Many businesses, especially larger businesses, experience employee turnover or a regular basis. Employees may resign, retire, or even be laid off or let go at any time during the year. While some employees may not need to be replaced, others will need a replacement hired immediately to fill their shoes and pick up the work where the ex-employee left off. While it may seem like the best idea is to quickly hire a new person to replace the ex-employee with a seemingly qualified candidate, being too hasty in making this decision may end up costing the company more than the replacement is worth.
Businesses operate on a profit and loss standard. The loss of an employee is both a loss and potential profit for the company. The loss is that work may not be getting completed in a timely manner. However, the company is now saving the former employee’s salary until a replacement is found. This savings can be used to supply overtime pay to other employees to help complete the excess work, while still leaving some extra profit in the bank account. In the meantime, the replacement employee may be hired at a lower wage than the ex-employee, leaving more room for profit for the company.
However, as wonderful as that may sound, it is important to determine the cost of on-boarding a new employee. First, you must advertise that the position is open. This can cost anywhere from $50 to several hundreds of dollars. Then, you must interview candidates, which may take time away from billable and profitable work. Then, you must train the employee. Hopefully, the candidate you choose is experienced and requires little training. According to SHRM in 2016, the average cost of on-boarding a new hire can be around $4,129. This is typically greater than two weeks’ salary for most new employees.
Assuming the average cost of on-boarding is just over $4,000 per new hire, imagine the financial loss associated with a poor hiring decision. Each new hire will cost an addition $4,000. Therefore, each time the same position needs to be replaced, you will spend another $4,000 to hire that new employee, whether the employee works one week or thirty years.
Another issue with a bad hiring decision can be damage to your company’s reputation. Without doing proper due diligence on the new employee, you are risking hiring a criminal, thief, or litigious person who has been known to bring litigation against every company in which he or she has ever been employed. This nefarious individual may cost you clients due to poor work quality or theft of information; profits due to theft of goods; or your good name due to a frivolous, yet damaging, lawsuit.
Loss of Productivity
Along with the financial and reputational loss associated with a poor hiring decision, productivity may slow to a detrimental level. A poor hire can bring down company morale and make other employees less willing to carry the slack for the new person. As productivity decreases, profits will soon follow.
While some of these concepts may be a bit extreme and the rarity as opposed to the norm, they can occur in any work environment when the process of hiring new employees is rushed and care is not taken to conduct proper due diligence and on-boarding services. If you are looking to hire new employees, speak with the experts at Fusion Employer Services at (609) 896-5900. Their qualified expert human resources personnel can help you streamline the hiring process and make sound hiring decisions.[/fusion_text]