The cost of hiring a bad employee

Although your company may be growing rapidly and you have positions that you need to fill quickly, hiring employees should not be a rushed decision. Making split second decisions could lead you to hire the wrong person for the job, which can end up costing your business a significant amount of money. Here we will explore the costs of hiring a bad employee.

 

Hiring a bad employee can be a real headache!

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Why do companies hire bad employees?

According to a study by The Chartered Institute of Personnel and Development, the cost of mis-hiring can be between four and six times the employee’s salary. A similar report carried out by the Future Foundation put the overall UK cost of managing poor hires over twelve billion pounds.

You may be wondering why employers fail to make the wrong hires when doing so costs their business so much money. One of the top reasons for this is that they are looking to fill the position quickly. By doing so they carry out inadequate research about the new recruit, their skills and their experience. Others fail to perform the necessary reference checks and end up hiring an employee with a less than perfect track record. Basically these companies are missing out important stages of the recruitment process and end up paying the price for doing so.

Recruitment costs

One of the main costs associated with hiring a bad employee is the cost of recruitment. Not only will companies pay this out when they make the initial hire, but they will then have to spend the time and money carrying out the process all over again when the person leaves or is fired.

Training costs

Training is also time consuming and expensive. If companies hire the wrong employee, they have essentially wasted hundreds, if not thousands, of pounds on their training. When they re-fill the position, training costs will then have to be accounted for again for the new hire.

Decreased productivity

Whilst recruitment and training costs may be obvious losses for companies hiring the wrong employees, many forget that a decrease in productivity can also cost businesses money. If you hire the wrong person for the job, it is likely that productivity will suffer, as they may be stopping their colleagues from being able to do their jobs. Hiring the wrong employee is also likely to affect staff morale, which will lead to a decrease in productivity levels and a loss of potential profit.

Increased sickness and absence

Another trait of a bad employee is higher than average levels of sickness and other absence. Bad employees are often poorly motivated and look for reasons to have time off work. Sometimes unfortunately this can be fraudulent sickness claims (which are difficult to prove) and other reasons for absence.

 

dropping productivity levels from bad employee choices

Hiring the wrong employee can cause productivity levels to drop, causing your company to miss out on potential profits.

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Extra management costs

Having to hire, fire and then recruit a replacement employee are all very time and therefore cost consuming, here are some areas of management cost:

·       Interviewing for a replacement employee (the manager, HR and other staff)

·       Dealing with staff issues due to the behaviour of the bad employee, e.g. staff meetings, complaints resolution, disciplinary meetings, warnings, etc.

·       Severance time, the cost of removing the employee from the organisation “by the book”, ensuring procedure is 100% and reducing the legal exposure to the company.

Severance pay and legal fees

Depending on the relevant policies and laws, many companies end up having to pay severance packages to the employees they fire. This can cost a significant amount of money, which the company would not have had to pay out had they hired the right person for the job in the first place. If things get nasty, companies may end up having to pay legal fees too, which can be extremely expensive. A court case can also damage a company’s reputation, which can ultimately cost them in lost profits.

Conclusion

The cost of hiring a bad employee can be extremely expensive, as not only do you have to pay out the cost of recruitment and training twice, but you also have to factor in severance packages and sometimes even legal fees. It is much better to conduct a strict and thorough recruitment process to ensure you hire the right person for the job first time round.

When it comes to recruiting new employees make sure that you ask the right questions during interviews, so you can gather evidence of their skills and experience, whilst also seeing if they are a good fit for the team. It is also important to carry our comprehensive reference checks to make sure the employee is as reputable and reliable as they are saying they are.

Image credits: lumaxart & lumaxart

 

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