Implementing a Pre-Employment Program (Remediation vs. Prevention)

When calculating the cost-to-benefit analysis for implementing a pre-employment program, consider the following factors:

• What is the original cost per hire?
• What can it cost your company in terms of legal fees, out-of-court settlements and court awarded fees for a hiring mistake?
• How do these costs compare to the cost of an ongoing preventative pre-employment program?
• What are the human resource costs to conduct the necessary interviews, coaching, employee assistance and paperwork to bring each case to closure?

Additional Considerations include:

• Management time needed to counsel and evaluate each individual and his/her co-workers
• Lost time and absenteeism
• Loss of productivity
• Poor morale
• Lost sales
• Rehiring process
• Learning curve
• Impact on your corporate culture (in cases of drug trafficking, theft, arrests at the worksite, etc.)
• Safety implications/site security
• Worker compensation claims
• Example Capital resource outlay for a problematic hire:
  • The average cost of hiring an employee ranges from $3,000 to $5,000 (with a higher amount for managers and executives)
  • The typical cost of employee turnover is estimated to be 1.5 times the annual salary for the position
  • Average litigation (in court) fees: $30,000 to $50,000 per week
  • Court settlements range from $5,000 to $2 million

Estimated Average Cost of a Problem Hire:

Salary	$50,000
Benefits	$12,500
Factored employee turnover cost	$75,000
Average litigation (one case)	$40,000
Court Settlement	$50,000
TOTAL COST:	$227,500/year per each incident
CUMULATIVE COST:	$2.275 million (assumes 10 problem hires/year)

(Based upon 10 litigious employee actions annually). Check with your legal counsel to determine how many litigation actions were brought in the past two years.