Question 1

Is it always cheaper to promote internally?

Accepted Answer

Not always — but it is more often than most organizations expect. Internal promotion becomes less favorable when: the internal candidate requires 12+ months of development before being effective, the role has highly specialized external skills that don't exist internally, or the cultural signal of 'always promoting internally' is actively harmful (can create insularity). External hiring becomes more favorable when you genuinely need a capability the organization doesn't have and can't develop in time.

Question 2

How do I calculate ramp time cost?

Accepted Answer

Ramp cost = (Months to full productivity × Monthly salary) × (1 - Average productivity during ramp). If an external hire takes 6 months to fully ramp and is 50% productive during that time, ramp cost = 6 × (annual salary / 12) × 0.5. For internal promotions, ramp is typically 1–3 months because the person knows the company, systems, and culture — even if the role is new.

Question 3

What is a typical agency recruiting fee for senior roles?

Accepted Answer

Retained or contingency search fees for senior roles typically run 20–30% of first-year salary. For a $150k role, that's $30k–45k. For very senior roles ($200k+), retained firms often charge 33%. In-house recruiting has lower hard costs but higher time costs — calculate the hours spent by recruiters, hiring managers, and interviewers at their hourly rates.

Question 4

How do I estimate retention risk for each option?

Accepted Answer

External hires in the first 24 months leave at roughly 20–30% higher rates than established employees. For senior roles in competitive markets, 24-month external hire departure rates of 30–40% are common. Promoted employees leave at 10–15% rates in the same window (lower because promotion increases engagement). The cost of departure includes recruiting cost + ramp cost again — which is why retention risk is the single biggest factor in 24-month TCO.

Question 5

What about the team that gets passed over for a promotion?

Accepted Answer

The morale and retention cost of passing over a strong internal candidate for an external hire is real and underestimated. Studies suggest the team member most likely to feel passed over has a 25–40% higher departure probability in the following 12 months. If that person is high-value, their replacement cost adds significantly to the true cost of the external hire decision. The calculator includes an optional team impact field for this reason.

Hiring vs Promotion Calculator — Which Actually Costs Less for Your Open Role?

Which Actually Costs Less Over 24 Months?

🎯 Role

🔍 External Hire

⬆️ Internal Promotion

Related Calculators

Is it always cheaper to promote internally?

How do I calculate ramp time cost?

What is a typical agency recruiting fee for senior roles?

How do I estimate retention risk for each option?

What about the team that gets passed over for a promotion?

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