Cost of a Bad Hire vs. Cost of a Background Check

Nick Fishman

bad-hire

They say a background check can cost someone a job, but what’s the cost of employers not doing a background check and making bad hiring decisions? It’s difficult to pinpoint the precise value of your employees. I mean, they are worth the world to you, right? However, when it comes to hiring and retaining new employees—ones that you hope will have a lasting contribution to your company, you can in fact pinpoint your costs if an employee does not work out.

What Defines a Bad Hire?

Scenario #1. You thought the candidate you chose was perfect—well-rounded in all desirable skills and experience. They came out of the hiring process like a shining star. But the bad news is, you didn’t fully verify their employment history and guess what? Not everything they said on their resume was true. Uh oh. It quickly becomes apparent after only a few months that the person you thought you hired…is not the person you hired. You have to let them go because after a year, they’re just not meeting the requirements of the position, even after extensive training.

Scenario #2. Your candidate seemed like a good fit for your company’s culture. They disclosed a minor offense—a criminal conviction—but they said it was years ago. So you interviewed them, checked their references and everything seemed peachy keen. Except you didn’t conduct a criminal background check because you took their word for it. Then after a couple of incidents with this employee, you decide to conduct a background check and end up finding several offenses—even within the last two years. And you’re back to the drawing board seeking someone to fill the position after only six months.

Not only would candidates like these cost you money, but precious time. And everyone knows time can be more valuable than dollars. You will have to invest additional time in the candidates you hire to replace bad hires like these, not to mention the compensation you spent on the original hires. Yep, you’ll be spending that money all over again. Do mistakes like these seem worth it? If not, keep reading to learn how the cost of a background check is exceedingly less than the cost of a bad hire.

Typical Cost of a Bad Hire

According to a recent CareerBuilder survey, 42 percent of U.S. employers estimate that a bad hire cost them at least $25,000 in the last year. I don’t know about you, but I wouldn’t want to throw that kind of money away on a whim or due to the need to fill a position right away. Not convinced yet? CareerBuilder’s survey also reported that, 25 percent of employers said a bad hire cost them at least $50,000 in the last year.

Why Do Bad Hires Happen?

  • 63% Failure to produce the proper quality of work
  • 56% Immediate problems with attendance
  • 49% Employee caused customer complaints
  • 48% Failure to meet deadlines

These are just a few reasons new employees don’t work out, but you know what? For each of these reasons, employers might have avoided a bad hire if an employment background check was conducted, which would have revealed problems in the candidate’s past (because these issues don’t just spontaneously manifest in the workplace.) Knowing the cost of just one bad hire, imagine if you had many of these per year—the cost could become steep.

Approximate Cost of a Bad Hire: $25,000-$50,000

Now that you’ve seen the cost of a bad hire, let’s compare how much it would cost to weed out potential bad hires before they cost you a cent (well, besides the background check.)

Typical Cost of a Background Check

Note: Each of these costs are an estimate and may not reflect your company’s background screening program—prices vary depending on your needs. Costs also vary depending on your screening provider, and these examples do not necessarily reflect the precise cost of EmployeeScreenIQ’s services. In addition, these services cover the basic ordering pattern of many of our clients.

Criminal Records Search

  • Social Security Trace/Address History
  • Comprehensive County Criminal Record Search
  • National Criminal Database

Total: $35.00

Resume Verification

  • Employment
  • Education

Total: $18.00

If you were to utilize both of these components…

Approximate Cost of a Background Check: $53.00/Applicant

Why an “Expensive” Background Check is Less Costly than a Bad Hire

Some may say that even a $50 background check is costly for their company, especially compared to those $19.99 or less deals you might find with a quick search online. Our response is this: While these costs might not represent the least expensive background checks in the industry, a comprehensive check with the above services, would provide the most accurate results. That being said, if you’re guaranteed the most thorough background check results, providing you the necessary information to make smarter hiring decisions, why wouldn’t you?

And at the end of the day, would you rather spend thousands of dollars—from the minimum to maximum cost listed above, while taking a gamble that you might be making a bad hire; OR spend less than it would cost to take a new hire out to lunch their first week by first conducting a background check? And perhaps it’s needless to say, but employers know the cost of hiring someone with 100% confidence—well, that’s priceless.



Nick Fishman
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Nick Fishman

Nick Fishman is the co-founder of EmployeeScreenIQ, a leading, global employment background screening provider, and serves as the company’s executive vice president and chief marketing officer. He pioneered the creation of EmployeeScreen University, the #1 educational resource on employment background checks for human resources, security and risk management professionals. A recognized industry expert, Nick is a frequent author, presenter and contributor to the news media. Nick is also a licensed private investigator in the states of Ohio and Texas.
Nick Fishman
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