, and sharing workplace culture on social media.
A strong employer brand reduces the need for paid advertising and attracts candidates who already understand and appreciate your company values.
8. Enforce position control to prevent over-hiring
Position control means evaluating whether a role truly needs to be filled when someone leaves. Not every departure requires a replacement.
Before automatically refilling a position, ask if the responsibilities can be redistributed, whether the role has changed since it was created, or if the role could be a part-time or contract position.
Sometimes restructuring or combining roles is more cost-effective than hiring someone new.
9. Manage hiring funnel with scalable tools
The hiring funnel tracks candidates from application to hire. Managing this process efficiently reduces time-to-hire and improves candidate experience.
Simple tools like spreadsheets or basic applicant tracking systems help track where candidates are in the process, how long each stage takes, and where candidates drop out.
Identifying bottlenecks in your funnel helps focus improvement efforts where they'll have the biggest impact.
How to retain new hires and saves
Reducing turnover is one of the most effective ways to lower recruitment costs. According to the Work Institute, replacing an employee can cost 33% of their annual salary.
The first 90 days are critical for retention. During this period, new hires decide whether the job matches their expectations.
A structured onboarding process includes clear training plans, regular check-ins, introduction to team members, and access to necessary tools and resources.
Communication tools can help organize this process and ensure new hires receive consistent information and support.
Tracking and evaluating results
Measuring the impact of your recruitment cost reduction efforts helps identify what's working. Key metrics to track include cost per hire (total recruitment expenses divided by number of hires), time to hire (days from job posting to accepted offer), source of hire (which channels produce the most successful candidates), and new hire retention (percentage of hires still employed after 90 days).
Review these metrics regularly to see if your strategies are working. Adjust your approach based on the data rather than assumptions.
Keep growing with smarter hiring
Reducing recruitment costs doesn't mean cutting corners. It means being more strategic about how and where you invest your hiring resources.
The strategies in this article—from automation and referrals to employer branding and retention—work together to create a more efficient recruitment process.
One-way video interview software like Truffle eliminates the need for complex candidate communication sequences entirely. Instead of managing email templates and automated follow-ups, solo recruiters and founders simply send one link and candidates complete their screening on mobile devices at their convenience, with high completion rates reported across industries.
The platform's AI candidate summaries and match analysis help you deliver manager-ready shortlists in minutes, not days of back-and-forth scheduling. At $99-129/month with 10-minute setup and no contracts, Truffle provides enterprise-level screening capabilities at a fraction of traditional recruitment costs—helping lean businesses build strong teams without $35K+ platform investments or dedicated hiring staff.
FAQs about reducing recruitment costs
How can I reduce recruitment costs quickly with limited resources?
Employee referral programs and optimized job descriptions provide the fastest results with minimal investment, as they leverage existing resources and help attract more qualified candidates from the start.
What recruitment costs deliver the highest ROI when optimized?
Automating initial candidate screening and building internal talent pipelines typically deliver the highest ROI, as they significantly reduce time-to-hire while improving candidate quality and fit.
How can applicant tracking systems help streamline recruitment processes?
Applicant tracking systems (ATS) centralize your hiring workflow by organizing applications, automating candidate updates, and filtering resumes based on key criteria. They reduce manual admin tasks, speed up screening, and ensure no qualified candidate slips through the cracks—making the entire hiring process faster and more efficient.
