What’s the cost of a bad hire ?

We all know that hiring the wrong employees can cost organizations a huge amount of money.

But here are some startling figures.

When it comes down to it, getting the right fit the first time matters a lot more than you thought it did.

Let’s look at the list of things that can add up when an appointment goes wrong.

(Based on hiring an employee on $52000. per year)

  • Hiring Costs include: (conservative estimates only)
    Advertising the position                                                                                          $500
    Reading resumes – 20 hours of your time @ $50 /hour                                         $1000
    Screening applicants and short listing – another 20 hours of your time                 $1000
    Interviewing the best 3 applicants – another 8 hours of your time                          $  400
    Checking references – phone conversations with referees = 3 hours                    $  150
  • Cost of maintaining the employee through three non-productive early months
    probably equates to 50% of 3 months wages – $52000/4 x 50%                             $6500
  • Disruption when they leave or are terminated = loss of productivity until
    replaced could easily equal the cost of those non-productive early months            $6500
  • Severance – payouts on departure = accrued leave entitlements, depending
    on length of employment could be at least another month’s wages                         $4300
  • Total                                                                                                                       $20350

Lost business is another variable that can vary with every business so
must be an add-on and
Replacement costs which must be incurred again

It is not inconceivable that a “bad hire” could be a $50,000 – 100,000 mistake and most business managers are not professional recruiters so chances are bad hires will occur from time to time.

So, how can a business avoid the “bad hire” risk?

One way could be to labour hire a casual for the first 3 months with a negotiable transfer fee to take the candidate on permanently at a later date. If the person works out well and fits with the culture of the business and other staff, this is low risk with no interviewing costs, minimal disruption if a changeover is required and no severance costs on departure. Savings are substantial and a professional recruitment is a virtual certainty…and it’s worth a thought.


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