The VGP Blog

The Cost of a Bad Hire

Date posted: June 12, 2013

The cost of hiring a new employee goes beyond salary and training. It requires an investment of hours that could be used for more productive matters if your new employee ends up not being a good fit for the position within your company.

There have been many studies about how much a new employee ‘really’ costs to a business. Below are some of the statistics that you may want to consider when hiring someone new. Is it worth it to hire someone that you could pay less, but is not really qualified for the job or is it better to pay more and have someone who is trained and skilled for the job?

  • An employee’s salary + plus benefits often equals from 1.25 to 1.4 times their base salary. You want to consider this when employing someone you may have to let go sooner rather than later.
  • Training is one of the most costly investments a company makes. On average each employee costs around $1,200 while in training and 32 hours of the person in charge of training that new employee.
  • A mid-level manager usually takes 6.2 months to break-even.
  • After training, new employees function up to 25% of their capacity, which means that the loss of productivity equals 75% of their salary.
  • For a regular employee, it takes up to 5 months for them to reach their full potential and the break-even point.

Cost of integration should be also considered when adding someone new to an already established team. This goes beyond structure and software needed for the new worker, it is also about how will he/she work with their peers.

There are many costs to consider when firing or hiring someone in your business. During the process you will experience a loss of revenue caused by the empty position and the time/money invested into finding a new candidate to replace them. After the hiring and training process, it is an adjustment of responsibilities that can also be translated into a money loss for the company. Hiring new personnel isn’t something that should be taken lightly and experts agree that in the end it is cheaper to pay more and hire the right fit, rather than paying less and hiring someone that won’t really work for your company.

Working with a professional staffing agency can help reduce the amount of time spent on finding an employee while also ensuring you find the right person for the job, instead of hiring the wrong person which will end up costing your company a lot more money than using an executive search firm, combined with the salary of the right employee.