Hiring economics
The Real Cost of a Bad Hire (and How to Calculate Yours)
Ask a CFO what a bad hire costs and you'll usually hear the recruiter's fee. Ask anyone who has actually lived through one and you'll hear about the quarter that disappeared. The honest number sits between 1.5× and 2× the role's annual salary — and for senior and revenue-carrying roles, it climbs higher still.
Where the money actually goes
The visible costs are the small part. A realistic ledger for a $90,000 hire that fails at month five looks like this:
| Cost line | Typical range | Example ($90k role) |
|---|---|---|
| Salary & benefits paid out | 5–6 months fully loaded | $48,000 |
| Recruitment fee (often 20–25%) | $0–25% of salary | $18,000 |
| Onboarding & training time | 2–4 weeks of team capacity | $6,000 |
| Lost output vs a good hire | 30–60% of expected output | $22,000 |
| Re-running the search (vacancy round 2) | 6–12 weeks of vacancy cost | $20,000+ |
That's ~$114,000 on a $90,000 role — before counting the costs that never make a spreadsheet: deals that slipped, features that shipped late, and the manager hours consumed by performance conversations instead of growth.
The quieter twin: cost of vacancy
A bad hire's underrated sibling is the seat that stays empty. Cost-of-vacancy research consistently puts lost output at 1–3× the role's daily salary for every day unfilled. Using a conservative 1.5×, a vacant $90,000 seat leaks roughly $2,600 per week. A six-week "normal" agency timeline quietly costs more than most success fees.
Rule of thumb: weekly cost of vacancy ≈ (annual salary ÷ 52) × 1.5. If your search drags past week four, the vacancy has probably already out-cost the recruiter.
Calculate yours
Drop your real numbers into the calculator — the same one on our pricing page:
How to make bad hires rare
1. Screen for evidence, not interviews-charm
Most mis-hires pass interviews comfortably — that's how they got in. Structured, scored screening (work samples, role-plays, AI video interviews scored against the brief) predicts performance far better than unstructured conversation.
2. Compress the timeline
Long pipelines don't just cost vacancy money — they lose the best candidates, leaving you choosing from whoever's still around at week six. Speed is a quality strategy, not just a cost one.
3. Shift the risk to your recruiter
Pay-on-hire pricing and a replacement guarantee align incentives: the agency only wins when the hire sticks. Our success-based model charges 8–12% only when someone signs, with a 2-month free replacement if it doesn't work out.
The takeaway
Budget conversations about recruitment fees usually optimise the smallest number on the board. The expensive numbers are the vacant weeks and the mis-hire risk — and both are screening and speed problems. Fix those and the fee takes care of itself.
Related reading: how AI screening cuts time-to-hire by 60% and our 2026 offshore salary guide.