You’ve got a HR situation: You have a job opening to fill soon and no suitable candidate in sight. In fact, you only have a couple of prospects that sort-of meet the requirements of this job. It can be tempting to hire someone because he or she seems okay, but every instinct is sending up red flags.
The dilemma is, should you leave the job open for the time being (and deal with lower productivity) or hire a “warm body” to cover things for a while (someone who is probably going to be a bad hire)? Specifically, what’s the financial risk of taking either of these actions?
This is something that occurs in workplaces all the time. Whether a company is in a high growth mode and creating job openings, or the need arises to replace an employee – an impact will be felt. It can be good or bad, depending on how you decide at this junction. Here’s how to calculate the risks.
Not Hiring Someone Now
To calculate the cost of waiting to hire someone, here’s a simple formula. Determine the cost of revenue generated by a single employee per day, minus their compensation and benefits. So, for a factory worker, who may be producing $200 profit per day in new units, subtracting their $168 per day in wages and benefits, potential lost revenue is $32 per day. This adds up to around $160 per week in lost profits until you either bring in a temp employee or hire someone suitable.
Making a Bad Hire
When you decide to jump and hire that so-so candidate now, the cost of a bad hire add up quickly. First, you will be paying them a salary and possibly benefits, at the rate of around $168 per day in wages. Over a week, that’s $840. Now, consider that this person is not going to be as productive as other employees because he or she lacks the skills. Profitability drops and may end up in the negative as a result. Say goodbye to the $200 per day in profits, and let’s say it’s more like $120 in profits (typical bad hires are 40% less productive based on most recent workforce data). You’ve now lost about $1,240 for each week this person is employed.
Decide to let this employee go now? How about getting slapped with an unemployment claim for the next 6 months, or worse yet, a wrongful termination lawsuit? That’s going to cost you.
Hiring a Temporary Employee
Here’s an alternative. Hire a temporary employee until you find the right hire, or to cover these open jobs at your company. If you hire a temporary employee, your personnel costs go down even more because the agency handles all the upfront things associated with recruitment, screening, payroll and benefits. You enjoy the productivity and revenue increases, while you reduce most, if not all, of the financial risks associated with a bad hire.
Sound Like a Much Better Option?
If so, get in contact with the recruitment team at PrideStaff Atlanta and let us help you lower your staffing costs and risk.