Employees are often a business’s most valuable investment. The cost of hiring a new employee can be significant, in more way than an employer could ever imagine. Many of these costs get buried and overlooked in day-to-day operations. There is one fact in business that all Human Resource Professionals understand, employee problems are caused by problem employees. Every new hire represents a huge investment as well as a potential risk to that employer.
The Costs
The risk consists of both visible and invisible costs. The visible cost can equate up to 30% of a new employee’s base salary, while the invisible cost can be substantially higher.
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The visible costs incurred during the hiring process, including but not limited to, advertising costs, in-house human resource salaries, third-party recruiter fees, on-boarding, employee orientation, travel expenses, sign-on bonuses, possible-relocation costs. and employee referral bonuses. The total cost of hiring one new employee could be as high as $7,500 or more in the professional or manufacturing industries. Even hiring a new employee in a services-related industry has a cost of more than $1,500.
The invisible cost comes in several legal forms including an employer’s duty to care, which is called due diligence. Employers have a duty of care to their employees, which means that they should take all steps which are reasonably possible to ensure their health, safety, and wellbeing.
Employers must consider if a new employee represents a risk to internal and external stakeholders alike.
If a problem hire gets through an employer’s in-house employment screening process, that employer can be held liable. Many states have allowed claims for negligent hiring and negligent retention. Negligent hiring occurs when an employer fails to review references or conduct a background check before hiring a new employee.
Bottom Line
Make it your policy to run a background check before you hire an applicant. Verify information on resumes, look for criminal convictions (to the extent allowed in your state), and check driving records. These simple steps will help employers protect their investments and reduce the visible and invisible cost associated with hiring.
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