Average Cost of a Bad Hire Statistics

Average Cost of a Bad Hire Statistics (2024)

Published on: January 7, 2024
Last Updated: January 7, 2024

Average Cost of a Bad Hire Statistics (2024)

Published on: January 7, 2024
Last Updated: January 7, 2024

In the current climate of the business world, the average cost of a bad hire statistics can offer a clear look at the risks employers take on.

Everything can seem perfect on paper, but hiring the right person will always feel like a gamble.

You can look at this situation from many different angles, but the truth is hiring the wrong person can be detrimental in more ways than one.

This article will focus more on the costs associated with bad hires and the extent of the damage that stems from hiring the wrong person.

Key Statistics

  • The average cost of the wrong hire can be upward of 30% of the hire’s annual salary
  • Depending on the situation, a bad hire can cost an organization as high as $240,000
  • The average cost of one bad hire is almost $15,000
  • Almost 3 in 5 bad hires stem from the employee’s inability to meet employer demands
  • From 2020 to 2021, companies spent over $92 billion training new employees
  • It can take roughly six months for a company to break even on a new hire
  • 27% of hiring managers who were surveyed feel a bad hire decreases morale
  • It can take weeks or months of wasted time to determine if someone is a poor hire
  • 76% of surveyed senior managers admit to hiring the wrong candidate for a role
  • The average cost of losing a good hire is $30,000

Average Cost of a Bad Hire Statistics: The Costly Reality

Bad Hire 115

People have a way of saying what you want to hear just to land a job.

It’s somewhat understandable, as everyone has bills to pay, but this poses significant challenges for employers.

Part of why new jobs require multiple interviews and plenty of strange questions is to help the hiring managers assess if you’re a good fit for the role.

Many people are great at executing interviews, but their intentions, demeanor, and work ethic change once the job starts.

Nevertheless, a bad hire can cost a company thousands of dollars and a lot of lost time and resources.

1. The Average Cost of the Wrong Hire

Getting straight to the point, hiring the wrong person for a role can incur costs upwards of 30% of the employee’s salary.

Although data supports this, it is somewhat of a generalization, as the cost of each bad hire can vary greatly.

These costs come from their salary, associated training, and resources spent on getting the new employee into the organization and up to speed.

Many employees don’t consider nor care about these costs, and some can act rather recklessly with how they manage their roles.

You’ll find that many organizations have systems in place to expect these costs, but every employer has their limit.

It’s advantageous to be able to sort through the bad hires, but it isn’t always easy to discern before they’re hired.

Sometimes, it requires a little trial and error, but it can’t be argued that the wrong hire can be a costly mistake.

(Zippia)

2. Costs Can Get Pretty Steep

On the higher end, a bad hire can cost an organization upwards of $240,000.

Once again, there are many factors that play into this, but it should act as an eye-opener to employers.

Having a thorough hiring process in place can help reduce this.

Moreover, utilizing proper training for every employee is equally important.

Sometimes, an employee does a bad job because they weren’t trained well; it isn’t always due to a lack of experience or work ethic.

Both sides are to blame for bad hires, but it’s a tricky landscape as interviews only provide so much insight.

$240,000 is definitely on the higher side in regard to the costs of a bad hire.

It’s nowhere near the average, but many employers will drag out a bad hire in hopes they’ll pick up the slack somewhere down the line.

This is rarely the case, and it’s best to nip a bad hire early on than let them incur more costs for the organization.

(Zippia)

3. What’s the Average Cost?

Thankfully, the average cost of a bad hire is a lot smaller than the figure mentioned in the previous section above.

In general, a single bad hire costs companies an average of $14,900.

This may seem like a breath of fresh air compared to $240,000, but multiply it by 10 employees, and it’s an entirely different story.

Finding the right person for the job is one of the biggest challenges hiring managers encounter.

Even if they vet the candidate from top to bottom, they can still end up being the wrong choice after watching them perform on the job.

Employers are consistently working on developing systems to detect a potential bad hire.

Some candidates make it obvious early on, while others hold up a mask for as long as possible.

Getting rid of a bad hire isn’t the end of the damage, though, as the replacement process can be equally costly.

(Zippia)

4. Meeting the Employers’ Demands

The weight of a bad hire isn’t always on the employer, as many people simply aren’t able to meet the demands of the role.

One could argue you aren’t really sure what to expect until you start.

Although this is true to some degree, three in five bad hires stem from their inability to meet the employer’s demands.

At this point, the employer doesn’t have much choice but to train them more or consider letting them go.

It can be a vicious cycle for both sides of the coin, but a bad hire can’t simply be ignored.

From another angle, many people would agree that employers don’t accurately describe the needs of a role.

In many cases, the job post will say one thing, and then employees encounter an entirely different set of requirements after they’ve been hired.

Both sides play into this issue, but letting a bad hire linger in a company will only make things more difficult for everyone.

(BusinessNewsDaily)

5. Training New Employees is Expensive

Reviewing data taken from 2020 to 2021, organizations spent $92 billion on employee training in this timeframe.

That’s a staggering number, but employee training is entirely necessary, or costs will only skyrocket for companies.

This figure includes additional hours spent at work, the cost of orientation, and initial training.

In the table below, you can clearly see the cost of training a new employee across different-sized companies.

Size/Year2015201620172018201920202021
Small$1,105$1,052$1,886$1,096$1,511$1,678$1,433
Midsize$544$870$941$858$829$581$902
Large$447$379$399$1,046$1,544$924$722
All Companies$702$814$1,075$986$1,266$1,111$1,071

You can see there’s a trend that larger companies usually take a smaller hit per bad employee.

This is likely due to their resources, whereas small companies suffer much more from a single bad hire.

For the most part, it has always been like this, but business owners will continue to find ways to mitigate this issue.

New hires could be considered a necessary evil as they can be a gamble for any organization.

You never know who you’re truly working with until they’ve been around for a while.

Nevertheless, with the right policies and procedures in place for hiring managers, businesses can end up with higher-quality employees who are a better fit for the role.

(Investopedia)

Wasting Time and Money

Wasting Time and Money 116

Although this article focuses primarily on costs associated with bad hires, you also want to consider the amount of wasted time that goes with it.

That’s why it’s such a tough cycle. Hiring and training new employees can burn through six months of the year.

After they’re let go, finding the right person to replace them can take weeks or months.

These little nuances are what’s eating away at corporations, many of which are constantly looking to get this problem under control.

Wasted time can lead to losing money, which is why it’s imperative that the hiring process is as thorough as possible.

You have to be able to weed out the bad eggs.

6. Months to Break Even

On average, it takes a company about six months to break even on the cost of a new hire.

You can see how this would be lumped into the losses incurred from a bad hire.

To explain in clearer terms, the new hire needs to be on the job for at least six months before the company can earn back the investment into that hire.

You can break down the productivity and cost scale into four distinct periods:

  • The first month – Most employees are operating at 25% productivity right after their training period. In turn, the cost of lost productivity is 75% for this employee.
  • Weeks 5 through 8 – By this point, productivity reaches around 50%. The associated cost at this point is also 50%.
  • Weeks 9 through 12 – Most employees reach about 75% productivity in this timeframe, corresponding to 25% in associated costs.
  • Past 12 weeks – This is an understandable timeframe to reach full productivity. If they still happen to be a bad hire, companies can expect even more incurred costs around the corner.

The information above is taken from statistical data but doesn’t reflect every unique situation with a bad hire.

Overall, it takes time to discern whether someone is a bad hire or not, but that time can end up incurring unwanted costs.

(Investopedia)

7. The Full Scope of Damages

Aside from costs related to a bad hire, there are other damages that stem from selecting the wrong candidate for a role.

Of the managers surveyed, 27% admitted that a bad hire leads to decreased morale and productivity among staff.

This makes sense, as a bad hire can make work more difficult for everyone around them.

Here are some of the biggest issues that stem from hiring the wrong candidate:

  • 33% feel a bad hire wastes more time
  • 27% admit they cause issues with morale and productivity
  • 20% say bad hires increase stress levels for supervisors

We can all agree that no one is perfect, but the points above are unacceptable in the corporate world.

The problem is that we all have to deal with these types of people from time to time.

Making life harder for everyone else doesn’t work in business, but companies are looking for more efficient ways to detect a bad hire.

(PRNewswire)

8. How Long Does it Take to Correct a Hiring Mistake?

Taking a look at the U.S. job market, you’ll find all kinds of company cultures from one state to the next.

You might be surprised to learn that businesses in many states take months to recover from just one bad hire.

The bullet list below highlights various cities where businesses work for months to bounce back from a bad hire.

  • Cleveland – 17 weeks
  • Denver – 17 weeks
  • San Diego – 17 weeks
  • Miami – 18 weeks
  • New York – 18 weeks
  • Dallas – 19 weeks
  • Philadelphia – 19 weeks
  • San Francisco – 19 weeks
  • Boston – 20 weeks
  • Los Angeles – 23 weeks
  • Minneapolis – 25 weeks
  • Seattle – 26 weeks

It might be hard to understand why it takes so long to recover from a bad hire, but a lot of it comes down to the associated costs.

Not to mention any work they may have messed up along the way, as fixing it usually ends up in the lap of other employees.

A bad hire causes stressors for everyone in an organization, which is why it’s so important they’re avoided at all costs.

(RobertHalf)

9. Managers Are at Fault Too

You can’t blame everything on a bad hire, as the hiring managers were a part of the process as well.

Roughly 76% of surveyed senior managers admit to making a hiring mistake, which turns into a snowball of a problem for the entire company.

64% of these senior managers also admit that the negative impact of a wrong candidate is more drastic than it was a year ago.

This goes to show that some of the problem starts with the hiring managers, as they’re the only wall of defense between the organization and a bad hire.

Those percentages are pretty high, which means many hiring managers aren’t doing their due diligence to vet candidates properly.

Anyone can lie on paper, but by asking the right questions and looking into their background, you can get a better feel for a potential candidate.

(RobertHalf)

10. What’s the Cost of Losing a Good Hire?

The downsides don’t always stem from losing a bad hire.

Sometimes, organizations lose stellar employees, which can leave quite a few negative effects behind.

From a cost perspective, losing a good hire amounts to upwards of $30,000, which is double the figure for bad hires.

Good employees can be invaluable in many ways, but employers won’t be able to hold onto all of them.

Most good hires move on to better job opportunities, but that doesn’t mean they aren’t fired from time to time.

Some people would say wrongfully so, but good employees get treated poorly by organizations all the time.

This article may be primarily focused on bad hires, but good hires carry as much, if not more, weight in comparison.

Overall, organizations lose when any employee leaves, as the entire operation is dependent on their daily work.

Transitioning from one employee to the next is simply a costly endeavor that really puts a dent in the finances of a company.

(CareerBuilder)

Avoid Hiring Bad Candidates

Hiring Bad Candidates 117

With the help of data, a little hindsight, and tact in interviews, companies can do better to avoid those bad hires.

That’s why many people agree that a job post receives many applications, but usually, only one or two turn out to be decent candidates.

By combining data and tips and tricks from the experts, business owners can be better equipped to identify a bad hire before it’s too late.

The following sections will focus on cost prevention, causes for hiring decisions, and more.

11. The Cause for Bad Hiring Decisions

Whether it’s due to a lack of experience or simply misreading a candidate, there are several primary reasons as to why hiring managers make the wrong choice.

Anyone who has hired new employees knows it isn’t always easy to see who candidates really are.

In the list below, you can get a look at some of the most prominent decisions that lead to a bad candidate getting hired.

  • Didn’t work close enough with HR – 7%
  • Didn’t complete a full background check – 10%
  • Lacked adequate tools to find the right candidate – 10%
  • Ignored warning signs – 25%
  • Focused on skills instead of attitude – 29%
  • Hard time finding qualified candidates – 29%
  • Pressured to fill the role quickly – 30%
  • Took a chance on a nice candidate – 32%
  • Lied about qualifications – 33%
  • Thought they could be trained to obtain required skills – 35%

The last two bullet points really stand out, as these are extremely common with many new hires.

As I said before, it’s easy to lie about your credentials.

Moreover, learning on the job is part of the process, but a new candidate should be able to fit the minimum job requirements beforehand.

(Zippia)

12. What Makes Someone a Bad Hire?

There are actually quite a few distinct qualities in a new employee that can have them labeled as a bad hire.

Sentiments on this specific topic are bound to vary, but there’s data to support common reasons someone ends up deemed a bad hiring choice.

image 1

All of these reasons are very valid, as everyone has encountered an employee like this at least once in their lives.

No one would argue that they’re all cause for having someone fired.

Employees with these traits only make life harder for everyone else and more costly for the organization.

(Zippia)

13. Attitude Matters

Surprisingly, around 29% of surveyed managers admit that they made a bad hire by focusing on their skillset while ignoring their attitude.

Even if someone seems to have the right experience for the role, their attitude should also be taken into account.

Their attitude will bleed into everything else in the company, and that only sets everyone back.

When you consider that 53% of employers mention a negative attitude makes someone a bad hire, attitudes should be carefully evaluated during interviews.

Once again, this is easier said than done because most people put on some kind of act to look their best when being interviewed.

There’s no perfect solution to avoid this problem, but having a little more tact and patience in the hiring process can be helpful.

(Zippia)

14. How Can Employers Avoid a Bad Hire?

While there’s no one way to ensure companies can avoid a bad hire, there are several tips and tricks that are known to be quite helpful. T

he following bullet points highlight focal points hiring managers should have with every interview.

  • Define prerequisite and trained skills in new candidates
  • Reduce mindless chatter in interviews
  • Subjective soft skills should be seen as objective
  • Narrow down the job requirements
  • Learn from past mistakes
  • Always contact the references
  • Don’t rush the hiring process

Taking this approach with every candidate can help weed out the bad hires early on.

It isn’t a cure for this issue, but it can be immensely helpful with the wrong candidates.

(BusinessNewsDaily)

15. The Real Cost for Employers

Employers 119

It’s understandable that financial loss would be a large focal point for employers in this situation, but the real cost goes far beyond that.

If employers get stuck in this cycle of one bad hire after another, they’ll end up hemorrhaging money while damaging the morale of their entire workforce.

Nobody wants to work with a bad hire, and they can act as a virus to the company culture.

Bad hires will always exist, but by learning from past mistakes, hiring managers can be more successful with their candidates.

(RobertHalf/Investopedia)

The Bottom Line

Dealing with bad hires is just a part of doing business, but the amount of damage they incur can be controlled to some degree.

Employers shouldn’t have to suffer with bad hires for months at a time.

If you’re able to discern the true nature of a new employee, it doesn’t hurt to go with your gut and let them go early on.

Overall, this article focused on the average cost of a bad hire statistics and many other damages that come with them.

Sources

ZippiaBusiness News DailyInvestopedia
Press.RoberthalfMMA.PRNewswirePress.Career Builder

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Written by Kelly Indah

I’m a statistics researcher here at EarthWeb with a special interest in privacy, tech, diversity, equality and human rights. I have a master’s degree in Computer Science and I have my Certified Information Systems Security Professional (CISSP) certification.