Understanding Cost Per Hire (CPH) in the Cannabis Industry

Updated: Apr 22, 2019

Whether your company budgets based on business succession planning or based on real-time needs cannabis-based businesses should know their average cost per hire or CPH in an effort to understand the costs that are associated with the recruitment and hiring process. Here is the standard formula for CPH according to the Society for Human Resources Management, SHRM:

CPH = ( ∑ (External Costs) + ∑ (Internal Costs) )


Total Number of Hires in a Time Period

Companies use this as a tool to determine accurate and comparable costs of hiring using deliverables and cost markers to show the actual cost, time, and money associated with recruiting and hiring the right talent.

To add some perspective, in 2016 the average CPH according to the SHRM was $4,129 per new hire taking place within a 42 day period.

To determine your own Cost Per Hire, we developed this Cannabis CPH Calculator.

Each year that number goes up by approximately two to five hundred dollars. This does not take into account if the new employee needed is full time, part time or contract as recruiters will expend the same effort regardless of job type or status of the new hire. The formula dictates the tasks needed and cost around producing a sourced, vetted, qualified, ready to on-board employee.

Because so much goes into recruiting, it can be difficult to hone in on your companies formula, however, a baseline is necessary for comparing and streamlining the budget around hiring as well as to create systems. Select the main variables first then work from there to assess cost, production, and turn-around time for filling a position at your company.

What are some of the typical external and internal cost variables that licensed and ancillary cannabis and hemp businesses operating in the New Mexico Medical Cannabis industry should factor into their formula?

New Mexico's Cannabis Licensed & Ancillary Business CPH Variables

Variable and Fixed Hiring Costs are based on the regulations imposed on cannabis businesses in New Mexico along with standard costs incurred from recruitment and hiring tasks.

External Recruiting Costs

  • MCP ID License Card Requirements (State & Federal Backgrounds, HIPAA & Food Handler Safety Certificates)

  • Core Compliance Training for New Mexico cannabis employees (Safety and Security, Ethics and Code of Conduct, Research and Developments of Cannabis, Lynn and Erin Compassionate Use Act, New Mexico Medical Cannabis Program)

  • Advertising & Marketing

  • Job Boards

  • Job Fairs and Networking Fees

  • Sign on Bonuses or Relocation Fees

  • Recruitment Process Outsourcing (RPO)

Internal Recruiting Costs

  • Revenue Loss from vacant position

  • In-house recruitment staff or human resources team

  • Hiring manager or decision maker salary and benefits

  • Employee referral programs

  • Systems such as Applicant Tracking Systems (ATS)

Total Number of Hires = total # of hires made in the time period being evaluated

Hiring Metrics for Cannabis Businesses

  • The time frame to fill a position

  • Retention rate

  • Candidate quality

*According to Cannabis NM Staffing calculations, New Mexico Hemp and Cannabis Businesses are paying an average of $9759/1 hire and at least $975 by the 10th hire during the same period when averaged through the CPH formula*

Essentially, corporate human resources and recruitment departments rely on this metric to reveal opportunities for improvement in the areas of budgeting, strategy, and overall recruitment process efficiency. Knowing CPH can also make a difference when selecting outside RPO’s and staffing companies, like Cannabis NM Staffing, to take on hiring processes at a lesser rate. Facilitating hiring through an organized RPO has the potential to save small businesses thousands of dollars a year in overall recruitment costs.

CPH should be flexible and re-evaluated on a yearly basis in an effort to understand exactly what a company must accomplish in our order to find qualified and retainable talent for the medical cannabis industries of New Mexico.

For more information on how licensed and ancillary cannabis businesses can improve CPH, please get in touch with Cannabis NM Staffing, LLC. Stay tuned for more tips from the Cannabis Industry Trainer & Staffing Lady, Shanon Jaramillo.

To determine your own Cost Per Hire, we developed this Cannabis CPH Calculator.

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