New research from employment marketplace SEEK suggests that hiring the wrong employees could be costing small and medium-sized enterprises (SMEs) close to $1 billion each year.
The report, drawing on hiring experiences in New Zealand and Australia, estimates that hiring the wrong person for a role, when they do not meet job expectations, can cost employers roughly $20,000 per hire.
The figure is derived from the direct costs associated with a bad hire, including the financial impact on the business, as well as the extra recruitment and training expenses required to find and onboard a replacement.
SEEK New Zealand manager Rob Clark said about one in five hires go wrong. Based on the scale of SME employment and hiring volumes, the annual cost of these failed hires is estimated at around $911 million.
He said not having to hire the right people occurs because time-pressured managers often fail to take the necessary early steps in the recruitment process to properly define and attract the right pool of candidates.
Clark said that an effective job advertisement needs to clearly and accurately outline the role, along with the expectations attached to the position. Advertisements should also clearly state a salary range, something missing from around 80% of listings, as well as other key conditions like the option to work from home.
He described these as significant factors that help candidates decide whether to apply for a role.
Artificial intelligence–based systems are also being used to screen applicants and identify the most suitable candidates for interview, as well as verify credentials. AI can also search employment agency databases to find potential matches for open roles.
Aside from issues with job advertisements, Rob Clark said there are also shortages of suitably qualified workers in some industries.
He noted this can sometimes lead managers to settle for less suitable candidates in order to fill roles.