The Hidden Costs of Failing to Address Hiring Challenges

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The Hidden Costs of Failing to Address Hiring Challenges

Hidden Costs of Failing to Address Hiring Challenges
HireME19 Jan 2023Share this

Hiring challenges are integral to any recruitment process and must be addressed by recruiters. Failing to recognize these challenges and the inability to find solutions to them can make the company run on losses aggravating its financial condition. The recruiters may feel that although they are putting in their best hiring efforts, something or the other is not working out. This happens because there are hidden costs of failing to address hiring challenges. It is the hidden costs that go unnoticed and are often the root cause of a glitch in recruitment. In this article, we will be discussing the hidden costs of making bad hires and the hidden costs of recruitment. We will also be discussing how we can overcome such challenges.

What are the Hiring Challenges and the Costs of Failing to Address Them?

The Hidden Costs of Making Bad Hires

Expenses on a Bad Hire

A hire recruited hastily without proper checking of background details may turn out to be a bad choice for recruiters. Since there are costs incurred in hiring the employee, letting them leave results in a loss of sales. A bad hiring decision also affects business relationships negatively. According to research, 29% of companies reported that choosing a bad hire cost them an average of over INR 20 lakhs.


A bad hire who is not ready to work as a team, and is not interested in performance alignment results in a loss of productivity and incurs grave costs. Also, the study reveals that a productive employee is twice as productive as the least productive employee. This proves that a bad hire leads to poor productivity which impacts the organization negatively.

Influencing Work Environment

A new and bad hire may increase an employer’s recruiting expenses due to personality clashes with other employees who may decide to terminate their jobs. Particularly, if they are being recruited for a superior position and are unable to boost team morale, this can lead to a loss of productivity hiking expenses. It is estimated that 80% of employee attrition is caused by a bad hire. Thus, a bad hire not only negatively impacts the job offered but also the workplace consisting of the management and other colleagues.

Training Time and Cost

The training meted out to a recruit takes a lot of revenue from the official recruitment budget. This is due to the investment in manpower and resources that are employed in the training process. According to an independent survey conducted by Robert Half, a bad hire can cost 15% to 20% of an employee’s salary. This percentage can escalate depending on the seniority of the role. A bad hire may take up a lot of time in doing the minimum amount of work. In other words, their productivity may take a downward curve. Training such hires often turn into a costly business.

Manager’s Training Time

Bad hires need more attention which is why a manager’s valuable time may be overspent trying to help out such a hire with their performance and productivity levels. A bad hire may cause a ripple effect in an organization with underperformance, decreasing morale and becoming the cause of stress amongst supervisors. On the other hand, in the absence of a wrong hire, a manager may have dedicated their time and efforts to multiple employees to boost overall productivity and performance. According to research, employees take an average of 24 weeks for optimum productivity but the time taken by a bad hire goes beyond limits.

Increased Workload Following Termination

A wrong hiring decision is regretted by every recruiter and this hiring challenge is eliminated to save the company from bearing further losses. However, when a bad hire is eliminated, there is additional pressure on all other employees. Just like a bad hire in a company brings many losses, their termination or the aftermath of eliminating such a hire also has repercussions.

The Hidden Costs of Recruitment

General or Visible Costs of Recruitment

In India, the cost per hire is Rs 25,500 on average. The amount is equal to a monthly salary of an employee. The visible costs of recruitment incurred by an organization are:

  • Candidate sourcing to onboarding costs
  • Job Advertising expenses
  • Fees for third-party recruiting firms that aid in gaining recruits
  • Attending networking events
  • Cost of reviewing candidates
  • Office equipment
  • Relocation costs if an employee relocates to the workplace
  • Cost of online communication tools like Skype, Teams, Meet, etc
  • The salaries paid to team members and extra team members
  • Referral bonuses to employees who bring in more hires
  • Investment in talent management software to manage the recruitment process

The Hidden Costs of Hiring

In addition to the obvious recruitment expenses borne by the business, there are also hidden expenses that frequently go unreported. These expenses are often taxing for enterprises, particularly small and medium ones. These SMEs continue to work hard to cut costs and increase margins, but a variety of factors cause them to suffer further losses.

Here are some of the hidden costs associated with hiring:

Probation Costs

The probation period refers to the time when an employee is new to a job role and their manager closely monitors their progress and tests their skills and capabilities. This period has its expenses. It is reported that the direct costs associated with a new hire are about 30% of their annual salary including the benefits.

Outsourcing Costs

Some organizations take the help of recruitment agencies to hire candidates. This is done to avoid the pitfalls of recruiting a wrong hire. Often, these recruiting agencies are advantageous over the organizations as they have better industry connections, databases, and manpower that will help them hire the perfect candidate for the job. Thus, outsourcing to recruitment agencies is one example of a hidden cost that is incurred by an organization. However, if the new hire turns out to be the right one, the organization will profit in the long run.

How the Hidden Costs of Hiring Challenges may be Overcome?

Management of Bad Hires

To avoid making bad hires, one must first create relevant and uncluttered job descriptions. They must ensure the right leveraging of the entire recruitment process. As a recruiter, you must have a good background check of the candidate and not rush the hiring process. There must be a consistent interview procedure with well-trained interviewers, appropriate employment branding, and adoption of modern hiring methods and analytics to provide insights into the recruitment process and find solutions to the things that need attention.

Recruitment Referrals

Referrals are often a good way to reduce recruitment expenses. Suggestions of good candidates may come through friends, family, colleagues, or other networks. As the internal recruiter is already familiar with the potential of the candidate, it would require less time to evaluate them thereby reducing costs. Setting up some incentives for employees who bring in new candidates often proves beneficial as it motivates them to contribute to the company.

Job Fairs and Conferences

Visiting job fairs to find employees is a cost-effective solution to recruitment challenges. You may choose to attend a live or a virtual job fair and don’t have to invest in a large and pricey stand. You may simply interact with visitors and make sure to bring your business cards to provide them to your new networks. Even attending industry conferences is very advantageous for connecting with potential recruits.

Social Media Platforms

Social media platforms are an ideal way to post about recruitment opportunities. Getting creative with graphics will make viewers stop and glance at the exciting new role. Video-making is even more profitable as it provides a lot of fun to the viewers. Effective imagery and videos will garner more attention and the number of applicants will increase. Using hashtags can also keep the media trending. As using social media is free, it is a very cost-effective way to eliminate hiring challenges.

Planning Your Budget

Planning your budget can often help in the recruitment process. You can take the help of your department head and arrive at effective recruitment solutions. If particular recruitment needs deserve discussion, finding logical solutions is often the best way to approach it. Try understanding the expensive elements of your hiring process and figure out which recruitment channels didn’t work. Devote time, money, and efforts to the things that work or were more fruitful in the past and ignore the rest.

Recruitment Management Software and ATS system

Investing in recruiting management software may seem like a significant upfront expense, but in the long run, it benefits everyone. In reality, such software does not come at a fee. Instead, it is a financial decision that will yield large rewards. An efficient Applicant Tracking System (ATS) can be found in recruitment management software like HireMe. Furthermore, all hiring tasks that formerly required manual intervention are now automated by this software. With talent management software like HireMe, there is simply no danger of double entering of data or duplication of effort. Use HireMe to reap all of the hiring benefits.

Final Thought!

We must first acknowledge the fact that nearly every company has to bear the hidden costs of failing to address hiring challenges. However, with timely intervention, a little thought, and proper action, they can overcome these challenges. While trying to avoid a bad hire, keep in mind that you must evaluate candidates based on both their technical as well as soft skills. Likewise, you must keep all those subtle as well as visible points in due consideration that are mentioned in this article to overcome hiring challenges. Besides, a proper investment like that of a recruitment management software will eliminate a greater part of the hidden costs of recruitment. With the solutions close by, all you need is the right implementation which you can achieve now.

Frequently Asked Questions (FAQs)

What is the cost of a wrong hire?

The costs of a wrong hire are three valuable things, time, effort, and money.

What is the challenge in the hiring process?

The challenges in a hiring process may include dealing with a bad hire and the hidden costs of hiring that go unnoticed.

How do you address hiring challenges?

There are several ways to address hiring challenges like a bad hire and burgeoning costs by going for referrals, networking with potential candidates at job fairs, planning the budget carefully, advertising through social media, and adopting a recruitment management software like HireMe.

What are the four key reasons for ineffective recruitment?

The four key reasons for ineffective recruitment are-

  1. Ignoring the background check of the candidate.
  2. Not equal consideration of technical as well as soft skills.
  3. Rushing through the hiring process
  4. Relying on traditional ways and not optimizing your recruitment processes by adopting recruitment management software.