Updated September 2026
Cost per hire is the total you spend to fill a role, external costs plus internal costs, divided by the number of hires in the period. For startups, the biggest levers are the recruiter fee model, the amount of founder and team time spent on interviews, and how long roles stay open. Switching from percentage fees to a fixed fee is often the fastest single reduction.
The cost per hire formula
The standard calculation is simple:
Cost per hire = (external costs + internal costs) ÷ number of hires
Run it per quarter or per funding round, and ideally per function too. An engineering hire and a sales hire rarely cost the same to make, and averaging them together hides where the money goes.
What to include in each bucket
External costs
- Recruiter fees, whether contingency, retained or fixed
- Job board posts and paid promotion
- Sourcing and assessment tools, and your share of an applicant tracking system
- Background checks and relocation, if you offer it
- Referral bonuses paid to employees
Internal costs
- Founder and hiring manager hours spent on sourcing, screening, interviews and closing
- Interviewer hours across the whole loop
- Any in-house recruiter or coordinator salary, split across the hires they worked on
Internal time is the line most startups leave out. To price it, estimate the hours per hire and multiply by a loaded hourly cost for each person involved. It will not be exact, but it will show whether the "free" option is cheap at all.
A worked example
Say a startup makes four hires in a quarter: two at $100,000, one at $140,000 and one at $60,000, all through a contingency recruiter at 20%. The fees are $20,000, $20,000, $28,000 and $12,000, which totals $80,000. At 25%, the total is $100,000.
Now add $6,000 of tools and job ads, and an internal time estimate of $4,000 per hire, or $16,000 in total. At 20%, cost per hire is ($80,000 + $6,000 + $16,000) ÷ 4 = $25,500.
Run the same four hires on Funded.club's fixed fees: $7,500, $7,500, $11,500 and $4,900, which totals $31,400. With the same tools and time, cost per hire becomes ($31,400 + $6,000 + $16,000) ÷ 4 = $13,350. The internal costs did not change at all, which is why it is worth working on them separately.
Five ways to reduce cost per hire
- Fix the fee, not just the percentage. Negotiating a contingency rate down a couple of points helps, but a fee that does not rise with salary removes the link between higher offers and higher invoices.
- Write a sharp brief. A clear scorecard with must-haves agreed upfront means fewer mismatched interviews and fewer hours burned.
- Cut interview stages. Map the loop and remove any stage that tests something another stage already covers. Give feedback within a day or two so candidates do not drop out.
- Protect founder time. Have someone else run sourcing and first screens so founders only meet candidates who are already qualified.
- Track time to hire alongside cost. A slower search costs more in team hours and in work that does not get done. Cheap and slow is often not cheap.
Metrics to watch alongside cost per hire
Cost per hire on its own can push you towards the wrong decisions. Pair it with:
- Time to hire: days from kick-off to accepted offer.
- Offer acceptance rate: a low rate means you are paying for interviews that do not convert.
- Early retention: whether hires are still in the role after their first months. A cheap hire who leaves is expensive.
Where Funded.club fits
Funded.club is a fixed-fee recruiting partner for funded startups and fast-growing teams across North America, Europe and APAC, and has helped 500+ startups from Seed to Series D. It helps with both sides of the cost per hire equation.
On external cost, the fee is fixed per hire and agreed upfront, from $4,900 to $21,900 depending on salary band and averaging 6 to 9% of salary. Full bands are on the pricing page. On internal cost, one dedicated recruiter handles sourcing, headhunting, screening and support through the offer, so founders spend their time on final interviews and closing. First screened candidates arrive within 7 days, and the average from kick-off to hire is 33 days.
Supernova (YC W19) made 22 hires with Funded.club at a 27-day average time to hire, saving about EUR 210k compared with percentage fees.
Frequently asked questions
Should cost per hire include internal time?
Yes. For startups, founder and team time is often a large share of the true cost. Leaving it out makes in-house hiring look cheaper than it is.
What is a good cost per hire for a startup?
There is no single right number, because it depends on the roles and salaries involved. Track your own figure per function over time and aim to bring it down without letting time to hire or retention slip.
How does a fixed recruiter fee change cost per hire?
It makes the external part predictable and stops it rising when you raise an offer. In the worked example above, four hires fell from $25,500 to $13,350 per hire with the same internal costs.
Where can I learn more about recruiter costs?
Read our guide to how much a recruiter costs for startups and our overview of flat-fee recruiters.
Worth a brief chat about your next hire? Book a free call.
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