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May 23, 2025
The cost of hiring the wrong person is likely to be much higher than you expect. According to one study, 74% of employers admit to having hired the wrong person at some point. From the person who has heavily embellished their CV to the person who just doesn’t have a collaborative attitude, there are lots of reasons a hire might not work out.
Costs to the employer are much more than just the cost of restarting the recruitment process. You might experience a dip in productivity, damage to your reputation, loss of team morale, and even legal costs associated with terminating an employee. Not to mention, it can be a drain on resources for members of staff tasked with training this individual.
To drive home the importance of making the right choice the first time, we’re going to explore some of the hidden costs associated with hiring the wrong person. Armed with this information, you can make the case for refining your recruitment processes to ensure no stone remains unturned.
Let’s start with the most obvious costs you’ll face when you realise you’ve made the wrong choice. If the employee has made it past their probationary period and has moved to a permanent contract, there will be costs associated with letting them go. This would typically be around one month’s salary. This is a good reason to make sure you are familiar with your own employment contracts and not use templates.
You’ll also have to start the process of finding someone to replace them, which could mean recruitment retainer fees, or directing internal resources towards finding candidates. Recruitment can cost around £3,000 to £5,000, depending on whether you are using internal or external recruitment tools.
These are some of the obvious costs that are directly related to choosing the wrong candidate. There are many reasons you might discover the candidate is wrong for the role. It could be that they have lied about their skills and experience and aren’t up to the level you were expecting. Or perhaps they are a bad culture fit and are proving to be a negative or toxic influence in the workplace.
There comes a point when the employer must decide if they want to continue down the road and hope that things improve, or to cut their losses and start the search for a new employee. This is difficult enough when it’s one employee in a relatively small organisation. When you are dealing with multiple problem employees across departments and teams, this can be even more complex and costly.
Alongside the obvious costs of making the wrong hiring decision, there are hidden costs that many employers will forget to think about. It might be more difficult to put a specific figure on these factors, as it might not be quantifiable. While you might not be able to put a price on these factors, they will still have a cost for your company and therefore shouldn’t be ignored.
A bad employee can make work miserable for everyone. It could be that they aren’t pulling their weight and forcing everyone to work harder to pick up the slack. Or perhaps they are a negative influence in the workplace and make it harder for everyone else to deliver their best work.
Staff morale is difficult to put a price on, but it’s important to consider. When morale is high, productivity spikes and staff happiness levels will soar. But a single toxic employee can make it difficult for anyone to enjoy their time at work and might even cause productivity to plummet.
Another hidden cost of hiring the wrong person happens when you allow this person to stick around for too long. Prolonged exposure to this bad employee will damage staff retention in the long term and could lead your best workers to look elsewhere for employment. This is simply because the good workers will lose faith in your ability to lead.
This will hit your organisation in a number of different ways. When you hire a new employee, you expect them to contribute to work output, so when they aren’t pulling their weight, you’ll notice this as a decline in productivity.
This can have a wide reaching impact on other parts of your team. For example, team members tasked with training the individual might find that they have to put in more time and effort towards bringing them up to speed. So this is another member of your team that will also have a decline in productivity.
A toxic employee can also lead to a decline in productivity for the wider team. They might feel frustrated with their negativity and this will impact their work output.
And finally, you’ll also have to direct company resources towards disciplinary procedures, which will result in a further loss in productivity. If this happens at a critical time for your business, this could impact customer experience and lead to lasting damage for your brand.
While some bad employees will recognise where they are going wrong and move on gracefully, others might feel inclined to put up a fight. This means going through the legal process of terminating their employment. It’s not uncommon for ex-employees to then take their grievances to an employment tribunal.
This will cost in terms of legal fees and also in terms of company resources directed towards defending the company. This can also be distressing for other employees, particularly if they are asked to comment in support of the company. After the ordeal of dealing with the toxic employee, facing them in a legal setting could be even more demoralising.
A loss of productivity and decline in output won’t just impact your profits, it could also damage your reputation. Clients and customers might notice the decline in service. And if the wrong hire was in a customer-facing role, there’s a chance customers may have also noticed subpar efforts.
Damage to reputation can be difficult to measure, but just as costly as a loss of productivity. A bad experience with a company can reduce the likelihood that a customer will return. Even relationships with loyal customers could be damaged by a bad hire.
And of course, there’s also the chance that the bad hire will try to do further damage to your reputation by talking about their experience online or to others in your industry. This can be distressing for remaining employees, particularly if their names are mentioned in this context. It’s important to know your legal position and steps you can take to protect your employees if this happens. But again, this is another associated cost.
Line managers in particular will feel the impact of a bad hire. This could lead to unnecessary stress levels that will make it hard for them to carry out their roles effectively.
In extreme cases, these managers might have to take time off work with stress. If they are signed off work with a doctor’s note, you’ll need to implement a return to work plan to ensure the same issues don’t arise again.
The human cost of a bad hire can be seen in lost sleep, loss of confidence and decreased productivity. It could also lead these managers to look for work elsewhere if the problem isn’t dealt with promptly.
Not only will you have wasted money on recruitment costs, onboarding and initial salary, but you’ll also have to pay to repeat the process. Restarting the recruitment engine can be costly, particularly if you don’t hire new employees very often.
What’s important is that you learn from your mistakes with your first bad hire and implement steps to ensure you don’t miss the same red flags again. This could mean taking longer to get to know the candidate, or carrying out more thorough reference checks to uncover any potential problems.
It’s important to not become jaded by the recruitment process. A bad hire can lead to a lack of trust, but it’s important to remember that not all candidates are lying in the interview process. Approaching the interview process with an assumption that you have to catch the candidate in a lie will result in an uncomfortable interview process.
What looks like a red flag might just be a simple case of nerves. By taking candidates through multiple stages and not rushing the decision, you’ll be able to get to know each candidate and feel more confident in your decision.
It’s also possible to implement a longer probationary period to protect your company against bad hires. A strong onboarding procedure will also help you to quickly determine if the candidate has what it takes to succeed in the role.
After comprehensive training, the candidate should be able to stand on their own two feet, so it will quickly become obvious if the candidate is struggling.
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