The ASTONISHING Financial Implications of a POOR HIRING Decision (5 Essential Factors)

​In the inaugural article of our blog series exploring the costs associated with a bad hire, let's delve into the contractual terms typically affecting employees. I'll cover their detrimental impact on businesses when an individual departs within the initial year of employment.

This matter requires little explanation; however, we must consider the weeks, months, or even the entire year during which the ill-suited hire remained with the company. With them often displaying above-average levels of sickness and other absences. Moreover, additional expenses can accumulate in relation to severance packages, HMRC contributions, bonuses, and benefits. Naturally, the financial burden escalates as the departing candidate's position becomes more senior within the organisation.

The following outlines the potential costs typically incurred based on the contractual terms applied to an average employee:

• Median Salary for Leadership Roles (UK): £71,850.73. The initial and potentially most substantial irretrievable expense lies in the total salary the hire received from the business throughout their tenure. The salary encompasses the overall earnings before any deductions, potentially encompassing overtime payments, bonuses, shift differentials, holiday pay, and more.

• Employer National Insurance Contributions: 13.8%. The subsequent consideration pertains to the costs incurred by employers through National Insurance contributions, which stand at 13.8% of employees' earnings and benefits.

• Minimum Employer Pension Contributions: 3%. Thirdly, we address Employer Pension contributions. Employers are obligated to make minimum contributions of 3% into an employee's pension scheme, although larger or high-performing companies often exceed this threshold.

  • To simplify the calculations, feel free to utilise our complimentary bad hire calculator available here What is the true cost of a bad hire?

• Severance Package and Redundancy. Statutory redundancy payments depend on the terms outlined in an employee's contract, their length of service, and the grounds for dismissal. These payments can sometimes surpass the total salary and may include severance pay, redundancy benefits, and additional employee allowances like bonuses and benefits.

• Notice Period and Garden Leave. During the notice period, an employer may place an employee on garden leave, thereby restricting their work activities either partially or entirely. This measure is often employed to prevent the departing employee from accessing sensitive or confidential information that could be utilised in a new position.

The financial implications surrounding irrecoverable salary costs involve numerous considerations. While it is impossible to guarantee a candidate's long-term commitment to your business, you can adopt measures to mitigate this risk.

Alternatively, if you wish to explore how Tech Heads can assist you in saving both time and money throughout your recruitment process, please click here for a no-obligation discussion.