The real cost of a bad hire (with a calculator that shows yours)

Ask your CFO what your last bad hire cost. You'll get a number that looks like the recruiting line item — agency fee, job-board spend, maybe an internal recruiter allocation. The Society for Human Resource Management has been telling us for fifteen years that this number is usually 5-15% of the real total. The other 85-95% is distributed across budgets the CFO never connects to the original hire, which is exactly why bad-hire costs are perpetually underestimated and perpetually under-prevented.

SHRM's headline figure is that a bad hire costs between 50% and 200% of the role's annual salary, with the high end concentrated in executive and customer-facing roles. The U.S. Department of Labor uses a similar framework, citing 30% of first-year earnings as a floor. These aren't the kind of numbers a finance team can ignore — but the reason they don't show up on a P&L line is that the cost is fragmented across seven different categories that each look like normal operating expense.

The seven hidden categories

1. Salary + benefits paid (loaded)

Every month they're on the payroll, you're paying not just salary but employer taxes, benefits, equity grants, and overhead allocation. The fully-loaded multiplier on US base salary is consistently 1.25-1.35x. For a $95K salary, that's actually $11,400 a month going out the door. If they leave in seven months, that's ~$80K just to keep them on the team — most of which goes to a role you needed someone else to do.

2. Ramp-time productivity loss

Industry studies (Allied HR IQ, Indeed Hiring Labs) consistently put new-hire productivity at ~60% of full output during the first three months, climbing to 100% somewhere in months three to six. For an executive, the ramp is six months and rarely faster. If a hire leaves before they finish ramping, every single dollar of that 40% productivity gap is sunk cost — and the team that backfilled their workload during ramp absorbed the loss invisibly.

3. Direct training + onboarding cost

The peers and managers who spend hours pairing with the new hire, the onboarding programs, the off-sites, the mentorship time. These costs scale with seniority — onboarding a senior IC runs ~5% of their salary; onboarding a director or exec runs ~10%. They're almost never tracked because they're absorbed by the existing team's payroll.

4. Post-ramp productivity gap

Once ramp ends, the bad hire continues to under-perform — that's what makes them a bad hire. The cost is the delta between what the role was supposed to produce and what it actually produced, weighted across whatever months they remained before resolution. This is the single largest component for any bad hire who stays longer than the ramp period.

5. Original recruiting spend

The line item you DO see on the P&L. Agency fees, job-board spend, ATS allocation, internal recruiter time. Across the seven categories, this is consistently the smallest single component — usually 5-12% of the total.

6. Severance + offboarding

Termination admin, severance package, COBRA administration, IT offboarding, knowledge transfer time, legal review. For an IC role this might be a single month of salary; for an executive role on a managed exit it's 3-6 months plus negotiated equity.

7. Replacement cycle (next hire, +40% cost)

The next time you fill this role, it costs MORE. The team becomes more cautious, the interview loop expands, the threshold rises. Empirically, replacement cycles for backfilled bad hires run 30-50% higher cost than the original cycle. The conservative estimate is 40%.

See the number for your situation

The calculator below produces the SHRM-band total for your specific bad hire. Adjust the inputs and watch the per-component breakdown update live. The arithmetic is transparent — every line traces to a specific component of the cost.

Why these numbers don't make people change their hiring

The standard response to a number like this is "yes, but I can't spend my way out of bad hires." This is half right. You can't buy your way to perfect hiring. You CAN make small fixed-cost investments in your hiring system that reduce the rate of bad hires by 15-30% — and the math works out on the first hire those investments prevent.

The four highest-leverage investments, in rough order of ROI:

• Structured interviews with calibrated rubrics — the academic literature (Schmidt + Hunter meta-analyses, replicated across multiple decades) puts structured interviewing's validity at roughly twice that of unstructured. This is the single biggest lever and the cheapest to deploy.
• Forced independent scoring before debriefs — the first words spoken in a debrief room shape everyone else's opinion. Independent scoring before discussion breaks the anchoring effect and surfaces calibration gaps you didn't know existed.
• Quality-of-hire feedback loop — connect interview signals to actual performance at 90 days and 6 months. Without this loop, you cannot tell which interviewers and which signals are predictive.
• Diverse interview panels — not because of mandates, but because the empirical evidence on identification of false positives (charismatic candidates who under-perform) shows that panel diversity catches them earlier.

What this calculator deliberately excludes

The number you see is conservative. Several real costs are excluded because they're too situation-dependent to model honestly: brand damage from a bad-hire dismissal that becomes public, customer churn caused by the role being mishandled (most acute for sales and CX roles), morale impact on the surrounding team, opportunity cost of delayed projects, and the cost of the open seat between offboarding and replacement (typically 4-12 weeks).

SHRM's broader research suggests these soft costs can equal the calculated total in customer-facing roles and add 30-50% in internal roles. The calculator above gives you the floor; the actual all-in cost is meaningfully higher.