It is inevitable that employers are going to hire workers in order to ensure that companies run effectively and efficiently. Unfortunately, employers don’t always take the time to ensure that they are making the correct hire, even though cheap and easy methods can be used to mitigate such problems. When an employer makes a bad hire, the costs can be severely damaging. Let’s take a look at some of the costs that can accrue.
General financial costs
It has been estimated that the cost of a bad hire can equal at least 30% of the hire’s first year expected earnings. It takes time and money to hire and then onboard new workers. The hiring process can include combing through resumes, conducting interviews, and having internal discussions to make a decision about which candidate or candidates should be hired. This can be a lengthy and involved process.
Onboarding can also take up to a couple of weeks where the worker is not particularly productive (while still earning money) because he or she needs to sign a lot of paperwork, read company policies, and be set up on company systems in order to begin working.
Once the onboarding has been completed and the new hire has begun actually working, it will likely take some time before management realizes that the new worker is not a good fit for the company for one reason or another. In the meantime, he or she will continue collecting a paycheck and wasting the company’s time.
Once the person has been let go, the entire hiring process and subsequent onboarding process must start over taking up valuable time and resources. This can be a damaging cycle both financially and otherwise.
One of the potential reasons for firing a worker is a workplace incident that causes harm to another person. It has been estimated that two million people become victims of workplace violence annually. If this worker harmed another person (within the scope of employment) and had a violent history, then the company could be sued and found liable for negligent hiring. A negligent hiring lawsuit can be very costly to an employer. For more information, see our article on negligent hiring.
A bad hire can have a negative impact on the company’s workplace environment and bring down other team members’ morale and productivity. If the negative impact is substantial enough, key team members may even leave to find new opportunities elsewhere. Decreased productivity and/or losing key members of the team can certainly have a negative financial impact. The firm’s reputation can also be damaged in a number of ways as any kind of criminal activity occurring in the workplace invites bad press resulting in the potential for clients to leave and more difficulty in hiring top level talent.
How to avoid these costs
These costs could have been avoided, or at least mitigated, through performing proper due diligence. All new hires should undergo a background check prior to any official hiring in order to protect the company from harm. Emptor can provide companies with fast and reliable background checks so that you can rest assured that you are hiring the correct people for open positions.