The Real Cost of a Bad Hire

The Cost of a Bad Hire Is More Than Employers May Assume

A study from the Harvard Business School found that hiring a toxic worker is twice as expensive as hiring a top talent employee. Although no employer ever intends to hire a bad employee, an astounding 74 percent of employers admitted to having been affected by a bad hiring decision.

As frustrating as it may seem to have to wait for the ideal candidate to apply, hiring the wrong person for the job will cost you more in the end. Employer Support Services has provided a cost list to consider before making a hiring decision for your company as well as tips for avoiding a bad hire.


The Recruiting, Hiring, and Onboarding Cost

SHRM reports that the average time to fill a job position is about 42 days, and the average cost of hiring and training a new employee is $4,129. The amount does not include creating accurate job descriptions or advertising the job opening on various platforms. Regardless, the time and effort you put into bringing in a new person to the workplace do have its costs.

And if the employee does leave the company, whether on their terms or the employer’s terms, you will have to invest money back into the recruitment and interviewing process. As an employer, your time is valuable, and having to go back to the beginning stages again to fill a job position can end up costing more if it keeps you from other responsibilities.

So, if you’re going to invest that much time and effort into hiring anyone, make sure they are worth your time.


Return on Investment LossImage of cash with stopwatch

An investment in an employee, calculated by weighing the hiring cost, compensation cost, and cost to maintain a new employee against their productivity, is important to consider when it comes to determining if a new employee is helping or costing a company.

The Bureau of Labor Statistics reported that 62.3 percent of total employee compensation came from salaries and wages, while the remaining 37.7 percent attributed to benefits costs. With compensation, the hiring costs mentioned earlier, and the cost to assimilate the employee into the workplace (training from other employees and other accommodations), CEO of Link Humans Jörgen Sundberg estimates the average cost of investing in an employee to be as much as $240,000.

To have a positive return on investment with your new hire, the employee must provide a company with greater profitability. If your investment does not eventually balance out with the work quality and productivity levels the new hire provides, it is important to evaluate if the employee is the best fit for the position.


The Cost of Employee Engagement Loss

Disengaged employees cost companies an estimated total of $450 billion to $550 billion in lost productivity annually. When bad hires bring negativity to a workplace, their attitude can be contagious and impact other employee’s engagement. A negative attitude can cause employees to be less productive and motivated.

Additionally, if your current employees are having to work harder to complete the tasks the new hire isn’t accomplishing, your good employees can end up overworked and frustrated. A bad hire can cause employees to become disengaged and disgruntled, making it likely that they will find jobs elsewhere.

Maintaining a strong relationship with your employees through effective communication is key to keeping your employees engaged. When there is a new employee in the workplace, be sure to check in with your current workers often and let them know that you value their input. Their feedback regarding the new employee will give you an indication of whether they are a good fit for the workplace or not.


Turnover CostBusinesswoman distressed over bad hire at her company

Employee engagement is also the largest contributing factor to turnover. When employee disengagement is caused by a bad hire, the turnover costs can become significantly higher. On average, the cost to replace an employee is more than the leaving employee’s salary. And if a toxic employee causes other employees to leave, your company could face a significant loss in profits and productivity.

According to a 2019 study, 34 percent of employees between the ages of 18-25 said they were most likely to leave a company because of a coworker. Additionally, 34 percent of employees between the ages of 51-55 had the same response. This means that if you have a bad employee in your workplace, you could be facing high turnover from other employees, including top performers.

An effective onboarding process is essential in preventing turnover among new hires. To retain the top performers in your company, be sure that they still feel like a valued part of the team and are engaged in the company’s success. Engaged employees will be willing to relay any red flags they notice with the new hire before deciding to look for a new place to work.


How to Avoid a Bad Hire

With the high costs a company can accumulate from hiring one bad employee, improving your hiring process can help prevent a toxic worker from affecting your workforce and profit margins. Here are a few tips to consider adding into your interview and recruiting process:

  • Consider company culture: During the interview process, think about whether the person would fit into the company culture.
  • Do your research: Call the candidate’s references and former employers to verify the information on the candidate’s resume is accurate. Be sure to also look through the person’s social media profiles and other public records to determine if the person would be a good employee at your company.
  • Add a personality test to the interview process: A candidate will be on their best behavior during a job interview, but that positive behavior does not always transfer over into the workplace. With a personality test, you can better understand the person’s natural behavior to identify toxic traits.
  • Don’t hire someone just to fill the position: When your biggest concern is to fill the job position rather than find the best applicant, you increase the risk of hiring a toxic worker. No matter how much the workload builds up, it is best to wait to hire a candidate that is best for the job than make a rushed decision.


Let ESS Help Bolster Your Recruiting and Onboarding Processes

Don’t let a bad hiring decision cost your company. At ESS, we have the best solutions to streamline your recruiting efforts and alleviate any HR responsibilities that are costing your company too much time and money. For more information, contact a representative today.

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