The True Cost of Hiring: Agency Fees vs. In-House vs. Embedded Recruiting (January 2026)
Dover
February 3, 2026
•
3 mins
Cost per hire breaks down to a simple calculation: total recruiting spend divided by number of hires. The most widely cited benchmark puts average cost per hire around $4,700, according to the Society for Human Resource Management.
But this number changes dramatically based on your hiring model and which expenses you're actually tracking. Internal costs like recruiter salaries, interview time, and software stack up differently than external costs such as agency fees, job board postings, and background checks.
For early-stage companies, this isn't background noise. For small teams, cost per hire consistently ranks among the most closely tracked HR metrics, especially for companies under 50 employees where each hire materially impacts runway. When runway is tight, understanding where each recruiting dollar goes becomes critical to scaling your team without burning cash.
Recruitment agencies charge 20-30% of first-year salary as a contingency fee, payable when your candidate accepts the offer.
For a $120,000 engineering hire, expect $24,000 to $36,000 in agency fees. A $90,000 product manager costs $18,000 to $27,000. An executive at $200,000 runs $40,000 to $60,000.
The percentage varies by role complexity and negotiating power. Standard corporate roles often land around 20%, while specialized tech positions or executive searches push toward 25-30%. First-time clients typically pay more than companies with existing agency relationships.
Many agencies offer a replacement or refund guarantee window, but you still lose time and opportunity cost if the hire fails. If you hire multiple people for the same role within the guarantee period, you'll owe fees on subsequent hires.
In-house recruiting costs can land in the low double-digits as a percentage of salary once you account for recruiter compensation, benefits, and recruiting tools. A full-time tech recruiter runs $80,000-$120,000 annually in base salary, with another $20,000-$30,000 for health insurance, payroll taxes, ATS subscriptions, LinkedIn Recruiter licenses, sourcing tools, and office overhead.
The per-hire math works cleanly at scale. If your recruiter closes 10 hires per year at an average salary of $100,000, you're spending roughly $12,000 per hire after dividing total cost by placements. But volume swings change the equation quickly. Drop to five hires and your per-hire cost doubles to $24,000.
You're also betting on finding a recruiter who can hire across multiple functions. An engineering recruiter may struggle to fill your first sales or marketing roles, forcing you to pay agency fees anyway.
Embedded Recruiting Costs and How the Model Works
Embedded recruiting brings in an external recruiter who works alongside your team on an hourly or monthly subscription basis. These recruiters use your ATS, attend your standups, and source candidates under your company's brand. You pay only for hours worked and can scale up or down as hiring needs change.
Pricing Structure
Most embedded recruiters charge $100-$250 per hour depending on experience level and role complexity. A typical month of support runs 40-80 hours, translating to $4,000-$20,000 per month.
Dover's fractional recruiters follow this model. Companies pay an hourly rate with no long-term contracts, and most spend $2,000-$7,000 per hire. This typically delivers substantial savings compared to traditional agency fees. On that $120,000 engineering role, you'd spend around $4,500 instead of $30,000.
Hidden Costs That Double Your True Hiring Expenses
Internal time adds up quickly. A five-person interview loop spending four hours each can easily cost over $1,000 in fully loaded labor, repeated for every finalist. Multiply that across hiring manager prep, panel coordination, and debriefs.
Failed hires compound the damage. Replacing someone within their first year means paying recruiting costs twice, plus severance and lost productivity. Bad hires cost roughly five times their annual salary when you include training waste and team impact.
Open roles drain revenue. For a $150,000 sales hire expected to generate $1M annually, each month of vacancy can represent roughly $80K+ in delayed potential revenue, before you account for ramp time and attainment variability. Engineering roles delay product launches. Every week a critical position stays empty means overworked teams and missed deadlines.
Startup Hiring Benchmarks: What You Should Actually Be Spending
Many early-stage startups aim to keep non-technical hiring in the $3,000-$5,000 per-hire range. Technical hiring costs jump to $10,000-$20,000 per engineer due to specialized sourcing requirements and extended interview processes. Executive placements start at $28,000 and climb based on seniority.
Tracking cost per hire matters more than hitting exact benchmarks. If you're spending $15,000 on a mid-level role that similar companies fill for $5,000, you're either overpaying for recruiting services or burning internal time on coordination.
Stage affects targets. Pre-seed companies hiring their first five employees should stay closer to $2,000-$3,000 per hire. Series A teams can support $5,000-$7,000, while Series B companies typically spend $8,000-$12,000 as quality bars rise.
When Each Hiring Model Makes the Most Financial Sense
How Dover's Fractional Recruiting Delivers Agency Quality at Embedded Pricing
Frequently Asked Questions
Final Thoughts on Reducing Your Cost Per Hire
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