by Resourcing People

The true cost of a bad hire depends on a number of things, including salary, location, recruitment costs and training hours. It can be difficult to give one simple calculation for the cost of a bad hire, despite there being numerous bad hire “calculators” available following a quick Google search.

Building a skilled and reputable tech team isn’t a straightforward task. In some instances, it can be painful and take months to find the right candidate for your organisation. 

However, with the war for talent increasing, and a number of organisations struggling to fill skill gaps in their teams, hiring managers may run the risk of making a ‘bad hire’, which could be more costly than just the impact it has on your bottom line.

Here we outline what the cost of a bad hire could look like for your organisation. 

Don’t be put off by tech talent who want to be paid more, it can pay off!

Take note: tech salaries are increasing, fact. With the rise in demand for technology talent continuing in 2021, salaries are also increasing - for example, a mid-level software developer would currently expect to receive salary offers of around €70,000, with ranges varying across an array of skill sets and roles.

Candidates are currently driving the market, so failing to meet a candidate’s salary expectations may mean that you’re left with unfilled roles and the skill gaps are still present in your team. You may also miss out on the candidate altogether which can be a disaster for some organisations who are rapidly growing and need more fantastic talent. You need to stay up-to-date with where the market is moving and what your potential candidates will be searching for.

Time is of the essence

Although it’s not advisable to only choose a candidate based on who is available the soonest, it’s worth keeping in mind that if your recruitment process is too long, you could be losing the best talent.

The demand for developers is at an all time high. If you are taking days to get back to candidates with feedback, or weeks to make a decision about the next stage, it’s likely they’ll find a new role during this timeframe.

However, the key here could be to widen your search to freelancer and contractor opportunities, and aim to then progress to permanent or full-time roles at a later stage. This way, you’ll be able to place and tap into fantastic talent, whilst building relationships and hit the requirements - fast.

Location matters

The specific cost of a bad hire, as previously discussed, varies on salary, seniority, training and so on - and one of the main costs to be taken into consideration is the location.

In terms of lost productivity when hiring the wrong candidate, there are some statistics on what this means in different EU countries. For example, businesses in Germany that were surveyed stated that bad hiring led to a 25% productivity decrease. In the UK the productivity decrease was 23%, and in France it was 15%.

If bad hiring in Germany leads to a 25% productivity decrease, this could cost organisations thousands, if not millions of euros over time. Technology teams often drive turnover for many startups and scale-ups, and if a select few employees end up doing all of the critical work, they will eventually reach burnout and look for a job elsewhere. 

The same can be said for those not being offered remote or flexible working - if you aren’t prioritising your employees’ wellbeing, burnout could lead to a decrease in staff retention. Whilst employees may not necessarily need to be physically present in the office, it’s equally important to place employee wellbeing at the top of the agenda, whilst widening your talent pool through remote working opportunities.

How to ensure you hire the right people

Improving your recruitment processes will result in making the right hires every time, and as a result saving you money both in the short and long term. However, money isn’t always the main concern; candidates want to work for an organisation they are invested in. Ask yourself:

  • How are we positioning ourselves as an employer of choice?
  • What are we doing to prioritise our employees’ mental health?
  • How can we streamline our recruitment process so we don’t miss out on the best candidates?

If you don’t know where to start, talk to us. We can tell you what your competitors are paying and what the current market rates are, to ensure your business isn’t falling behind and losing candidates.

Look out for the next blog from Resourcing People where we will be discussing how you can avoid the unnecessary costs of bad hires.