How much does bad recruitment cost?

A successful hire can help a company thrive by adding essential talent to its team. However, a bad hire can lead to significant costs, both financial and human. These costs can have profound consequences on a company’s financial health, productivity, and culture. We will explore in detail the costs of a bad hire in Belgium, taking into account different aspects of the recruitment process and its short- and long-term impacts.

What is a bad hire ?

A hire is considered a failure when the employee hired for a position leaves the company within 12 months of their arrival.

Indeed, the departure of an employee within the first year after their integration may reveal several issues during the hiring and onboarding process:

• Poor assessment of the candidate’s skills
• Misjudgment of the candidate’s fit with the company culture
• A mismatch with the proposed position
• Poor onboarding
• Misalignment between the company and the candidate
• Poor work environment

a. Recruitment Process Before Hiring

The recruitment process in Belgium is often expensive. It includes:

• The cost of job platforms (LinkedIn, Indeed, etc.) or recruitment agencies

• The drafting and posting of job advertisements

• Internal staff time spent sorting applications, conducting interviews, and the time and resources required to verify candidates’ references.

The average cost of a recruitment process in Belgium ranges from €3,000 to €8,000, depending on the complexity of the position and the recruitment method used.

When a recruitment is deemed a failure, these costs should be considered a total loss, as the company will have to repeat the entire process to find a new candidate. Additionally, companies using recruitment agencies or headhunters may face even higher costs, as they often pay substantial fees, sometimes based on a percentage of the new employee’s annual salary.

b. Training and Integration After Hiring

Once an employee is recruited, the company invests in their training and integration. In Belgium, companies spend an average of €4,500 per new hire on training, onboarding, and integration. These costs include training programs, time spent by colleagues or supervisors to train the newcomer, and any tools or resources needed to facilitate their integration.

If the recruitment is a failure and the employee leaves the company shortly after being hired, these costs are lost. Worse yet, the company will need to invest again in training and integrating a replacement, further increasing the overall cost for the company.

c. Termination of the Employment Contract

In Belgium, labor laws strictly regulate employment contracts, and terminating a contract can result in significant costs for employers. If the company decides to terminate the contract, it may face severance payments, legal fees, or costs related to mediation. The amount of these payments depends on the type of contract, the employee’s length of service, and the specific circumstances of the departure.

In Belgium, these costs can be particularly high due to the strong protections employees enjoy. The amount of severance can represent several months’ salary, depending on the circumstances of the dismissal, which can quickly add up, especially for high-responsibility or highly paid positions.

Beyond severance, the notice period can also represent a cost of several months’ salary with reduced productivity.

The cost can be estimated between €3,000 and €10,000 for contract termination, severance pay, or notice period and exit package.

This cost is not directly quantifiable, and it varies depending on the time other employees are involved.

a. Loss of Productivity

A bad hire can lead to a decrease in team productivity. An incompetent or poorly suited employee may require intensive supervision from colleagues or supervisors, diverting them from their own tasks. Additionally, if the employee is not performing well, projects may be delayed, the quality of work may decline, and the company may miss out on business opportunities.

b. Impact on the Team

A bad hire can also affect team dynamics. A poorly integrated or incompetent employee can create tensions within the team, lower other employees’ motivation, and increase work-related stress. These factors can, in turn, lead to decreased collaboration, increased absenteeism, demotivation, and even the loss of key talent who choose to leave the company due to a deteriorated work environment.

Company culture is an important factor to consider when recruiting. A new employee who does not fit into this culture can create an imbalance within the teams.

This cost is not directly quantifiable and varies depending on the position of the new employee and the impact of their work.

a. Loss of Growth Opportunities

A bad hire can prevent a company from seizing growth opportunities. If a key position is filled by an incompetent or underperforming individual, the company may miss opportunities to close deals, develop new products, or improve internal processes. This can have a direct impact on the company’s long-term growth and profitability.

b. Brand Image and Reputation

A company’s brand image can also suffer in the case of a bad hire. If an incompetent or poorly suited employee is in direct contact with clients or business partners, it can damage the company’s reputation. Mistakes, delays, or inappropriate behavior can lead to a loss of trust from clients and partners, which in turn can affect sales and long-term business relationships.

Moreover, firing a new employee increases a company’s turnover rate, which is detrimental to its image, both internally and externally.

a. Improving the Recruitment Process

To minimize the risk of bad hires, it is essential to improve the recruitment process. This includes:

• A clear definition of the position’s requirements

• A rigorous evaluation of candidates’ skills, and the use of appropriate selection methods. Companies can benefit from the expertise of specialized recruitment agencies and/​or more specialized recruitment platforms.

• The use of psychometric tests, skills assessments, and job simulations can also help better evaluate candidates’ suitability for the position. Cebir offers reliable and comprehensive solutions for candidate evaluation.

• Involving several team members in the selection process can provide a more comprehensive view and reduce the risk of errors.

b. Investing in Integration and Continuous Training

Integration and continuous training are crucial elements to ensure the success of a hire. It’s not enough to hire the right candidate; you must also help them integrate effectively and develop their skills. For optimal integration and onboarding:

• Create the new employee’s schedule for their first weeks

• Organize meetings with the teams

• Present the company’s internal workings in detail

• Provide a structured training schedule with set goals.

It is important to assess and support the employee after their arrival and throughout their experience in the company. To achieve this, we also offer services that provide internal psychometric tests, improve team management, and enhance talent retention. 

c. Work Contract Flexibility

Another approach to minimizing the risks of bad hires is to adopt more flexible employment contracts. In Belgium, fixed-term contracts, trial periods, and temporary contracts can provide companies with some flexibility to test a candidate’s skills and adaptability before committing long-term.

These contracts help limit costs in the event of a bad hire, as they facilitate contract termination if the employee does not meet expectations. However, it is important to use these contracts ethically and in compliance with Belgian legislation to avoid disputes and maintain a good employer reputation.

The cost of a bad hire includes not only direct financial costs but also costs related to productivity, missed opportunities, reputation, and employee well-being. To recap, the termination of a contract within the first 12 months of an employee’s tenure is considered a bad hire.

As for the direct cost of a bad hire, solely in the recruitment process, we find:

• Between €3,000 and €8,000 for the initial recruitment process

• An average of €4,500 for training, onboarding, and integration

• Between €3,000 and €10,000 for all contract termination costs

This totals a minimum of €10,500. Note that these costs double when searching for a new candidate to make up for a bad hire.
 

Example of the direct cost of a bad hire

An employee with a monthly salary of €3,500 (the employer cost is approximately €4,800 per month). The contract is terminated after 12 months.

(4,800 x 12) + ((3,000 + 4,500 + 3,000)) = 57,600 + 10,500 = €68,100

In conclusion, for an employee with a monthly salary of €3,500 and who stays only 12 months, the minimum direct cost will be €68,100.

To minimize these costs, it is essential for Belgian companies to invest in a rigorous recruitment process, improve new employee integration, and adopt human resource management practices that promote talent retention and job satisfaction.

In conclusion, a bad hire can have financial and human consequences for the company. By taking the necessary steps to avoid these mistakes, companies can not only reduce their costs but also build stronger, more motivated teams better equipped to tackle future challenges.