Why India Is the Best Destination for Optimized Cost Per Hire?

While building an efficacious remote team for high-stakes business projects, you will undeniably want the best talent. But you should keep costs in check, and this is why companies hold the cost per hire as a vital measure. Cost per hire is basically the total cost considered associated with bringing the new employee on board. And that’s pretty much the epicenter of this blog. Let’s see how.

With labor becoming costlier everywhere, companies are beginning to look for value-for-money recruitment options. Options that will not compromise on the quality of the talent. This is exactly what businesses have achieved while hiring in India. When it comes to hiring an employee, it is just like hiring any other resource for the business. Would you be paying a fortune for the same resource when you can acquire it at a fraction of the cost from other places? 

India with its huge labor force and competitive salary structure is emerging as the right choice to hire for good costs. The country also boasts about lower operational expenses and robust business infrastructure.

In this blog, we have brought together all the essential elements of reducing your cost per hire in India. We have also added a bonus section on how to effectively hire in India. So, stay tuned!

What Is Cost Per Hire in India?

In India, companies benefit from significantly low cost per hire as compared to Western markets. This is primarily due to lower recruitment overheads. We have already given you a hint of the cost-per-hire concept in the introduction. Thus, in this section, let’s analyze what this metric consists of. It includes various costs such as:

• Recruitment agency fees: If a company uses external recruiters or headhunters, their service charges add to the hiring cost.
• Job advertisements: Posting vacancies on job portals, social media, and newspapers involves fees.
• Screening and background checks: Costs incurred for resume screening, aptitude tests, and background verification.
• Onboarding and training: Expenses related to induction programs, orientation, and initial training sessions for new employees.

Formula for Cost per Hire

The standard formula to calculate cost per hire is:

In essence, total recruiting expenses (as discussed above) are divided by the number of employees recruited in a given time frame. Hence, if a company spends ₹500,000 on recruitment for a year and hires 50 employees, then the cost per hire would be: 

This formula helps businesses examine the increasing hiring efficiency and optimize recruitment costs.

Why India Offers an Optimized Cost Per Hire?

We will now get into one of the most crucial parts of the blog. We have stated the fact that India offers the most optimized cost per hire. But how does it do so? What’s the secret sauce behind it? We will discuss it in this section. 

Competitive Salary Structures

India’s salary structures are highly competitive. They offer an excellent balance of affordability and expertise. While professionals in IT, engineering, and business services maintain high skill standards, their compensation remains significantly lower than in Western markets. 

For instance, the average annual salary for a software developer in India ranges from ₹6-12 lakhs ($7,000-$14,500). Whereas their U.S. counterpart often makes over $100,000. This cost advantage extends across various roles and industries in the country. 

Large and Skilled Talent Pool

In India, approximately 10 million young adults graduate every year. Thus, making them highly potential employers in the job market. The country has specialists in IT, finance, data analytics, engineering, and business services. It is for this reason that India has become the best-emerging playground for scaling a business. 

It also ensures that companies can find qualified candidates at competitive costs. The high level of English proficiency among Indian professionals further enhances their global employability. Indian employees are capable of exceptional communication and collaboration within the team.

Lower Cost of Hiring and Operational Costs  

Beyond salaries, the overall cost of hiring and administrative operations in India is significantly lower. Office space rentals in major cities like Bangalore and Pune are far more affordable than in New York or London. Job postings on leading platforms such as Naukri, LinkedIn, and Shine cost a fraction of what companies pay in Western countries. Additionally, recruitment agencies and headhunters in India charge lower fees, further optimizing hiring expenses.  

Favorable Government Policies and Regulations

The Indian government actively supports foreign investments through initiatives like Make in India and Startup India. This motivates global businesses to hire and operate in the country. India’s labor reforms facilitate smoother hiring processes. 

Laws like the Industrial Relations Code, 2020 allow companies with up to 300 employees to hire and terminate staff without approval. Tax incentives, like SEZ exemptions and lower corporate tax rates (22% for startups), reduce the cost of hiring. These reforms offer foreign employers flexibility in workforce management.

Strong IT and Business Infrastructure

India has a well-established IT and business ecosystem with multiple global tech hubs. These hubs offer top-tier infrastructure and butter-smooth internet connectivity. They stand tall in modern coworking spaces that support remote and hybrid work models. The availability of excellent IT support and digital tools ensures that businesses can hire and manage talent within a budget.

How is Cost per Hire Calculated in India?

Considering that you chose India to hire your remote team, your immediate next step should be grasping the different expense channels and recruitment cost components. This would provide you an edge to keep your hiring budget under control. It will also help you scrutinize if there is any room for improvement in it. So, let’s get started with it. Shall we?

Job Posting Costs 

Advertising vacancies on local job portals in India is relatively affordable. Let’s take an example of one of the pioneered job portals in the country, Naukri.com. You have to pay USD 45 approx for 100 resume views. Considering the job listing costs on other platforms, this is the bare minimum. 

Let’s go with another all-time hit job listing site, LinkedIn. You have to pay a monthly fee of USD 10 to post a job in India. These facts are cited directly from Internshala. 

Now it is a drop in the bucket, isn’t it? To add a cherry on the top, many Indian job sites offer free postings or budget-friendly premium listings.

Recruitment Agency Fees 

Hiring through recruitment agencies is a popular hiring option in India. It rose to fame for charging significantly lower commissions than its foreign counterparts. You might be thinking how much does it cost to hire a headhunter in India? So, the standard recruitment fee in India ranges from 8% to 15% of the candidate’s annual salary, depending on the industry and role complexity.

Candidate Screening and Interview Costs 

Most of the Indian recruitment industry has shifted to an automated hiring process. The industry leverages tools like ATS (Applicant Tracking Systems) like Zoho Recruit and Fetcher for sourcing and shortlisting. Online assessments for technical and behavioral skills help simplify the selection process. 

This also reduces the need for multiple in-person interviews. Automated video interviewing platforms allow employers to conduct organized and hassle-free mass interviews. Then there are AI-powered tools for onboarding and background checks of individual employees. All these factors cumulatively help employers cut recruitment expenses.

Onboarding and Training Costs 

Training new hires is a key part of the cost of hiring. However, India’s lower wage structure allows businesses to invest in upskilling talent at a reduced cost. Many companies use Learning Management Systems (LMS) and virtual training platforms to further minimize expenses.

Now that you have a preview of the recruitment cost factors in India, let’s move ahead with the next step. The step where you’ll learn about carrying out an uninterrupted hiring process in India.   

How to Effectively Hire in India?

By now, you are well-acquainted with the concept of how much does it cost to hire a headhunter in India. The next thing you need to understand is the dynamics of the hiring channels to effectively assimilate the best talent in India. Then, it will become a cakewalk for you to convert these individual recruits into a power-pact team. Let’s have a closer look at hiring channels in India.  

 Utilize Local Hiring Platforms and Networks

You are well aware of the notion of hiring candidates through local job portals or collaborating with a cost-effective recruitment agency. These platforms allow businesses to hire candidates based on skills, experience, sector trends, location, and salary benchmarks. This process makes talent acquisition more targeted and efficient. 

However, there are hiring options beyond these in India. For example, companies can engage with professional networks, industry forums, and alumni groups. This helps them connect with passive job seekers who may not actively apply through traditional job portals. Other popular channels include University and campus hiring, employee referrals, social media networks webinars, etc. 

India also witnesses government-backed career initiatives like Skill India and National Career Service (NCS) and internal talent mobility programs. These initiatives offer pre-screened candidates with specialized training. Plus they enable companies to upskill and promote existing employees instead of hiring externally. Overwhelmed by the choices laid down on your plate? Wait, there’s more!

Leverage Employer of Record (EOR) Services

The time has come to find the missing puzzle piece in this otherwise perfect picture of “effective hiring in India”. I’m talking about the current favorite of business owners and employers, the Employer of Record (EOR). This model is especially for companies unfamiliar with Indian labor laws, tax regulations, and compliance requirements. 

An EOR acts as the legal employer of record for your employees in India. Other than hiring candidates, they take on responsibilities like drafting work contracts and documentation. You can easily expect your EOR partner to handle onboarding new candidates and manage payroll processing for you. 

In short, they handle the entire employment lifecycle for your newly hired team. They also help you retain your top talent through employee benefits like health insurance, paid leave policies, and other statutory benefits. The picture does look complete and pretty satisfying now. Right?

Learn more about how Employer of Record is the most cost-efficient solution for businesses

Why Does Cost Per Hire Matter for Businesses Expanding in India?

Planning to hire an international remote team is a daring job per se. There will be multiple expenses lining up in front of you during the hiring process. Considering that, you have to count every dollar to prevent your finances from going out of hand. As cost per hire directly influences your financial planning, you have to track every minute detail of the impacts. Let’s assess how cost per hire is impacting your finances.   

Direct Impact on Profit Margins

On an average, cost per hire reduces by approx. 60% (Source: SHRM) when hiring in India as compared to the U.S. or Europe. The difference in expenses is almost unfathomable. When businesses save up such huge chunks of money at the hiring front, they free up capital for market expansion, product development, and operational improvements. This recruitment cost advantage provides businesses with quite a good ROI.

Long-Term Financial Sustainability

India’s affordable yet highly skilled workforce ensures sustainable business growth. Here’s how. Companies can build and expand teams without excessive payroll burdens. Additionally, lower costs of hiring make long-term workforce investments feasible. Some of these investments include upskilling programs and leadership development. This enhances productivity within the team without crossing the estimated budget.

Lower Employee Turnover Costs

High turnover rates can cripple team motivation and simultaneously damage your brand’s reputation. Fortunately, India’s workforce tends to exhibit strong job stability and loyalty. This attitude among employees is particularly visible when companies invest in career growth. 

 

Lower turnover rates mean overall reduced recruitment costs for rehiring, training, and onboarding. Businesses that focus on employee engagement and retention strategies can see significant savings in workforce management. The strategies include competitive salaries, career progression plans, and workplace benefits.

Improved Workforce Planning

The thing with hiring in India is even the most high-end talent here has a relatively lower compensation package than a very mediocre talent in the US. This dissimilarity in salaries is a consequence of various factors. Some of them include a lower cost of living in India, a large percentage of expert professionals, high competition for jobs, etc. The point being, that companies can afford to recruit specialized talent and build diverse teams without overshooting their budgets.

Efficient Use of HR and Recruitment Resources

It can be clearly stated that India has a wide range of hiring options, all within very reasonable pricing. This plethora of options allows businesses to focus on talent management and talent retention. They are not overwhelmed by constant hiring cycles anymore. Rather, they use the remaining hiring budget for employee well-being and meaningful team building. Isn’t that something every organization looks for while onboarding a new resource?        

Conclusion

As I conclude this assumably elaborative article, I want to make sure that I have hit the right notes on this topic. India as a business hub receives an ode from innumerous international entrepreneurs and large-scale organizations. According to a Statista report, there are 5,035 registered foreign companies in India. Sure, get lured by the statistics because it’s worth it. 

However, do not forget to assess the most indispensable factor of the recruitment process, “cost per hire”. Analyze all the hiring options available to you and compare the cost per hire for every model before deciding which one to go with. Use this blog as your guidebook if you are overwhelmed by the concept of how much does it cost to hire a headhunter in India. Or you can just have a quick discussion with our experts if you want to have everything served on your platter.