Because workforce turnover affects your entire organization, the true cost of replacing an employee is a combination of many direct and indirect costs, including staff and management time:
- Recruitment advertising and services
- Screening and interviewing
- Background checks and drug testing
- Training costs
- Equipment, supplies and uniforms
- Administrative burden of on-boarding a new employee
- Overtime pay for other workers
- Unemployment insurance increase
- Lost productivity due to…
- Other potential costs…
- Empty position
- Co-workers covering for missing employee
- Decrease in employee morale
- Training a new employee
- Employee taking time to get up to speed
- Customer complaints
- Loss of competitive information and trade secrets
- Negative word-of-mouth PR in the community about your company
Because replacing a bad hire can cost the organization anywhere from 1x to 5x that person’s annual salary, prudent companies take their time in finding a candidate that fits. In addition to exercising patience when searching for the right candidate, more and more organizations are implementing an introductory “assessment” period for each new hire. In fact, many staffing companies offer a “temporary-to-hire” service, which allows the employer—and the candidate—to “test drive” each other for three or four months before making a longer commitment.
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