Recruitment and HR

UK SMEs wasting over £125k on failed recruitment

24 Oct 2019

It will come as no surprise that “people problems” are causing sleepless nights for business leaders across the UK.

Attracting and retaining talent is one of HR’s biggest challenges in 2019, and companies are finding that what they believe are robust recruitment strategies simply aren’t producing the results.

According to recent research, 39% of employees are leaving within six months and SMEs are wasting an average of £125,347 a year on failed recruitment.

When the process of recruiting can involve a phone interview with a recruitment consultant, one or more interviews, and tests or tasks, that’s a lot of time and energy to secure a hire that may not last half a year.

The research, by talent acquisition technology provider Oleeo, also revealed that businesses employing up to 250 people lose 14% of their staff each year.

Speaking about the findings, Oleeo’s CEO and founder Charles Hipps explained that businesses often don’t pay enough attention to the “hidden factors, such as staff churn, time taken for new recruits to start performing, or an organisation’s effectiveness at attracting talent that both stays and performs.”

In short, senior leaders need to put morale and productivity impacts ahead of monetary losses.

But if we were to put a figure on it, what is the cost of a bad hire? Estimates can vary hugely.

While he was CEO at Zappos, Tony Hsieh famously said that bad hires had cost the company over $100 million (about £770,000). A more cautious estimate from the Institute for Personnel and Development put the figure at between £8,200 and £12,000.

Research by the Recruitment & Employment Confederation (REC) suggests that the price of a poor hire at mid-manager level (average salary of £42,000) costs more than £132,000. This figure takes into account the related cost of training, replacement, loss of productivity and the impact on the wider team.

Hipps has done his own calculations. Based on the data, the average cost per hire (based on a £25,000 per annum role) is £9,183. In an SME employing 250 people, he explains, which is losing 14% of its staff each year and 39% of its new recruits are leaving within six months, £125,347 is being wasted on failed recruitment each year.

Is it any wonder businesses feel immense pressure to get it right?

Finding the right talent is a major challenge for UK businesses. 47% of those questioned in Oleeo’s research expect to lose more than a tenth of their workforce in any given year. 14% expect new hires to leave within just 30 days, and 72% feel that competition for the top talent is greater or the same as it was three years ago. Meanwhile, 94% have a problem with people pulling out of the process after accepting an offer.

The truth is that the cost of a bad hire is so much more than just financial. Businesses need to consider how it has affected the team. Remember that a position was being hired for a reason, so work out whether the failed hire has put the team under pressure. And determine how the wrong character fit affected staff morale across the business.

If you want to hire right, first time, get in touch with Stopgap. We can help you take back control of the recruitment process, finding the right people who fit with your business. Speak to the team today to find out more or brief us on a role today below. 

£125,347 is being wasted on failed recruitment each year.
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