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  • myHRscreens Expert

The High Costs Of A Bad Hire and How To Evade Them

Updated: Dec 9, 2023

In the fiercely competitive business arena, recruiting the right talent is a paramount concern for leaders in order to build continuity and avoid the costs of a bad hiring decision. A good hire can significantly boost a company's progress with their skill and dedication. Conversely, a bad hire can lead to financial loss and a disintegrated company culture. In this article, we break down the financial toll of a bad hire and discuss how a meticulous screening process can help avoid these issues.


What Are the Financial Costs of a Bad Hire?


The Recruiting Process

The recruitment process comes with its own set of costs right from the get-go. Job advertising, for instance, can cost up to $500 for premium listings on popular job boards. Then come recruiter fees, which typically run between 20-30% of the hire's annual salary. For a job with an annual pay of $50,000, this translates to a hefty sum of $10,000 to $15,000. The costs continue to pile up during the interview phase, which can be over $500 per candidate, factoring in the time spent by interviewers and any associated expenses.


Training Your New Employee

Once a candidate is hired, training and development are the next significant expenditure. Formal training costs can vary widely by industry and role but often range between $1,000 to $5,000 per employee. Additionally, mentorship and on-the-job training can have hidden costs, as they take away from the productivity of experienced employees mentoring the new hires. The lost productivity during this phase can range between $2,000 to $10,000, depending on the complexity of the role and the duration of training.


Losing Vital Productivity

The financial toll extends to the productivity of the new hire. It typically takes a new employee between 3-6 months to reach optimal productivity. For a position with an annual salary of $50,000, the potential lost productivity due to the ramp-up time can be in the ballpark of $12,500 to $25,000.


Separation Costs Of A Bad Hire

If the unfortunate decision comes to let a bad hire go, separation costs enter the equation. Severance packages can range from a few weeks to several months of the employee's salary, depending on the contract. Moreover, if the termination leads to legal repercussions, the costs can skyrocket from $5,000 to $250,000 or more, depending on the complexity and duration of the litigation.


Affects on Company Culture

Apart from the financial aspect, the intangible cultural costs stemming from a bad hire are a crucial concern. They include decreased morale, a tainted company reputation, and disrupted team dynamics which can have long-lasting, adverse impacts on the organization. Low morale can lead to low productivity and high employee turnover.


Employee Screening Helps Mitigate The Risk Of A Bad Hire

Shielding against these detrimental effects necessitates a robust employee screening process. This process should include:

  • Thorough background checks by a Consumer Reporting Agency (CRA) such as MyHRScreens to ensure the candidate provided accurate information, does not pose a threat to fellow employees and meets the regulatory requirements.

  • Diligent reference checks to understand a candidate's past performance and fit.

  • Assessing Technical skills and cultural alignment of the potential hire.

Every dollar invested in refining the recruitment process is a step towards ensuring a harmonious and productive work environment. Understanding both the tangible and intangible costs of a bad hire underscores the critical importance of a strategic, well-thought-out hiring approach, making it a worthy investment for the sustainable growth of the organization.


In conclusion, hiring isn't merely about filling a vacancy; it's a strategic endeavor with substantial financial implications. Armed with knowledge and a solid screening process, companies can ensure that each hire propels them closer to their long-term goals, rather than being a costly misstep.


Let MyHRScreens Help With Your Hiring Needs

MyHRScreens will provide you with the comprehensive employee screening program you need to avoid the costs of bad hires. Contact us today at klewis@myhrscreens.com, 866-899-8970 ext 118 or schedule a free consultation HERE.

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