A Breakdown of the Cost of Bad Hires

The costs of making bad hires go far and wide, way past direct impacts. In fact, a study conducted by the Society for Human Resources Management found that the cost of a bad hire can constitute as much as five times the bad hire’s annual salary. Logically enough, the higher level the position, the more the cost loss. The longer the bad hire remains, the greater the financial hit as well. Here’s a breakdown of the cost of a bad hire.

Expenses stemming from a bad hire
Many reasons go into why making a bad hire is so costly. For example, there is lost worker productivity. Bad hires make other people work longer and harder to compensate and pick up the slack. Other employees become more stressed, strained and unproductive. After the bad hire leaves, there is the negative effect on employee morale and on clients. This translates to lost sales, overworked, disillusioned and restless employees, and workplace disruption. It also means a lack of stability and continuity.

Other reasons are more quantifiable, such as the time and expense needed to search for a replacement employee and hire and train the person. While the bad hire is with the business, losses include the cost of keeping the employee in the position and the cost of missed opportunities that an appropriate employee would have capitalized upon. Plus, there is the cost of the bad hire’s severance package and possibly COBRA and unemployment benefits.

Temp to hire as a solution
One possible solution to this problem is to go temp-to-hire when filling a position. Your business should look to long-term temporary employees with the intent of hiring them as permanent employees if the match is good. Temp agencies have large databases of workers who fit various criteria, helping boost the chances of the right fit. If a temp does not work out, many costs such as severance packages and employee morale are cut out entirely or drastically reduced.

Image Source :  iosphere