It’s time to stop guessing about the cost of a bad hire, and get down to the nitty-gritty.
We’re not just talking about money here—we’re also talking about the impact on your company culture, employee morale, and productivity.
If you’re looking for some ugly numbers that will help you justify taking a hard line on hiring practices, then look no further. We’ve compiled a list of statistics that will show you just how expensive a bad hire can be!
Cost of a Bad Hire Statistics (The Highlights)
- The cost of a bad hire is at least 30% of the employee’s pay within the first year.
- On average, it can cost a company up to $240,000 to find and hire a new employee.
- 74% of employers state they hired the wrong person for a job.
- 37% of employers agree that bad hires result in productivity reduction.
- 54% of employers will classify an employee as a bad hire if they fail to produce the proper quality of work.
What Goes Into the Cost of a Bad Hire
1. Bad hires cost employers at least 30% of their employees’ annual salary.
It’s a sad but true fact: hiring the wrong person can cost your company a lot of money.
Recruiting, hiring, and onboarding a new employee can cost a business as much as $240,000. And the U.S. Department of Labor reports that a bad hire costs an organization at least 30 percent of that employee’s first-year salary.
This may not appear to be much to a large business or corporation, but if you are a tiny company with a small and previously calculated budget, this adds up to a lot of wasted money that can erode the company’s profit.
This is why it’s so important to take the time to find the right person for the job, rather than just hiring anyone who seems qualified. The cost of a bad hire can be devastating to your business, both in terms of money and morale.
If you’re not sure how to go about finding the right candidate, consider working with a professional recruiter. They can help you sift through applications and narrow down your options to find the very best fit for your company.
(Forbes, U.S. DOL)
2. The cost of a bad hire at a C-level position could be as much as 40 times their salary.
When you’re hiring at a high level, the stakes are high. You want to make sure you find the right person for the job.
A bad hire at a C-level position could cost your company as much as 40 times their annual salary. That’s right: if you hire someone who’s worth $500K and they turn out to be a bad fit, that could cost your company up to $20 million!
That’s because, when you’re hiring a high-level employee, you’re looking for someone who can make an impact on the company—and if they don’t fit into the team, that impact is going to be negative. They’ll likely have to be replaced, and the pay for their replacement will be steep.
In addition to the replacement cost, there are also costs associated with new training, lost productivity while trying to find new candidates, and potentially even legal fees due to wrongful termination or discrimination claims.
That’s why it’s important to make sure you’re doing everything you can to minimize your risk when it comes to hiring new employees.
3. 34% of CFOs believe that not only do bad hires reduce productivity, but supervising them is also significantly time-consuming.
Managers claim that money isn’t the only thing they lose by hiring the wrong person, as they must also spend 17% of their time monitoring underperforming employees. In a typical workweek, that equates to nearly a full day of wasted time.
(Robert Half International via Fortune Insiders)
4. 44% of CFOs agree that a bad hire greatly affects the team’s morale.
Another 47% said that it somewhat affects team morale, while a mere 9% of CFOs said that bad hires have no effect on team morale.
Additionally, CFOs estimate that 26% of managers’ time goes into coaching and/or supervising underperforming employees.
5. 37% of employers agree that bad hires result in productivity reduction.
The hiring process is like a game of dominoes: one wrong move and the entire thing can fall apart. And guess what? It’s not just you who suffers—it could be your whole team.
According to a recent study, 37% of employers agree that bad hires can hurt the productive of their company. Another 32% reported losing time in recruiting and training replacements, while 31% agree that bad hires brought about compromised quality of work.
These findings highlight the importance of making sure you are hiring the right employees for your business.
6. The latest available data reveals that the cost of losing a good hire is $29,600.
Losing a good hire is as big a problem as replacing a bad one. While 75% of employees state they’re loyal to their employers, only 54% think their organizations are loyal to them.
This disconnect can lead to costly turnover for businesses, as well as decreased morale and productivity among the workforce. To avoid these problems, it’s important for businesses to foster a culture of loyalty and mutual respect between employees and management.
7. The average cost-per-hire is $4,129.
Replacing a bad hire is not only expensive but also very time-consuming.
Data further reveals that the average time to fill a position is 42 days. Considering that the average annual turnover rate is 19%, these figures add up to a significant financial burden.
(SHRM via Apollo Technical )
8. Companies spend an average of $1,071 per employee on training.
This is the average across the board, from experienced staff participating in a few annual training and professional development programs to new hires requiring on-the-job training.
The smaller the company, the bigger the training expenditure per employee. Namely, small organizations spent an average of $1,433 on training, mid-size businesses spent $902, and large corporations spent $722.
9. Turnover of a technical or supervisory position can cost 75%-150% of the employee’s yearly salary.
Employee replacement costs include the expenses of separation, recruitment, and productivity. These expenditures arise from not only replacing the hired person but also the rest of the workforce, who must either cover additional responsibilities or spend time looking for a replacement.
Replacing professionals and skilled hourly workers can cost 75%-125% and 75%-100% of their annual salary, respectively. Turnover of a clerical/administrative position can cost 50%-80%, service/production roles can cost 40%-70% while replacing entry-level/non-skilled positions can cost 30%-50% of the employee’s yearly salary.
10. 74% of employers state they hired the wrong person for a job.
Not only are bad hires common, but they’re also costly. The latest available data reveals that organizations that hired the wrong people lost an average of $14,900 in yearly expenses per bad employee.
There are a few reasons why this might happen. Maybe the job description wasn’t clear enough, or maybe the interview process didn’t give a good sense of what the candidate was actually like.
Whatever the reason, it’s important to be aware of the cost of making a bad hire so you can avoid it in the future.
What Makes a Bad Hire
11. 35% of employers who have made a bad hire agree that they thought candidates could learn quickly, even though they didn’t have the necessary skills.
Another 33% say that candidates lied about their qualifications, while 32% wanted to take a chance on a good person. 30% of employers were pressured to fill in a position quickly, while equal 29% portions had difficulties finding qualified candidates and were too focused on candidates’ skills instead of attitude.
When it comes to what made them think they made the wrong hiring decision, another 25% of employers admit they ignored the warning signs. Equal 10% portions agree they lacked the appropriate tools to find the right employees and didn’t do a complete background check. Another 7% of employers admit they didn’t work close enough with HR.
12. 54% of employers will classify an employee as a bad hire if they fail to produce the proper quality of work.
An employee having a negative attitude follows closely at 53%, and so does an employee not working well with others at 50%.
Another 46% of employers will categorize an employee as a bad hire if they have immediate attendance problems, while 45% will do the same for employees whose skills don’t match what was claimed upon hiring.
13. 66% of employees admit they have accepted a job and realized it was a bad fit later.
Of such workers, 50% quit within the first six months, while 37% have decided to stay with their employer.
When it comes to the reasons why these employees thought their job was a bad fit, 46% reported toxic work culture, and 40% didn’t like the management style.
Another 37% say that the actual job didn’t match what was said in the listing and during interviews, and 33% reported a lack of clear instructions about the role.
What Affects Bringing In Bad Hires
14. 63% of recruiters say talent shortage is their biggest problem.
According to this significant percentage of employers, the majority of talented potential workers are not even looking for employment. 70% of the working population is formed of passive talent who are not actively job-looking, and only the remaining 30% are persistent in job searching.
According to 41% of recruiters, entry-level jobs are the most difficult to recruit.
15. Attracting the right job candidates is the most difficult task for 76% of hiring managers.
Managers claim that candidates who are right for the job are the hardest to find, and the best hires are usually gone in the first ten days of actively being available on the market.
This leaves recruiters to spend about a third of their working week on sourcing candidates per role and adds up to a hiring process that lasts 36 days, on average.
16. Investing in new recruiting technology, according to 68% of recruiting experts, is the best approach to boost recruiting performance.
This could involve anything from new software to help with candidate sourcing and screening to online tools for streamlining the application process.
70% of participants agree that sourcing automation would boost productivity. When it comes to the importance of sourcing, on the other hand, 62% of talent teams say it uncovers higher-quality candidates than inbound applications.
Cost of a Bad Hire Around the World
17. 29% of Indian enterprises indicated that a single bad hire cost them an average of INR 20 lakhs.
This means that every 3 in 10 companies in India have lost at least 20 lakhs due to hiring someone who wasn’t a good fit for the job. This underscores the importance of taking care when hiring new staff, as even one bad apple can end up costing the company dearly.
Stats further reveal that eight out of ten (84%) employers in India reported having hired the wrong person for a position.
18. 69% of German tech companies rated hiring the right staff as critical to their business.
However, this is easier said than done, since corporations acknowledge hiring unsuitable individuals and suffering money and time losses as a result. 39% had hired a candidate who was a poor fit, and 30% had kept these employees for 3-6 months.
(European Business Magazine)
19. Bad hires in the UK contribute 25% less value than good matches.
Furthermore, in the UK, a bad hire made at a middle management position at a salary of £42,000 can cost businesses a total of £132,015 to resolve.
Businesses place recruitment and staff quality as the second most important success factor. Still, it is estimated that 24% of workers are not a good match for their job.
Furthermore, improving staff matching can increase UK labor productivity by 5%, and by improving the matching quality, the recruiting industry increases UK productivity by an estimated £7.7 billion per year.
20. 89% of employers in Russia reported bad hire experiences.
Brazil and China follow closely with 87% each, and so does India, where 84% of employers have hired a bad match.
The US and Italy share the fourth place with 66%, followed by the UK with 62%, Japan with 59%, Germany with 58%, and France with 53%.
21. 57% of companies in China reported productivity losses due to a bad hire.
The above figure is by far the largest when compared to other countries. Namely, 45% of Russian companies reported productivity losses due to a bad hire, and the same applies to 42% of companies in India, 40% of companies in Brazil, 36% in the US, and 31% in Italy.
In Japan, 28% of employers reported productivity losses due to a bad hire, and so did 25% in Germany, 23% in the UK, and a substantially lower 15% in France.
22. Bad hires had a negative impact on employee morale in 37% of companies in China.
The United States had the second-highest percentage of negative effects on employee morale (32%), followed by Germany and Japan (31% each).
In India and Russia, respective 25% and 24% of companies reported negative effects on employee morale due to bad hires.
23% of employers in Italy and Brazil reported the same, and so did 22% in the UK and 19% in France.
23. Hiring the wrong person had a negative impact on client relations for 32% of companies in China.
India ranked second with 25%, followed by Russia, Brazil, and Italy with 22%, 21%, and 20%, respectively.
18% of companies in the US reported a negative impact on client relations due to a bad hire, and so did 17% in Germany and France, followed by 16% in the UK and 13% in Japan.
24. 24% of companies in China and India reported sales losses due to poor hiring.
Russia came in second with 22%, followed by Japan (13%) and the UK (12%).
11% of employers in France and Brazil reported sales losses due to a bad hire, and so did 10% of companies in the US and 9% in Germany and Italy.
25. 35% of companies in Brazil said that bad hires affected the cost of recruiting and training another worker.
The same applies to 31% of companies in the US and India, followed by China (30%), Russia (29%), Italy (23%), and the UK (22%).
15% of companies in Germany said that bad hires affected the cost of recruiting and training another worker, and so did 12% of companies in France and 11% in Japan.
We’ve looked at a lot of data on the cost of bad hires, and there’s no doubt that it can be costly in many ways. From financial losses to decreased morale and productivity, bad hires can have a significant impact on your business.
The good news is that there are steps you can take to minimize the chances of making a bad hire, such as using high-quality candidate assessments and taking the time to vet candidates thoroughly. By being mindful of the cost of a bad hire, you can help ensure that your company makes smart hiring decisions that will pay off in the long run.
So, there you have it! We hope that this article has given you a better idea of how much a bad hire can cost your company. We also hope that it’s motivated you to take action and make sure you have a hiring process that works for your company.
Now go out there and start making some great hires!
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