Bringing in a new employee requires a significant investment on the part of the hiring company. Along with the traditional costs associated with recruiting, like advertising fees and staff time, businesses often have expenses related to training and onboarding, as well as productivity adjustments while the new hire gets up to speed.
But a bad hire can add a significant amount to those totals. In fact, some estimates show that the cost of hiring, compensating and maintaining an underperformer comes in at a stunning $240,0001. How can that be true? It’s due to the fact that a bad hire can also affect team performance, disrupt operations and projects, lead to lost customers, weaken the employer brand and even lead to litigation expenses. And, once the underperforming employee is out the door, you have to start the hiring process all over again.
To help you see how these expenses add up, here is an overview of some of the most common costs associated with a bad hire.
Recruiting and Hiring Expenses
The average cost per hire is easily over $4,0002 each time you have to fill a position.
In cases where a new employee doesn’t work out, leading you to have to begin recruiting again, you can plan on spending that $4,000+ each time. By taking the time to choose the right employee the first time, you only pay the recruiting and hiring expenses once before you have the chance to enjoy having a productive new team member on staff.
Costs of Onboarding
Typically, there is paperwork that has to be filed and entered into the HRIS, employee handbooks and training materials that must be provided, and a range of other administrative tasks that other staff members must handle. This means part of another worker’s salary is provided in exchange for handling the duties associated with bringing the new employee on staff3, and that is money wasted if it turns out to be a bad hire.
An employee’s salary is intended to be compensation for the productivity boost they will provide. However, a bad hire doesn’t equal a return on investment. That means their pay is heading out the door and nothing (or very little) is coming back in. In worst case scenarios, you may even be paying an employee who is costing you more money beyond their compensation, especially if their poor performance begins to impact other workers, creating a compounding situation that leads to additional productivity losses.
A bad hire can hurt productivity in two ways. First, if the employee is negatively impacting your other staff, it can lower morale. When one employee isn’t pulling their weight, then other staff members are often stuck picking up the slack. Over time, this can breed frustration and resentment, leading them to be less engaged on the job and often causing their performances to suffer as well.
Second, when the less-than-stellar employee leaves the business, you are shorthanded. This also ups the burden on the rest of your workers and creates additional stress relating to the company restarting the hiring process.
Poorly performing employees also take more time to manage. In fact, managers can spend approximately 17 percent4 of their time dealing with underperforming workers, a time commitment that is just shy of a full workday every week.
Avoid Bad Hires by Working With a Top Staffing Agency in Atlanta
The best defense against bad hires is not to rush when evaluating candidates and make significant efforts to find the ideal applicant before bringing anyone on board. If you would like to increase your odds of making a strong hiring decision, the recruitment professionals at Employ Partners have the expertise to support your goals. Contact us today to see how our staffing services in Atlanta can help you find the right person to join your team.
1 – https://www.shrm.org/resourcesandtools/hr-topics/employee-relations/pages/cost-of-bad-hires.aspx
2 – https://www.shrm.org/about-shrm/press-room/press-releases/Pages/Human-Capital-Benchmarking-Report.aspx
3 – https://www.glassdoor.com/employers/blog/hidden-costs-employee-onboarding-reduce/
4 – https://smallbiztrends.com/2014/04/true-cost-of-a-bad-hire.html