UK businesses are failing to hire the right person for two out of five roles despite the significant financial costs of making mistakes, according to a new report from the Recruitment & Employment Confederation (REC).
Perfect match: Making the right hire and the cost of getting it wrong explains the common mistakes employers make, defines the real cost of poor hiring, and offers practical advice to businesses seeking to avoid financial risks at every stage in the hiring process. The report shows:
- 85 per cent of HR decision-makers admit their organisation has made a bad hire, and a third (33 per cent) believe that these mistakes cost their business nothing
- a poor hire at mid-manager level with a salary of £42,000 can cost a business more than £132,000
- the hidden costs involved in bad recruitment include money wasted on training, lost productivity, and increased staff turnover
- four in ten employers (39 per cent) admit that the interviewing and assessment skills of their staff should be improved.
Perfect match: Making the right hire and the cost of getting it wrong contains a step-by-step guide to calculating the price of a bad hire, enabling employers to take an informed and measurable approach to investing in recruitment.
REC chief executive Kevin Green says:
“Getting recruitment right is even more important during a time of economic uncertainty because businesses need to ensure they’re not wasting money. Our calculations show that UK businesses are wasting billions every year because of the volume of hiring mistakes being made.
“Shockingly, we discovered that employers are completely underestimating the financial impact of getting recruitment wrong, and not learning how to improve.
“This report outlines the hidden costs of making hiring mistakes, and outlines how employers can implement a robust selection process to minimise this risk and improve performance.”
This report has been produced in partnership with global job site, Indeed. Bill Richards, UK Managing Director, Indeed, says:
“Hiring is one of the most important aspects of business growth, but one of the most costly if done wrong. In today’s tight labour market there is a full-blown battle for talent, and employers need help navigating the terrain.
“The good news is that when it comes to connecting candidates to open positions, search engines like Indeed have emerged as a powerful tool for employers. Our mission is to help people find the right job, and the insights raised in this report will help hirers source and retain candidates to meet their business needs.”
Perfect match: Making the right hire and the cost of getting it wrong has been produced by the REC in partnership with Indeed as part of the Good Recruitment Campaign, which is promoting good practice recruitment to UK business in all sectors.
- Perfect match: Making the right hire and the cost of getting it wrong is available free to REC corporate members and Good Recruitment Campaign signatories, or can be purchased online here.
- UK businesses are wasting billions every year because of the volume of hiring mistakes being made. This is based on the following calculation and assumptions:
The number of hires made between Jan-Mar 2017 is 1,864,700 - this accounts for inflow to employment (1,034,000) and job to job flow (830,700, which is 2.6% of the 31.95 million UK workforce). See ONS employment data.
Leadership IQ data shows that more than 40 per cent of hires turn out to be bad hires within 18 months. Forty per cent of 1,864,700 is 745,880.
The number of bad hires made in Q1 2017 (745,880) multiplied by average weekly earnings for full-time employees (£539 per week) is £402,029,320 per week. See ONS salary data.
If each bad hire made in Q1 2017 remained at a business for only one month (4.2 weeks), the total cost in wasted salaries would be £1,688,523,144.
The actual cost to business is likely to be much more when taking into account recruitment costs, loss of productivity, and increased turnover.