The true cost of a bad hire



Depending on the position, a bad hire could set you back anywhere from $25,000 to $300,000.

That’s according to researchers at the National Business Research Institute (NBRI). They’ve created an info-graphic to explain their findings for the lowest and highest paying jobs.

Based on their research, 66% of employers said they experienced negative effects of bad hires in 2012.

Of these employers, 37% said the bad hire negatively affected employee morale. Another 18% said the bad hire negatively impacted client relationships. And 10% said the bad hire caused a decrease in sales.

Cost per position

Researchers examined five main factors to help them estimate the cost of a bad hire:

  • loss in productivity – the annual salary of the employee
  • training costs – 25% of the annual salary of the employee
  • HR costs – calculated using the average HR Generalist’s salary
  • interviewing costs – calculated using the average HR Generalist’s salary, and
  • employment ads for a new hire – anywhere from $100 to $1,600.

When these factors are combined, companies take a huge hit to their wallets.

The lowest paying jobs – like fast food cook and farm worker – often earn a salary between $18,600 and $20,320. But a bad hire in one of these positions can cost a company an average of $25,000.

It’s a similar situation for the highest paying non-medical jobs. Sales managers and lawyers earn an average salary somewhere between $110,000 and $130,000. A bad hire in those positions can cost employers anywhere from $152,000 to $220,000.

It gets even worse for the highest paying medical jobs, which earn a salary between $191,000 and $233,000. The cost of a bad hire in one of these positions: nearly $300,000.

Why companies make bad hires

So, if bad hires cost so much money, how do they keep finding employment?

For starters, 10% of respondents said the recession has made it hard to pay staff to go through applications looking for the best candidates.

But the number one reason 43% of companies made what turned out to be a bad hire: They needed to fill the job quickly.


A study showed that at least 31 percent of those bad hires could have been averted had the company had the proper talent intelligence and references checked. An additional 26 percent of employers couldn’t identify why they made the bad hire, but its’ safe to assume they wouldn’t have made those decisions had they had an adequate background on the candidate at the time of hire.

  • A well designed background screening program can help your organization avoid bad hires and resulting negative impact by:
  • Validating information provided by candidates
  • Ensuring your new hires have the right background
  • Reducing your risks of negligent hiring
  • Creating and maintain a safe workplace environment
  • Reducing losses from employee theft, drug abuse, turnover and absenteeism
  • Reducing incidents of workplace violence
  • Minimizing internal fraud

The aim of any well designed comprehensive background screening solution is to ultimately lower your organization’s exposure to risk and litigation, while helping you comply with laws governing the use of consumer reports. Don’t leave your business or organization at risk. Learn more about how 360 Background Solutions may be able to help you design a custom program to fit your organization’s needs.