Calculator, Team
What does a bad hire really cost?
A hire that does not work out costs far more than the paychecks. Add it up line by line.
Total cost of a bad hire
$32,300
That is 59% of their yearly salary. Salary paid during their time with you was $27,500.
Cost breakdown
- Lost value from pay and benefits$19,800
- Manager time$4,500
- Original recruiting$3,000
- Replacement recruiting$3,000
- Severance or payout$2,000
The US Department of Labor's often cited floor is 30% of first year pay, about $16,500 here.
Hiring right is one of the lessons inside Mentor Pods.
How this works
Salary paid is yearly salary times the share of a year the person stayed. Lost value from pay counts only the share that did not produce value, then adds payroll taxes and benefits.
Manager time is the hours spent hiring, training and managing the problem times the hourly cost of that time. Total cost adds original recruiting, lost value from pay, manager time, severance, and replacement recruiting.
This leaves out harder to measure costs like lost customers and team morale, so the real number is usually higher.
Source: The 30% figure is widely attributed to the US Department of Labor.
Next step
Make the next hire with clear eyes.
A strong hiring process costs less than repeating an expensive mistake.