If you’ve been trying to put a number on the cost of a bad hire, you’ll know there’s no universally agreed formula to reach for.

Almost half of TA professionals say they have limited visibility into the financial impact of a poor fit, according to 2026 research from Hirebrain and UNLEASH. The data tends to sit in three or four different systems, and pulling it together isn't anyone's job.

The recruitment costs on a balance sheet are also only part of the picture. Lower team morale, lost productivity and missed opportunities all carry a cost, but none of them are visible on a spreadsheet.

So how should you calculate the cost of a bad hire to your business? Read on for a simple framework, or use our free cost of a bad hire calculator to work it out the easy way.

In this article

• What's the difference between Cost per Hire and Cost of a Bad Hire?

• The data you need before you start

• Calculating the Cost of a Bad Hire: a simple framework

• A worked example: a £45,000 hire who left at month five

• The case for calculating your Cost of Bad Hire

What's the difference between Cost per Hire and Cost of a Bad Hire?

These two metrics get used interchangeably, but they measure very different things.

Cost per hire is an efficiency metric. It tells you what it costs to fill a role, and you'll need this to work out the cost of a bad hire.

The cost of a bad hire is a loss metric. It tells you what a hiring mistake took out of the business, including what happened after the person started.

Most organisations can produce numbers for a Cost per Hire, but it's harder to calculate the Cost of a Bad Hire.

Did you know? We also have a free Cost per Hire calculator.

The data you need before you start

To calculate the Cost of a Bad Hire, you need four key sets of figures:

1. Recruitment spend, or what you spent filling the role. This includes any agency fees, job advertising, assessment and background-check tooling. You'll want to include the hours interviewers and hiring managers spent screening, interviewing and debriefing, costed at the salaries of the people who spent them. You could also include your ATS subscription's share for one hire. If you already track cost per hire, you'll likely have this.

2. Employment costs, or what you paid that person while they were there. Base pay for the months worked, plus employer National Insurance, pension contributions and benefits. Onboarding is part of it too, and can include equipment, software licences, training, and the manager and buddy time the first few weeks absorb. Ideally, you would subtract the approximate value of the work you got back. If that's too difficult to estimate, you could always take a percentage of what a fully performing hire earns and subtract that.

3. Disruption costs, or what their time in post cost everyone else. Manager hours spent supervising, loss of morale or productivity, colleague hours spent covering work or redoing it. Depending on the role, you may also be able to quantify lost business opportunities (e.g. missed targets, slower shipping, poor customer service delivery, etc.)

4. Replacement costs, or what it cost to fix the mistake. The recruitment cost again, any notice period, any gaps before the replacement reaches productivity again. Occasionally, there are additional HR or legal costs to include.

Some of these figures may be harder to pin down than others. Recruitment spend should be simple enough, but the others often sit across different functions or are difficult to put a number on. A first pass doesn't need to be exact - an estimate with caveats is worth far more than a precise one that never gets finished. Note the assumptions next to any estimated figures so those reading can see how you got there, and it can always be tightened in further iterations.

💡 Tip: to work out your interviewers' hourly rates, divide their annual salary by 52, add 15-20% for employer contributions and divide by their weekly working hours (e.g. 35). You'll then multiply this by your organisation's average interview times. You can also use approximate or loaded rates, like we've done in our example.

Calculating the Cost of a Bad Hire: a simple framework

Once you have your figures, the calculation is simple:

(Recruitment + employment + disruption + replacement) - value of any work delivered

If you're calculating for multiple roles, you could add these up and divide it by the number of bad hires in that period, or just use averages.

Of course, there is one element that's missing: you have to define what constitutes a bad hire. Is it someone who left or was exited within twelve months? A candidate who pulled out right before starting? Will you mark by performance KPIs instead? The definition should work as long as it is consistent.

Whether you calculate by role or by average will depend on what you're using the figure for. The individual one may shed light on specific roles or teams, while the average will be essential for budgeting, broad reporting, and showing whether process changes are making a difference.

💡 Did you know? A bad hire will almost certainly impact team productivity. Research from business consultancy Robert Half found that bad hires resulted in 15 wasted hours of productivity per week due to performance issues. Compounding this, 56% of hiring managers reported that a bad hire led to turnover on their team.

A worked example: a £45,000 hire who left at month five

Now we know the figures we're looking for, we can try an example in practice. The figures below are illustrative, and assume a role was filled directly (without agency fees). If your role did use an agency, add 15-20% of the salary to both the recruitment and replacement lines (depending on the agency contract, as some cover replacements within a certain amount of time).

In this case, the cost of a bad hire was £33,610, or around 75% of the role's annual salary, for someone who was in the business for under half a year - and this is without agency costs.

Everything in the table is an estimate. If the blended hourly rate moves by £5, for example, the total amount shifts by £1,500. The 300 hours assume a disruption that ran for 20 of the 22 weeks they were employed, excluding the fortnight of onboarding (which falls within employment costs). Still, even if there is a margin of error within some of the numbers, it helps to show how much these problems are costing if they scale.

If you make 40 hires a year and one in ten goes wrong at roughly this scale, that costs around £134,000 to the business (again, without agency fees). If the role's salary is £100,000, the cost climbs to around £62,000 for the individual hire, or £250,000 for four bad hires per year - and again, that's without agency costs. Is that something that the company can afford?

The case for calculating your Cost of Bad Hire

Calculating the Cost of a Bad Hire can feel overwhelming before you start. But it's worth doing anyway, because it translates your hiring performance into language the rest of the business makes decisions in. Finance teams and hiring managers don't always know how to interpret a Quality of Hire score. A bottom line number - especially if it's a cost to the business - is much easier to grasp and act on.

For a lot of organisations, these first calculations are when the problem becomes visible. Individual departures get absorbed one at a time, each with its own explanation. A figure covering a full year is harder to explain away, and shows if there are patterns worth spotting.

Your first figure may not be precise, but it doesn't need to be. It's enough to start a conversation, and a conversation should open up access to the data that will make it more accurate.

There are three final tips that we would recommend doing alongside your Cost of Bad Hire calculations:

1. Define a bad hire once and apply it consistently. Whichever definition you choose, each period is only comparable to the last if the definition hasn’t changed.

2. Track Quality of Hire alongside the cost. The cost figure tells you the size of the problem. A quality baseline tells you whether anything you’ve changed is working, and lets you separate a difficult quarter from a shift in the process itself.

3. Keep a usable record of what happened at interview. When you walk a bad hire back through the funnel, a half-completed scorecard written three months ago rarely tells you much. Interview intelligence tools help here. At Screenloop, we combine AI note-taking and transcripts with interview recordings, so there’s something substantive to review when you need to understand how a decision actually got made.

Remember: understanding what a bad hire costs is the first step in reducing it.

Don't want to calculate your Cost of Bad Hire on your own? Use our free Cost of Bad Hire calculator to discover the financial impact in your own organisation in just a few minutes.

Ready to see what else Screenloop can do for your team? Book a discovery call or drop us a message.