"Bad fit" employees can cost your company thousands. There’s no doubt that today’s business climate is highly competitive regardless of your industry. This means you need to operate efficiently to grow and succeed. At the core of your success are your employees. Each one needs to operate at their maximum capacity to help your business grow, not cost your company money. Having the right people in the right positions is critical. When you need everyone to contribute and positively impact your bottom line, hiring bad fits can disrupt your finances and your producing employees. It’s much harder to “hide” bad hires, to “find a place” for them somewhere in your company where they won’t detract from business. This reality means bad hires need to be weeded out of your company, which can be an expensive process.

The Statistics of Bad Hires 

The financial costs of a bad hire range depending which source you look at:

• From the Society of Human Resources Management- up to 5 times their annual salary; more the longer the person stays with company.

• From the United States Labor Department- one-third of that person’s salary, and increases the higher up in the organization they were.

• From Fred Yager, Editor at eFinancial Careers- two-and-a-half that person’s salary; if they made $100,000 it would cost you $250,000 to replace them.

Why are these costs so high? When you fire a bad hire, you aren’t just losing the money you paid them for their salary. There may also be termination and potential litigation costs. You also have to keep in mind the recruiting, interviewing, and hiring time and effort that was put in to this employee you are now letting go. 

The “Other” Costs of Turnover from a Bad Hire There are also non-financial costs that can have an impact on your company’s finances:

• Your company’s reputation

• Missed business opportunities

• A dip in employee morale

• Low production

Preventing a Bad Hire Now that you know the true costs of a bad hire, you may be saying, “Gosh, I hope this never happens with anyone we hire.” The truth is this really depends on you and whoever else is in charge of hiring for your company. You need to properly source, screen and interview applicants. Not only do they need the skills required for the job, but they also need to fit the culture of your company. Having the person with the right skills, work ethic and personality to positively impact your company is the ultimate goal. You can read more about how to prevent a bad hire here.

Sound overwhelming? It can be, with so much riding on each hiring decision. It can benefit you to work with a recruiting organization like Skywalk Group to ensure you get the decision right. We offer various levels of recruiting assistance through our OnRecruit service. Get in touch with us today to see how we can help you make the best hiring decisions for your company’s future.

Originally published June 16, 2015
Updated for clarity and relevance June 15, 2021