In shortFor a mid-level permanent role in Australia, a bad hire that leaves or is exited within 12 months commonly costs $100,000–$250,000 once you count salary paid, lost productivity, re-hiring, and the flow-on to projects and team. The cost is almost always set at the shortlisting stage, not the interview.
Ask a business what a bad hire cost them and most will name the recruitment fee. That is the one number that shows up on an invoice, so it is the one that sticks. It is also the smallest part of the total.
Here is a realistic breakdown for a permanent role on a $140k package that does not work out and is exited at the nine-month mark.
| Cost | Estimate |
|---|---|
| Salary and on-costs paid over 9 months | $115,000 |
| Reduced productivity (ramp-up never completed, ~40% output) | $60,000 |
| Management time spent managing, coaching and eventually exiting | $15,000 |
| Re-recruitment (agency fee or internal cost + time) | $25,000–$45,000 |
| Vacancy cost while re-hiring (2–3 months) | $20,000–$35,000 |
| Project / client impact (delays, rework, relationship cost) | Highly variable — often the largest line |
| Team disruption and morale (others cover, some disengage) | Hard to price, real |
| Direct, conservative total | $150,000–$250,000 |
On a live project, the “project impact” line can dwarf everything else. A Site Manager or Project Manager who is not on top of the job can cost weeks of program and six figures of rework before anyone concludes it is not going to come good.
Where bad hires actually come from
In our experience, mis-hires are rarely caused by a bad interview. They are set earlier.
1. A brief that was never really agreed
The role gets advertised before the hiring manager and the business have agreed what “good” looks like — which sector background, which project scale, which non-negotiables. The shortlist is then built against a moving target, and the interview becomes a gut-feel exercise.
2. A shortlist built from who applied, not who fits
If the process only ever sees people who responded to an ad, it only ever sees the portion of the market that is both actively looking and happened to see the ad. The strongest candidates for most permanent roles are employed and not scrolling job boards. A shortlist drawn only from applicants is a shortlist drawn from a slice of the market.
3. Reference checks done as a formality
Two rushed calls to referees the candidate chose, asking questions that only invite “yes”. Proper reference checking — structured questions, to people who actually managed the work, about the specific things the role will demand — catches a meaningful share of mis-hires before they happen.
How to reduce the risk
- Agree the brief in writing before anything is advertised. Sector, project scale, the three things this person must be able to do, and the two things that would rule someone out.
- Search, don’t just advertise. Make sure the process is actively approaching suitable people who are not applying, not only screening inbound applications.
- Structure the interview around the actual work. Fewer “tell me about yourself” questions, more “walk me through how you closed out the commercials on your last job”.
- Reference properly. Talk to direct managers, ask specific questions, and be willing to slow down if the answers are vague.
- Stay involved after the start date. Most mis-hires that survive probation were visible at week three. A structured check-in at 30, 60 and 90 days catches problems while they are still fixable.
This is the reasoning behind how we work: a permanent-only focus, a proactive search rather than an ad, a small and genuinely matched shortlist, and staying engaged after the placement. It is more work up front, and it is a lot cheaper than a mis-hire.
Related reading: permanent vs labour hire, and how long it takes to fill a permanent role.