From 20k to 150k: what is the cost of bad hiring?

Wiggli Team
May 21, 2024

From €20,000 to €150,000: this is the cost of bad hiring according to studies carried out on this subject. Recruiting the wrong candidate can be very costly for a company. But what is the reality behind these figures? How can one bad hire jeopardise the entire recruitment policy … or even the company?

Let’s explore this subject.

What is bad hiring?

Before we talk about the cost, we need to understand what failed recruitment entails. It is usual to consider a recruitment to be “bad” when the person who was hired leaves the company within 12 months of their arrival, or if their departure takes place during or after the trial period. It turns out that this situation is far from unusual: 45% of resignations take place in the first year (Workelo study).

But what are the concrete reasons that cause a newly hired candidate to take off? Obviously, they are many and they are personal. While management and a lack of freedom push one new recruit to abandon ship, for another it can be the gap between the perceived vision of the job and the reality.

Whatever the case, the reasons for leaving will involve one or more of these situations in general or in particular:

  • A mismatch between the company values and the employee’s personal values
  • Company culture that does not suit the employee’s personality
  • A position description and tasks that do not match skills and aspirations
  • Poor relations between work colleagues
  • Remuneration that is different to that announced during the interview

What is the impact of bad hiring?

Recruiting the wrong person is not without consequences. Above and beyond the financial aspect, a casting mistake can have repercussions on other areas:

The company image will be damaged

An employee who leaves the company shortly after being hired is not a good sign. On one hand, there is a significant risk that they will share their poor experience. In fact, one study revealed that one in two employees share with the people around them. On the other hand, this event opens the door to mistrust and questioning. External talent will rightly question the employee experience. They may prefer not to apply to a job offer.

Colleagues’ working conditions will deteriorate

When a hire ends with the departure of the new arrival, this is generally unexpected. The team then has to take on an additional workload, reorganise with one person missing, perhaps independently when the person who leaves is in a management or supervisory position. This situation is a source of stress, worry and annoyance for the employees. The workplace atmosphere is degraded.

Performance will suffer

How can monthly or quarterly targets be met when there is one employee missing? How can service quality be ensured when a company is understaffed? Recruitment takes several weeks or several months depending on the skill set and rarity of the profile being sought. During this time, service and business do not function optimally.

What are the concrete costs of bad hiring?

Any hiring mistake involves direct and indirect costs. Here they are:

Direct costs of failed recruitment

On the front line, we find costs related to the departure of the new employee. They fall under three categories:

>Costs related to hiring the employee. This is the time spent by the internal recruiter, as well as the means undertaken. In concrete terms, we can take the hourly salary of the internal recruiter dedicated to looking for the right candidate into account, as well as the costs associated with using an ATS and advertising the position on one or several job sites. In the case where the company outsources the recruitment, the cost is increased by 15 to 25% of the annual gross salary of the future employee.

>The remuneration of the employee being hired. Remuneration includes the salary, benefits in kind and bonuses. Add to this employer charges of around 25 to 42% of the annual gross salary. Obviously, the higher the salary, the higher the cost of the failed recruitment. Another factor to take into account is the duration of the collaboration and the value created by the employee. When they resign within 6 months of being hired, the return on investment is low. Therefore, the cost of the recruitment is heavier.

>Costs associated with hiring a replacement. If one employee leaves, then a new employee will have to be recruited. Sometimes, this involves starting the entire process from scratch. In this case, the costs are similar to those related to the bad hire. If you can find the replacement on the short list, then you should seize the opportunity! The costs of the recruitment will be lower in comparison to the predecessor.

Indirect costs of bad hiring

Indirect costs related to a hiring error are more difficult to measure, but they are just as important as the direct costs. Among them are:

>Costs associated with onboarding the employee. A onboarding failed process costs around €7,000 (Workelo study). Among the costs are the time spent by the manager and employees to integrate the new recruit (IT, admin and HR, etc.), training on internal tools.

>Loss of revenue related to the employee’s departure The workload is spread among the different members of the team. But as we have seen, it is hard to maintain a high level of performance and service quality when employees have to take on an excessive workload. This usually leads to a drop in revenue for the company.

>Costs related to the employee’s departure A departure during the trial period, resignation or termination... Depending on the way the contract ends, the costs will vary. Leaving during the trial period is not costly compared to a termination which takes time and entitles the employee to termination compensation. The higher the employee’s salary, the higher the cost of their departure.

>Costs associated with the employer brand. Failed recruitment can have an impact on the company’s brand image. In this case, attractiveness is diminished and the entire recruitment chain is called into question.

5 steps to successfully recruit the right person

Hiring the wrong person happens. What counts is to take action to prevent it happening again. By following these 5 steps, you

Step 1: define your candidate persona. What is their personality? What are their soft skills? What are their expectations in relation to the position and the working conditions? What are the main problems they encounter in their job search? What is their past experience?

Step 2: mention the recruitment context Be specific: are you planning to develop a new service? To develop internationally? Are you restructuring a department? Contextual elements will allow the candidate to better understand the reasons you are hiring and picture themselves in the position more easily.

Step 3: communicate about a salary range. 9 out of 10 candidates want to know the salary before applying to a job offer.

Step 4: give details about the tasks. What are the goals/projects of the position? Which people will the employee be in contact with? What are the work tools and rituals? The more precise your description, the better candidates can picture themselves.

Step 5: play the transparency card when it comes to your company culture. With a careers site, candidates can judge how they would fit into your company.

Now you know, the costs related to bad hiring are many! Thankfully, with a well thought out recruitment process and good communication, you will increase your chances of hiring the right person.

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Wiggli your comprehensive guide to a successful career One platform. Infinite possibilities Request demo
Your data is safe with us

Data protection is our priority, we are GDPR-compliant

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© 2024 Wiggli. All rights reserved.
Wiggli your comprehensive guide to a successful career

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