Cost of a Bad Hire Calculator

Inputs

• Base salary — Annual gross pay on the offer letter, before anything else.
• Payroll burden — Payroll taxes, benefits, equipment, software, and space as a share of salary — the gap between the offer letter and what the seat costs. 25–40% is the usual range.
• Months before you acted — Start date to last day. The honest number, not the one that makes the decision look timely.
• Months to full productivity — How long a solid hire takes to reach full output in this role — around three months for a support seat, six to nine for most professional roles, longer where there is a domain to learn.
• Output delivered vs a good hire — What they produced as a share of what a solid performer would have, over the same months. Guard against hindsight: the answer is almost never zero.
• Recruiting cost per hire — Job ads, agency or referral fee, assessments, background checks, and the recruiting tooling this req consumed. Charged twice, because you are hiring twice.
• Interview and selection hours — Every hour anyone spent screening, interviewing, debriefing, and writing it up — summed across all of them, not per person.
• Manager hours per week on the problem — Coaching, re-reviewing work, documenting, the difficult conversations, and the hours spent turning it over on a Sunday. Most managers guess this at about half.
• Team hours per week lost to cover and rework — Cover, rework, and questions the rest of the team fielded. Zero is not the honest answer if anyone picked up slack.
• Loaded hourly cost of that internal time — One blended loaded rate for the interview, manager, and team hours above. Managers and senior interviewers cost more than the blend, so this leans conservative.
• Severance and notice — Severance, notice, and garden leave, in weeks of loaded cost. Zero is fine if none was paid.
• Months the seat sits empty — From last day to the replacement's start date. Charged at the seat's loaded cost on the assumption the work still needed doing.
• Direct damage — Anything not proportional to salary: a lost deal, a blown migration, a customer that churned, a penalty. Leave it at zero unless you can name the thing.

How to use this calculator

1. Run it on a hire that has already ended, while you can still remember the months. Doing it from memory a year later produces a number that flatters whoever is holding the calculator.
2. Start with the salary and the payroll burden. Burden is taxes, benefits, equipment, software, and space (the difference between the offer letter and what the seat costs), and 25–40% is the usual band. Everything downstream scales off this, so getting it roughly right matters more than getting anything else exactly right.
3. Enter the months before you acted and the months a good hire needs to reach full productivity. These two set the shape of the whole answer: the ramp is a cost any hire imposes, and the tenure is the only input on the page you actually controlled.
4. Set output delivered as a share of what a solid performer would have produced over the same months. Hindsight pushes this toward zero and it is almost never zero. A hire who delivered nothing at all usually did not last nine months.
5. Be generous with the manager and team hours. Count the re-reviewing, the documenting, the difficult conversations, and the hours spent turning it over on a Sunday. This is the block that never appears on a budget line, and in most runs it is the largest thing on the page after the salary itself.
6. Read the gross figure and the incremental figure as two different tools. Gross is what the episode cost the company and is the one to take to a budget conversation. Incremental is what it cost versus hiring right the first time, and it is the only one that answers whether another week of interviewing was worth it.
7. Then use the last two rows, which are the point of the exercise. They convert the whole thing into hours of extra interviewing per hire: a currency a hiring manager can actually spend, and a far better argument for a structured process than any percentage.
8. Change the tenure by three months in each direction before you close it. If waiting cost more than the severance did, you have found the real lesson, and it is not about the person who left.

What each term means

Fully loaded cost

Salary plus payroll taxes, benefits, equipment, software, and space: what the seat costs, as opposed to what the offer letter said. Usually 1.25–1.4× base.

Ramp

The months between a start date and full productivity. A cost every hire imposes, which is exactly why it hurts here: a hire who does not work out makes you pay it twice.

Gross versus incremental

Gross is everything the episode cost. Incremental strips out the recruiting round and the ramp any hire would have caused, leaving what the bad hire added. Quote gross for a budget; decide with incremental.

Performance shortfall

The output gap between what this person delivered and what a solid performer in the same seat would have, valued at the seat's loaded cost. The bad-hire-specific part of the salary burn.

Vacancy cost

Output foregone while the seat sits empty. You are not paying a salary, but the work still needed doing. It moved onto someone, or it did not happen.

Regretted attrition

A good person leaving for reasons you would have paid to prevent. A bad hire on a small team is a common trigger, it is not modelled here, and it is often larger than everything that is.

Escalation of commitment

Sticking with a decision because of what has already been spent on it. The reason bad hires run long: the months invested feel like an argument for waiting, and they are gone whichever way you decide.

Bad-hire rate

The share of hires from your current process that end this way. You cannot drive it to zero, and the last row prices what each ten points off it is worth per hire.