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The Cost of a Bad Hire

A bad hire not only costs you valuable time in filling an immediate staffing need, but there is a high monetary cost associated as well. The average monetary cost of a bad hire for an employee making $35,000 per year who leaves after one month of employment is approximately $10,151.

Monetary loss is not the only cost of a bad hire. A bad hire can have a negative impact on employees’ productivity and morale, can lead to loss of existing business or business opportunities, expose your company to being required to pay unemployment compensation, severance, or legal fees related to terminating the bad hire, and will lead to additional expenses for recruiting a replacement.

Whatever your staffing needs, Madden can help lower your costs, improve focus, and reduce the risk of a bad hire.

Let's Break it Down

Human Resources Time Cost
Create specifications for the position.
Prepare classified ads.
Review resumes from 30 ad respondents.
Telephone screen ten candidates.
Schedule, prepare for and coduct five interviews
Conduct assessment testing for three candidates
Reference check three candidates
Total HR Cost ($ per house x hours)
$45/hr* x 30 hrs = $1,350
Other Recruitment/Interviewing
Management's interview time
Other interviewers' time

Cost of advertising
$56/hr* x 6 hrs = $336
$45/hr* x 9 hrs = $405
3" ad run for three sundays = $2,500
Salary & Related Costs
One Month Salary
Benefits (based on national average of 35%)
Overhead, administrative expense, etc. (20%)
$2,916
$583
$333
Training & Orientation
Trainer's Time
Manager's Time
$30/hr* x 16 hrs = $480
$56/hr* x 8 hrs = $448
Productivity Losses
Compensating for sub-standard performance
(co-workers doing or re-doing bad hire's work: assumes bad hire is working at 75% capacity
$20/hr* x 40 hrs = $800
Total Cost of a Bad Hire $10,151

*Hourly rate is based on the average wage for the position plus 35% for statutories, benefits and 20% overhead burden.

Additional Expenses to Consider

This estimate of the real cost of a bad hire doesn't even take into account costs which are extremely difficult to calculate, such as:

  • The negative effect on co-workers' productivity and morale
  • Lost business and opportunities due to mishandling by the employee
  • Unemployment compensation, severance pay or legal fees
  • Recruitment and training costs which you must incur again to replace the employee

The Bottom Line

Whether you need help hiring a new employee or additional personnel on a temporary basis, Madden Industrial Craftsmen can help lower costs, improve focus, and reduce the risk of a bad hire.