The True Cost of a Bad Hire
Reading time: 6 minutes
We’ve all been there before: you hire someone, and everything seems fine at first. But then things start to unravel. Maybe they don’t quite fit in with the team, or their skills aren’t what you expected (or what was promised). And before you know it, you’re dealing with a bad hire. From wasted time to a hit to the wallet, these hiring mistakes can do more damage than you think… Let's break down the real costs of a bad hire and help you steer clear of them!
Table of contents
Some straight numbers
The average cost of a bad hire depends on a few factors, but to tell you the truth, it will always be a pain to your wallet. Take a look at the following factors:
Recruitment costs: Average $4,700 per hire, and it’s higher for executive roles. Think of advertising or recruitment agency fees, employee referral bonuses, and HR overhead.
Training costs: Ranges from $477 to $1,105 depending on your company size, according to Statista based on new hires in the U.S.
Small (100–999 employees): $1,105 per hire
Midsize (1,000–9,999 employees): $544 per hire
Large (10,000+ employees): $477 per hire
Salary and perks: The wasted compensation for a bad hire can be 3-4 times their annual salary.
Legal costs: Wrongful termination and other disputes could also lead up to legal fees, like non-compliance penalties or severance packages.
Source: Near
To sum that up, a bad hire can cost you about 30% of the employee’s first-year earnings, according to research in the U.S. - right down the drain. And sorry to break it to you, but there’s even more that you need to take into account…😳
The Sneaky Psychological Toll
Now let’s talk about the stuff that’s harder to put a number on: the emotional drain. We’ve all worked with that one person who just doesn’t match the team spirit. One bad hire can set off a chain reaction. Maybe they’re negative or not pulling their weight. Either way, the vibe changes. Suddenly, meetings feel tense, lunch breaks get a little quieter, and the team’s overall energy takes a deeeep nosedive.
It might seem minor, but Gallup found that teams with low employee engagement have 37% more absenteeism: the stress caused by someone not pulling their weight often leads to burnout among your best employees, who are left to pick up the slack. This leads to lower morale and, in the worst cases, more turnover.
The Long-Term Impact on Employer Reputation
Bad hires don’t just hurt your budget and/or team morale - they can also severely damage your company’s reputation as an employer! In fact, 86% of employees and job seekers research company reviews and ratings to decide on where to apply for a job, Glassdoor says. A series of negative experiences can quickly lead to poor reviews, making it much harder to attract top-tier talent.
How to Avoid a Bad Hire
Alright, enough with the gloom. Let’s talk solutions. So how do you make sure you’re hiring the right people? Here’s a quick checklist to help you out:
Culture fit: Sure, skills are important, but those can be taught. What you can’t change? Someone’s character. Look for people who align with your company’s culture and values - the ones who’ll fit right in and contribute to the tribe’s dynamic.
Use (smart) data: Here’s where we come in. Magnet.me helps you find candidates who have the skills and are a great fit for your company culture. With our algorithm-based hiring network, job seekers can view your company's photos, videos, and testimonials - giving them a clear picture of your culture. This attracts candidates who genuinely align with your values.
Don’t rush: Take the time to ask the right questions and involve the rest of the team in the process! More perspectives mean a better chance of finding the right fit.
Check on those references: It’s tempting to skip this step…but don’t. Ask about specific situations, like how they handled tight deadlines or resolved conflicts. Did they take initiative? How did they work under pressure? These examples give valuable insight into their work ethic and behavior.
Why Investing in Hiring is Actually Smart (and not just an extra cost)
So, think about it: would you rather spend a bit more upfront to find the right person or deal with the costs of a bad hire over and over again?
HR is often seen as a cost center, but smart hiring is an investment: When you hire well and build your tribe, you reduce turnover, boost productivity, and create a work environment people actually enjoy. And that’s priceless.
Your team is your company’s greatest asset, so why not bring in the best?
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