How to Calculate ROI on hiring process?

In 2025, Hiring has expanded beyond traditional realms with the emergence of new fields. Now, with the recent rise of technologies such as Artificial Intelligence (AI), even recruiters have to step up their game. It is because Hiring has now become expensive, and if not done correctly, the costs only rise further. According to a report from the Society for Human Resource Management (SHRM), a bad hire can cost a company six to nine months of the employee’s salary.

This is why companies have also started to analyze Return on Investment (ROI) in hiring. Doing so allows companies to identify whether their hiring processes are foolproof and successful in both the short and long term. However, the question thus arises: what is the most effective way to measure ROI on Hiring, and whether such a strategy can be beneficial to an organization?

In formula terms, ROI on Hiring can be described as follows:

ROI on Hiring = (Value Generated by the New Hire – Cost of Hiring) / Cost of Hiring

So, how does one calculate ROI on Hiring, and why does it matter?

Key Components to Calculate Return on Investment 

Calculating ROI on Hiring requires breaking down both the costs and the returns associated with hiring a new employee. While the exact formula may vary by company or role type, the general approach is to assess:

However, there are several components to it, and we will examine them one by one.

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Cost Components 

The first and most important part of ROI on Hiring is the cost component. These include the inputs or expenses that go into attracting, selecting, and onboarding a candidate.

Recruitment Costs

The first part of the cost components is the recruitment costs that any company incurs while hiring people. These things include things such as:

• Internal recruiter salaries or hourly rates
• External agency or headhunter fees
• Job board fees (LinkedIn, Indeed, etc.)
• Recruitment marketing (ads, events, sourcing tools)
• Applicant Tracking System (ATS) or interview platforms like BarRaiser

These costs can be described as the backbone of a company’s recruitment efforts. These costs are also fixed costs, which must be paid almost every month, regardless of the intensity of the recruitment effort. 

Also Read: Effective strategy for improving slow hiring at workplace

Interview Costs

Interview Costs are defined as the money spent by the company on the infrastructure to conduct interviews. These costs include things such as:

• Time spent by employees conducting interviews (usually calculated as hourly wage × hours × number of interviewers)
• Time spent reviewing resumes and scheduling
• Assessments, case studies, or technical evaluations

Unlike recruitment costs, Interview Costs can vary from month to month based on the intensity of the Hiring. It also depends on whether a company is using external platforms such as BarRaiser and their Interview as a Service (IaaS), where they have to pay experts per hour to conduct interviews.

Also Read: What are the critical DEIB Questions for Talent Acquisition Teams

Onboarding & Training Costs

The next phase of cost components is the onboarding & training costs. These include things such as:

• HR/admin time for orientation
• Time spent by managers or peers on ramp-up
• Training materials, LMS, or certifications
• Lost productivity while the hire is ramping up

The onboarding and training costs involve the money spent on training and orientation for recruiters and interviewers. 

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New Hire Compensation

Some models include first-year compensation as part of the cost if you’re comparing ROI across employee types. This includes things such as:

• Signing bonuses (common in competitive Hiring)
• Performance bonuses (annual or quarterly
• Referral bonuses (sometimes factored if the hire came through an employee referral)
• Equity or Stock Options: These may include RSUs (Restricted Stock Units) or stock options with a vesting schedule, which are commonly offered in startups or companies with a tech background.

Also Read: Dunning-Kruger effect: Definition, causes and how to counter it

Other benefits and perks 

• Health, dental, and vision insurance
• Retirement plan contributions (e.g., 401(k) match)
• Paid time off (PTO, holidays)
• Wellness stipends, parental leave, etc.
• Relocation assistance
• Equipment & IT setup (laptop, monitor, software licenses)
• Travel or expense reimbursements
• Training or certification costs

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Value Components 

Value Components in hiring ROI represent the benefits or returns a new employee brings to an organization. While the cost side of Hiring is relatively straightforward (recruitment, onboarding, salary), calculating value is more nuanced—and often role-dependent.

Value Components are essential when calculating ROI, as they also help companies determine whether their hiring policy is having a positive or negative impact on the organization overall. 

Also Read: Key Differences Between Job Specification and Job Description

Revenue Impact (Direct ROI)

Under this, the company measures the contribution a new employee makes to the company’s revenue—either directly or indirectly.

Sales Roles:

• Direct impact through closed deals, upsells, and renewals.
• Tracked via quota attainment and CRM data.

Marketing Roles:

• Influence revenue via lead generation, conversions, and campaign performance.
• Tracked through attribution models and pipeline influence.

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Customer Success:

• Increases revenue retention by reducing churn and boosting renewals.
• This may include upsell and expansion contributions.

Product & Engineering:

• Drive revenue by launching monetizable features or improving time-to-market.
• Value is often measured through feature adoption and the impact on ARR.

Measurement:

• Use metrics like bookings, MRR/ARR impact, pipeline contribution, or product usage linked to revenue.

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Why It Matters:

• Helps assess the financial impact of a hire and justifies investment in specific roles.

Cost Savings or Efficiency Gains

Under these metrics, the company measures how a new hire helps reduce company expenses or improve operational efficiency.

Operations & Finance Roles:

• Streamline processes to cut costs (e.g., vendor renegotiations, workflow automation).
• Reduce manual errors and improve compliance.

Engineering & IT:

• Automate tasks, reducing human effort and downtime.
• Optimize infrastructure to lower cloud or tool costs.

Procurement & Legal:

• Negotiate more favorable contracts and minimize liability or regulatory penalties.
• Ensure efficient use of company resources.

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Support & HR:

• Implement systems that reduce ticket volume or improve onboarding and offboarding times.

Measurement:

• Track savings in labor hours, operational costs, downtime reduction, or error rate decreases.

Why It Matters:

• Lowering costs without reducing output directly boosts business margins and hiring ROI.

Productivity Metrics

Under this metric, the company measures how effectively a new hire performs their role and contributes to the delivery of output or projects.

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Engineering Roles:

• Number of features released, bugs fixed, or systems improved.
• Deployment frequency and code quality metrics (e.g., PR velocity, incident rates).

Product & Design:

• Projects completed on time, user adoption rates, or customer feedback scores.
• Efficiency in delivering against sprint goals or OKRs.

Marketing & Content:

• Campaigns launched, assets produced, or engagement metrics (clicks, conversions).

Also Read: What Is Fixed Salary and How It Compares to Variable Pay

Support & Operations:

• Tickets resolved per day, time-to-resolution, or process cycles completed.

Measurement Tools:

• Use KPIs like output per week/month, velocity charts, or OKR completion rates.

Why It Matters:

• High productivity shortens the time to value and increases the return on investment (ROI) from each hire.

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Strategic Value

Under this metric, the company measures a new hire’s contribution to long-term business goals, innovation, and competitive advantage.

Leadership & Executive Roles:

• Shape company direction, vision, and market positioning.
• Drive cross-functional alignment and scalable growth strategies.

Product & Innovation Roles:

• Launch new business lines or enter untapped markets.
• Develop intellectual property (IP), patents, or breakthrough features that differentiate the brand.

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Technical Experts & Architects:

• Build foundational systems or infrastructure for future scale.
• Set technical standards that influence company-wide practices.

Brand & Culture Champions:

• Enhance employer branding, DEI initiatives, or public credibility.
• Attract other high-impact talents (a “hiring multiplier”).

Measurement:

• It is challenging to quantify short-term, but it is reflected in milestones, market share, or long-term valuation.

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Why It Matters:

• Strategic hires create leverage and value beyond daily tasks—amplifying organizational impact over time.

Retention & Engagement Effects

Under this metric, the company measures the impact of a new hire on team stability, morale, and long-term workforce engagement.

Positive Cultural Influence:

• High-performing or well-aligned hires boost team energy and collaboration.
• Help reinforce company values and psychological safety.

Improved Team Retention:

• Strong peers or managers can reduce turnover by creating supportive and high-performing environments.
• Lower attrition means reduced costs for backfilling and hiring.

Also Read: What are pros and cons of Emotional Intelligence in hiring?

Engagement Ripple Effect:

• Engaged employees influence others to be more productive and committed.
• Creates a multiplier effect across teams and departments.

Measurement Indicators:

• eNPS (employee Net Promoter Score), manager feedback, pulse surveys.
• Retention rates in teams led or joined by the hire.

Why It Matters:

• Long-term retention reduces hiring costs and preserves institutional knowledge, thereby improving ROI over time.

Also Read: What is Caring Culture and why it is necessary in the workplace?

Long Term Value 

This metric measures the cumulative impact a hire delivers over multiple years, including growth, adaptability, and loyalty.

Career Progression & Internal Mobility:

• Employees who grow into senior or leadership roles amplify their impact.
• Internal promotions reduce future hiring and training costs.

Institutional Knowledge & Continuity:

• Long-tenured employees build deep company knowledge and cross-functional trust.
• They help onboard and mentor new team members effectively.

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Cultural Stability & Influence:

• Long-term employees strengthen company culture and contribute to consistency.
• Often, they act as cultural carriers and informal leaders.

Adaptability & Role Expansion:

• Employees who evolve with the company take on broader responsibilities over time.

Measurement:

• Tenure, promotion history, number of roles filled, team stability.

Why It Matters:

• High long-term value = lower churn, stronger teams, and increased cumulative ROI per hire

How to Measure Value Components

Component	How to Measure	Frequency
Revenue Impact	CRM / sales reports, marketing attribution	Quarterly
Productivity Gains	Projects completed, output metrics, time saved	Monthly/Quarterly
Cost Savings	Budget comparisons, procurement reports	Annually
Team Impact	360 feedback, eNPS scores, retention rates	Bi-annually
Strategic Value	Exec reviews, roadmap milestones, OKRs	Annually
Long-Term Value	Promotions, tenure tracking, performance scores	Ongoing

Also Read: What is Internal Recruiting and how does it benefit a company?

Loopholes in the ROI of the Recruitment Process

While calculating ROI on hiring and its components (like revenue impact, cost savings, etc.) helps make hiring more data-driven, the process does have several loopholes and blind spots that can lead to inaccurate or misleading conclusions if not handled carefully.

Attributing Value Too Narrowly

It occurs when ROI is only credited to roles with clear, direct outputs (like revenue), ignoring others’ indirect yet critical contributions.

Overfocus on Sales/Revenue Roles:

• Sales and marketing often get full credit due to visible impact (e.g., deals closed).
• Supportive roles (HR, IT, operations) are undervalued because their impact is indirect.

Ignores Interdependence:

• Success in customer-facing roles often depends on internal systems, tools, onboarding, and backend support

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Misses Value from “Enabler” Roles:

• Recruiters improve talent quality.
• It boosts productivity with efficient systems.
• HR drives retention and engagement—critical for long-term ROI.

Result:

• This leads to biased hiring, underinvestment in essential functions, and poor organizational design.

Fix:

• Use role-specific value frameworks and measure both direct and indirect contributions.

Also Read: Why Hiring DevOps Engineers Is Hard

Overemphasis on Short-Term Metrics

It is when companies start to rely too heavily on immediate outcomes (e.g., first 3–6 months) when evaluating a new hire’s value.

Short-Term Focus Examples:

• Measuring ROI by early productivity, revenue generated in the first quarter, or onboarding speed.
• Judging success solely by time-to-fill or cost-per-hire.

Risks:

• Overlooks long-term contributions like innovation, team building, and leadership growth.
• May undervalue hires in complex roles that require longer ramp-up periods.

Also Read: How To Reduce Time-to-Hire with IaaS

Skews Decision-Making:

• Encourages hiring for quick wins instead of sustainable impact.
• This may push managers to favor “safe” candidates over high-potential ones who take longer to ramp.

Fix:

• Combine short-term metrics with indicators of future impact (e.g., learning curve, adaptability, culture fit).
• Track value across 12–24 months for a fuller ROI picture.

Also Read: The Rise of Remote Hiring And How IaaS Fits In

Ignoring Team-Based Contributions

It is when companies start over-attributing value to individuals while neglecting the collaborative nature of most workplace achievements.

Problem with Individual Attribution:

• ROI often assumes a single person drives success (e.g., a sales rep closing a deal).
• Ignores support from product, marketing, operations, or customer success teams.

Undervalues “Glue People”:

• Team players who enable collaboration, reduce friction, or mentor others often lack quantifiable metrics but are vital to success.

Skews Performance Reviews & Hiring Decisions:

• May reward visible output over team-enhancing behaviors.
• Encourages competition over collaboration.

Reality:

• Most results are co-created across functions and require alignment, coordination, and shared accountability.

Fix:

• Use 360° feedback, project-based evaluations, and team outcome metrics.
• Attribute success across roles when measuring ROI to reflect actual contribution dynamics.

Also Read: Biggest Hiring Challenges in 2025 and How IaaS Can Help

Assuming Linear Ramp-Up

It is the flawed assumption that all new hires become fully productive at a fixed, predictable rate (e.g., 30% in Month 1, 60% in Month 2).

Reality:

• Ramp-up varies significantly by role complexity, prior experience, onboarding quality, and manager support.
• Some roles (e.g., enterprise sales, product leadership) may take 6–12 months to show full value.

Risks of Linear Assumption:

• Misjudging early performance as underperformance.
• Prematurely labeling high-potential hires as low ROI.
• Poor investment decisions (e.g., cutting support too soon).

Role-Specific Variations:

• Sales might ramp faster than engineering or strategy.
• Junior hires may take longer but offer long-term upside.

Fix:

• Use custom ramp-up curves based on historical data per role.
• Measure progress through learning milestones and early indicators of impact—not just output.

Also Read: The Ultimate Guide to assess Software Developers

Lack of Contextual Benchmarks

It is where a company measures a hire’s ROI without comparing it to relevant internal or industry standards.

The Issue:

• ROI is often calculated in isolation—e.g., revenue per hire or time-to-productivity—without knowing what “good” looks like.
• This can lead to overestimating or underestimating performance.

Context Matters:

• A developer generating $500K in value may be top-tier in one company but average in another.
• Benchmarks vary by industry, role level, company size, and market maturity.

Consequences:

• Misguided hiring strategies.
• Misaligned performance expectations.
• Unfair comparisons across teams or geographies.

Fix:

• Establish internal benchmarks (average ramp time, output per role).
• Reference external benchmarks (industry reports, peer data).
• Adjust ROI models to account for market conditions, role complexity, and team maturity.

Also Read: What is Predictive Validity and how it should be used in workplace?

Inconsistent Data Tracking

It occurs when critical hiring and performance data is incomplete, inaccurate, or scattered across systems—undermining ROI accuracy.

The Problem:

• Metrics like revenue impact, time-to-productivity, or engagement scores are often not tracked consistently across hires or departments.
• Data may reside in disconnected systems (ATS, HRIS, CRM, performance tools).

Common Gaps:

• Missing onboarding timelines, role-specific KPIs, or promotion history.
• Lack of standardized definitions for “productivity” or “impact.”

Consequences:

• ROI analysis becomes guesswork or anecdotal.
• Biases and assumptions fill in for real insights, leading to poor hiring decisions.

Fix:

• Create a centralized, standardized ROI tracking framework.
• Integrate key systems (HR, finance, performance tools).
• Use consistent data points (e.g., ramp-up time, engagement scores, retention rates) across all hires.

Also Read: How can companies meet aggressive hiring targets?

Neglecting Quality of Hire

It is when companies are focusing too much on hiring speed or cost while ignoring whether the new hire is actually effective, engaged, and aligned with company goals.

The Issue:

• Metrics like time-to-hire and cost-per-hire are easier to track, so they’re often prioritized.
• Quality of hire, which truly determines long-term ROI, is overlooked or poorly measured.

Consequences:

• Fast or cheap hires may underperform, disengage, or churn quickly.
• This leads to repeated hiring cycles, wasted onboarding resources, and hidden costs.

What Quality of Hire Includes:

• Job performance, cultural fit, engagement, retention, and growth potential.
• Peer feedback and alignment with organizational values.

Fix:

• Track performance reviews, ramp-up speed, promotions, and retention.
• Collect feedback from managers and peers 30/60/90 days post-hire.

Also Read: How BarRaiser offers end to end solutions for hiring

No Adjustment for Cultural Fit or Negative Impact

It is when companies fail to account for how a new hire influences team dynamics, morale, or company culture—positively or negatively.

The Problem:

• Traditional ROI models focus on output (e.g., sales, projects delivered), ignoring behavioral impact.
• High performers who are toxic or misaligned culturally can reduce overall team performance and increase attrition.

Negative Outcomes:

• Disruption of team cohesion and trust.
• Increased stress, conflict, and turnover in affected teams.
• Damage to employer brand and internal reputation.

Why It Matters:

• One poorly aligned hire can negate the value of multiple others by eroding morale and productivity.

Fix:

• Include cultural fit assessments during hiring.
• Track team engagement scores, turnover rates, and peer feedback post-hire.
• Weigh the negative impact in ROI calculations to reflect the full cost.

Also Read:How does compliance check help in improving hiring

Inflated Attribution

It is when the company gives a single hire full credit for outcomes that were actually achieved through cross-functional teamwork.

The Issue:

• Individual ROI is often calculated based on high-level outcomes (e.g., revenue closed, feature launched).
• Ignores the contribution of supporting roles (e.g., marketing, design, engineering, ops).

Examples:

• A salesperson credited for closing a deal that relied heavily on product demos, case studies, and post-sales support.
• A product manager celebrated a successful launch without acknowledging the work of devs or QA.

Consequences:

• Overestimates individual impact.
• Encourages ego-driven culture and misaligned performance incentives.
• This can lead to poor promotion or compensation decisions.

Fix:

• Use shared KPIs and project-based attribution models.
• Collect 360° feedback and evaluate outcomes as team achievements when applicable.

Also Read: Things To Remember While Selecting Interview Intelligence Tool

One-Size-Fits-All Metrics

It is when the companies use the same metrics to evaluate ROI across all roles without accounting for functional or contextual differences.

The Problem:

• Treats vastly different roles—like engineering, HR, and sales—as if they contribute value in the same way.
• Ignores role-specific goals such as retention improvement (HR), code quality (engineering), or customer satisfaction (support).

Examples:

• Applying “revenue generated” as a universal success metric—even in non-revenue roles.
• Measuring “tasks completed” without assessing impact or complexity.

Consequences:

• Misalignment between evaluation and actual job purpose.
• Underappreciation of strategic or enabling roles.
• Risk of incentivizing the wrong behaviors (e.g., volume over value).

Fix:

• Define role-specific success criteria.
• Mix quantitative (KPIs, efficiency) and qualitative (peer feedback, innovation) metrics.
• Review metrics regularly based on evolving team and business priorities.

Also Read: Why is Industry knowledge important while hiring

The rise of interview-as-a-service (IaaS) platforms has been rapid, with a host of platforms offering their services can be a great asset for improving ROI on hiring platforms. While some offer end-to-end hiring solutions, others only help with a specific part of it, and some only help with technical platforms (HackerRank, CodeSignal, and Karat).

One such platform is BarRaiser, which offers end-to-end hiring solutions. Our tool guarantees to take your hiring to the next level. Firstly, with our AI Interview Copilot, an interviewer gets a digital assistant who helps them navigate the interview process.

Even before the Interview begins, an interviewer can simply ask the AI Interview Copilot to create a structured interview question format within seconds. An example of this would be as follows:

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‘Create a questionnaire for the post of a senior product manager. The candidate should have at least five years of experience. Candidates should have experience with SaaS, B2B/B2C products, and platform development and should also be proficient in tools such as SQL, Google Analytics, Mixpanel, and Tableau.’

After this, the tool takes seconds to create a thorough question set. However, that is not all. During an interview, if the interviewer runs out of questions, they can simply ask the interviewer to create new questions by going through the candidate’s CVs or the interview context (as the entire Interview is recorded and transcribed).

Also Read: 12 Best Recruitment Strategies for Finding Excellent Candidates

Moreover, our tool also monitors the behavior of both the candidate and the interviewer. The reasoning behind this is simple: a recruitment process is efficient as long as there is no bias present. This is why our AI bot creates two reports. The first is created with the recruiter’s help, and the candidate is judged on multiple metrics. The second report, however, is created by the AI on its own on the interviewer’s behavior to ensure that no candidates suffer from bias. This report is shared with all the stakeholders of the interview process, through which the interviewer can also give some feedback.

Using BarRaiser, we guarantee quality hiring that will bolster diversity and inclusion. BarRaiser is the best AI interview platform that features structured interviews and tools to ensure quality hiring while eliminating recruitment bias. With BarRaiser’s support, you’ll be well-equipped to build a strong team of sales associates who will drive sales and deliver exceptional customer service.