The True Cost of a Bad Hire: How to Calculate It and Reduce the Risk

Ask Google (or ChatGPT) what the cost of a bad hire is and you’ll find plenty of answers. Usually some kind of simple equation like a percentage of salary or a multiple of annual compensation.

But real hiring mistakes rarely work that way—and their costs are rarely that straightforward. An employee who leaves after six weeks creates a very different cost than a senior hire who spends nine months missing targets. That’s why a useful bad-hire calculation has to get a lot more specific.

For this guide, a bad hire means a hiring outcome where an employee doesn’t deliver the value expected. The cost can include the money spent recruiting and onboarding that employee, lost output, extra manager and team time, rework, exit expenses, another search, an open position, and the time a replacement needs to get up to speed.

Ready to see what a bad hire could cost you? Lever’s Cost of a Bad Hire Calculator does the math for you—using your own inputs—and shows where the measurable costs add up.

Key Takeaways

• There’s no universal cost of a bad hire.
• Recruiting is only part of the bill. Rework, vacancies, and replacement ramp-up keep adding costs after the employee leaves.
• Better hiring starts with better evidence. Role criteria and skills validation give teams more to base a decision on.

How Much Does a Bad Hire Cost?

The bad news: There’s no magic dollar amount or salary percentage that works for every hire.

To truly calculate what a bad hire costs you, you have to get into the nitty gritty.

Start with the role itself. Losing an employee after a few weeks may mean eating recruiting and onboarding costs, but the employee had little time to affect projects or customers. Keep an underperforming manager in place for a year and the expense keeps growing.

The hiring process matters too. A difficult search with agency fees and paid sourcing comes with a bigger recruiting investment than a role filled quickly from an existing candidate pool.

Here’s a quick look at all of the factors you’ll want to consider:

Two companies can make the same hiring mistake and end up with very different totals. Your own recruiting process, compensation, and role requirements will tell you more than a generic benchmark.

How to Calculate the Cost of a Bad Hire

Start with the easy stuff. Some costs, like recruiting spend or severance, may already have a dollar amount attached. Others take a little math. Think about how many hours recruiters, hiring managers, and interviewers spent on the hire and what that time roughly cost (estimated using hours and compensation).

For example, say you spent $1,500 on recruiting, 20 recruiter hours at $50 per hour, eight hiring manager hours at $75 per hour, and $500 on onboarding. That’s $3,600. All before considering performance issues or extra management time.

Remember: Those harder-to-measure costs still matter, but don’t force them into the total with an arbitrary percentage. A smaller estimate built from credible inputs is more useful than a bigger number that’s inflated by guesses. If you can’t truly price something, keep it outside the dollar total.

Lever’s Cost of a Bad Hire Calculator walks through the measurable pieces using your own hiring inputs.

What Counts as a Cost of a Bad Hire?

This is money and time you can trace back to the hire, which includes expenses like:

• Job advertising
• Paid sourcing
• Recruiter time
• Hiring-manager interviews
• Assessments
• Background checks
• Onboarding
• Training
• Equipment

Then there’s what happened while the person was in the role. If you have the data, look at missed goals or work that didn’t get done. Think about things like the extra time a manager or teammate spent stepping in to fix mistakes or get a key project back on track. Not all of that will come with a neat price tag, but if you can reasonably put a number to it, include it.

And if the hire ultimately doesn’t work out, the costs keep adding up. Depending on the situation, that might include severance or other exit costs followed by recruiting and training a replacement. At that point, you’ve paid for parts of the hiring process twice.

Should You Count the Bad Hire’s Entire Salary?

Salary paid to an unsuccessful hire isn’t automatically the same as money lost. An employee may deliver useful work even if performance falls short. The better question is how much value the company expected from the role compared with what it received.

For jobs with clear performance measures, estimate the difference using actual output. Think: a salesperson’s quota or measurable project delivery. Other jobs won’t give you such an obvious number. Treat the performance loss as an estimate in those cases.

Calling every dollar of salary a loss makes the final number bigger. But it doesn’t necessarily make it more accurate.

What Are the Hidden Costs of a Bad Hire?

The easiest costs to calculate are the ones that are closest to the hiring process. But the effects reach further than that. These are some of the costs that aren’t always visible or easy to measure.

Additional Manager Time

An employee who needs more help than expected turns one person’s performance problem into a manager’s time problem. More coaching. More check-ins. More review. Those hours have an opportunity cost. Time spent repeatedly intervening with one employee can’t go toward planning, developing the rest of the team, or whatever else the manager would have been doing that day.

Lost Team Productivity

If one employee misses deadlines or submits work that needs to be redone, those responsibilities have to land somewhere. A coworker fixes the error or a teammate stays late to finish the deliverable. Now the cost is more than the original employee’s output. You’re paying other people to compensate for it.

Project or Service Delays

A salesperson who misses opportunities affects revenue. A customer-facing employee can create service problems. A manager can hold up decisions for an entire team. These costs are real, but sometimes assigning a dollar amount is difficult. The safest approach is to quantify what you can. Don’t make up a percentage.

Employee Morale and Retention

Extra work is harder to dismiss when the same people keep absorbing it. Good employees may have to cover responsibilities outside their own roles, which adds to their workload. If the situation continues, frustration and burnout turn into retention concerns. And you may just find yourself paying to replace high-performing team members as a result.

Customer and Business Impact

Missed support follow-ups can damage an account. Errors lead to refunds or escalations. Other roles affect customers indirectly with product quality or delivery speed. Look for outcomes you can connect to the role like churn or project delays.

Why the Cost of a Bad Hire Can Continue After They Leave

Okay, the employee has left. But the costs to your business don’t exactly walk out the door with them.

Now the company has an empty role or work that needs to be redistributed. Recruiters and hiring managers spend more time sourcing and choosing another candidate. Then the replacement needs time to settle into their new role.

Basically, you’re starting the hiring clock all over again. And if the bad hire was a leader or executive? The costs increase even more. Their departure may leave a team without direction or force other leaders to step in while the company searches for a replacement. If employees have already lost confidence in leadership, rebuilding that trust can take time too.

On top of all that, the original hiring mistake starts a second hiring cycle. Counting the recruiting expense for the first employee and stopping at their last day means you’ll miss months of additional costs.

Why Do Bad Hires Happen?

Bad hires can rarely be traced back to one bad interview question or one recruiter making the wrong call. However, your odds of making the right hire start with the people you have to choose from. If candidate quality is low, bad hires spike. But finding qualified candidates isn’t exactly a walk in the park. Even with a strong candidate pool, there are plenty of places for a hiring decision to go sideways.

Maybe the role is too loosely defined and your pipeline is getting bombarded with unqualified applicants. Or pressure to fill the position pushes the process along too quickly, and people make rushed decisions.

And sometimes, it’s a mismatch between how the job was described and what it actually ended up being. Spoiler: That’s also a top reason why workers leave a role within the first 90 days.

Ultimately, bad hiring decisions happen when teams don't have enough useful information to determine if someone can do that particular job—and do it well. And without the right tools and systems in place, companies will keep running into that problem. Over and over again.

How AI Makes Polished Applications Easier to Create

Generative AI adds another wrinkle to an already complicated situation. Because now candidates can apply to more roles faster, which leaves recruiters sorting through a bigger pool to find their needle in a haystack. In other words: Today, it’s harder than ever to find the people who are genuinely a fit.

Candidates can use AI to tailor resumes and improve application answers. A polished application still tells you something about the candidate, but you don’t know what’s really them and what’s AI regurgitating what you wrote in the job description.

The solution? You need other ways to gather more role-relevant signals, because asking recruiters to make decisions from applications alone will lead to more bad hires. The resume still has a job to do. It just can’t be the answer to every question.

How to Reduce the Risk of a Bad Hire

No hiring process can guarantee that every employee will work out. But you can push the odds back in your favor. Here’s how.

Clearly Define the Role

Decide what someone needs to do well in the job before the first candidate is sitting in front of you. Get specific about skills, experience, and expected outcomes. Use those criteria as candidates move through the process.

Otherwise, recruiters and hiring teams can end up comparing candidates based on whatever stood out in each conversation. If everyone works from the same definition, it’s more likely that hires will improve.

That’s the idea behind Lever’s Talent Fit, too. Teams can quickly see top-matched candidates based on a defined set of criteria for the role, with clear justification for each match.

Look Further Than the Resume

A resume can show where someone worked, but it doesn’t tell you what they can really do. For instance, candidates with nontraditional career paths may have other relevant skills that carry over. Screening capabilities help recruiters evaluate if candidates have the skills the role requires, giving them more information to decide who should continue. AI Screening by VONQ, built into Lever, uses structured chat and voice conversations to gather role-relevant information from applicants. Recruiters receive summaries and explainable scoring. Then they decide who moves forward.

Structure the Interview Process

Interviews work better when everyone is clear on what they’re evaluating and uses the same criteria to assess each candidate. Decide what you need to learn before the interview, then build questions around specific skills and situations. For a software engineer, for example, that might mean asking candidates to walk through an example of a technical decision and the implication.

Give interviewers a consistent way to record what they heard, too. A structured rubric or scorecard keeps feedback tied to the criteria you defined for the role instead of just relying on a gut feeling. Bonus: It also makes it easier to compare candidates.

Validate Skills

If a skill matters on the job, give candidates a chance to demonstrate it. Work samples are useful for a reason: the candidate does work that resembles what the job requires. Lever’s marketplace includes assessment providers that hiring teams can bring into the recruiting workflow, including tools for role-specific, technical, cognitive, behavioral, and other skills assessments.

Use Multiple Indicators

Every hiring method has blind spots. That’s why you need to look at resumes, interviews, and your own data. Look at employees who have performed well and stayed with the company. Were there skills or experiences they had in common? Then, analyze early turnover or hires that didn’t work out. Search for patterns there too.

The goal is to use what you learn to keep refining the criteria and questions your team relies on. Using what happens after the hire to improve what you look for in the next one.

FAQs About the Cost of a Bad Hire

How Much Does a Bad Hire Cost a Company?

There’s no universal amount that captures the impact of a bad hire. A useful estimate should use your organization’s costs wherever possible. Start with recruiting, onboarding, training, measurable performance losses, additional employee time, exit expenses, the replacement search, and the time it takes the replacement to ramp up.

How Do You Calculate the Cost of a Bad Hire?

Add up the costs you can connect to the unsuccessful hire. Use spend and time data where you have it. Treat harder-to-measure effects as estimates and make the assumptions clear. Lever’s Cost of a Bad Hire Calculator lets you plug in your own hiring inputs to determine your total costs.

What Are the Hidden Costs of a Bad Hire?

Managers spend additional time coaching and monitoring performance. Coworkers redo work or take over responsibilities. These costs are harder to calculate because every situation is different. They could impact the course of a project or even the business as a whole. Separate the costs you can confidently price from the business effects you can document.

Should Salary Be Included in the Cost of Replacing a Bad Hire?

Salary can be part of the calculation, but counting every dollar paid as a loss may overstate the cost. If you have meaningful role-specific performance data, compare expected output with actual output to estimate the shortfall. If you don’t have a credible way to measure that difference, treat the performance cost as an estimate.

Can a Bad Hire Still Cost Money After They Leave?

Yes. The employee’s departure may create a vacancy, force other employees to pick up the work, and start another recruiting process. Recruiters and hiring managers spend time finding and interviewing a replacement. The new employee then needs time to reach expected productivity.

How Can Companies Reduce the Risk of Bad Hires?

Give hiring teams better evidence to help them make decisions. Define the criteria that matter for the role and use multiple indicators to get relevant information. No individual assessment can tell you everything about a candidate. Different parts of the hiring process answer different questions.

Can AI Help Reduce Bad Hires?

Yes. For example, AI Screening by VONQ uses structured chat and voice conversations to collect more information from applicants and help recruiters sort through it. The recruiter still decides which candidates fit.

How Can Skills Assessments Help Improve Hiring Decisions?

Skills assessments give candidates a chance to show what they can do. An additional work sample that matches the job is valuable too. It tells you more than asking someone to describe their skills in an interview.

See how Lever helps teams make better hiring decisions. Request a demo.