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True Cost of Employee Turnover and Hiring a Replacement


Just One Bad Hire Away From Losing $37,845

Research has revealed that 4 out of 10 companies admit to bad hires. The question is, why do companies make these mistakes? It has been discovered that over 35% of employers rush to fill up job vacancies, resulting to about 34% of the workforce not being fit for the job. 11% said that bad hiring decisions was a result of insufficient intelligence and 11% did not refer to the checks before taking decision.

Six Tell Tale Signs of a Bad Hire

There are several signs indicating a bad hire. When a new recruit exhibits any of the following signs, it is an indication for concern.

1. Negative attitude.
2. Inability to produce quality work.
3. Subject to consistent complaints from customers.
4. Bad interpersonal relationship.
5. Inability to meet deadlines.
6. Issues related to attendance.

Breaking Down the Cost of a Bad Hire

The following are the cost implications of a bad hire.

Recruiting Cost
The recruitment process starts with posting the vacancy of the job board. The price increases rapidly from there. To post a job on websites like LinkedIn and Monster can cost up to $550. The next step will be to filter the resume. You may use a resumator to filter the resumes. This can cost up to $850. Interviews are next. This would involve scheduling the interview between 2 to 20 hours of the recruitment manager’s time and will cost around $700. Candidates will travel to the internet venue and you would have to run a background check on each candidate. The combined cost of this would be $2100. Employee referral programs could cost up to $4000.

From a survey conducted on North American businesses, it was discovered that the total recruiting cost per employee ranges from about $2000 for large companies to $3632 for medium firms and $3805 for small firms.

Cost of Training
Research reveals that American companies spend about $159 billion on the average to train their employees. This does not include the 31 hours on the average sent by the company in the training of the employees. Breaking it down, it is about $30 a hour for the trainer, $22 a hour for the employee, resulting in an average cost of $825 for large firms, $1,102 for medium firms, and $1,615 for small firms.

Opportunity Cost
When the mistake of a bad hire has been made, there is almost nothing anyone can do. There is almost nothing that can be done to regain the lost investment. This results in the following costs.

1. A derailed team. Bad recruit has actually bad influences on the team ultimately derailing it. This results in 41% reporting loss of productivity, 40% reported loss of time to recruit and train another staff, and 36% reported negative impact on the motivation of other employees and 22% report negative impact on client solutions.

2. Legal cost. Lots of legal work is required for an existing employee. About 10% of companies report legal fees of between $5000 to $20000 associated with bad hires.

3. Productivity losses. Approximately $6,000 will be lost if it takes six months to identify a bad hire working at $25 per hour.

4. Avoid sunk cost. Make sure that not a single bad hire slips through your filter. Make sure of tools like Kira talent’s video interview screening platform.

About The Author
Last month, more than 2 million people visited Brandon's blog. He shares exactly how he took his blog from zero to 1 million monthly visitors here. His path to success was not easy. Brandon had to comeback from being disabled, by a rare health disorder, for most of his thirties. God delivered him from hardship and has blessed his family in so many wonderful ways. You can send Brandon a message here.