The real cost of a bad engineering hire

Salary is the smallest part of the loss in our opinion. The real cost is fixing the bad code or a delayed roadmap or the cultural problems that a misfit can create. Here’s how to know what actually a bad hire is costing you. 

The 4 costs

1. Direct costs: Salary paid, benefits, taxes, severance, agency fee. This is the money that leaves your bank account. It is the easiest to count and the smallest.
2. Recruiting costs: You run the hiring cycle twice. Interview hours, sourcing, onboarding setup, and the empty seat while you search again. If you used a hiring partner, add their fee here too, usually 15% to 25% of annual salary.
3. Productivity costs: Usually the biggest bucket. Reworked code, the ramp months at low output, senior time pulled into review, and the technical debt you inherit after the person is gone. Hard to measure but it is the most affected part. 
4. Soft costs: Low morale, good people leaving etc. Morale and trust cannot be measured cleanly.

How to know how much they are costing you? By stage

The approx way

Take their annual salary and multiply by your stage. 

Stage	Team	Cost of one bad hire
Early (0 to 1)	Founder plus first engineers	3x to 10x salary
Growth (1 to 10)	Small engineering team	1.5x to 3x salary
Scale (10 to 100)	Established team	1x to 2x salary

The cost decreases as companies become more established because there is more room to absorb a mistake.

• Early (0 to 1): 1 engineer is a big part of your entire team because your team is small at this stage. Because you are in an early stage, a wrong architecture call can sink the product, and founder time gets pulled in to clean up. This cost is even higher than that of sunk cost on salaries.
• Growth (1 to 10): You have some backup, so 1 bad hire is not fatal but it still drags velocity, and bad code becomes debt that compounds as you scale. Culture is still forming, so a bad hire sets the norm for the next 10. Mid to high cost but manageable with early spotting. 
• Scale (10 to 100): You are established at this stage so you have teams that can absorb the loss of a bad hire without creating a lot of culture or tech debt. The catch: a weak performer hides longer in a big organization, so you catch it late, and the damage concentrates in senior or lead roles.

These figures are inspired from industry data from the US Department of Labor and SHRM, but nobody agrees on one exact number. Read it as a believable bad case, not a precise truth. The real cost is usually higher, because morale and reputation never make it into the math.

The more elaborate break up

If you want to get closer to how much you actually lost, accounting for all of it, use the companion calculator. Two versions, one in INR and one in USD.

• Pick your stage tab.
• Enter salary, months employed, and if they apply, agency fee and severance.
• It shows what you can count next to the fuller stage range, so you see how far the countable costs sit below the likely true cost.

Conclusion

A bad engineering hire is not just a cost of wasted salary. But think about the repercussions a bad hire can create. It also becomes a lost-momentum problem, and momentum is the one thing an early team cannot buy back. 

Whatever number you land on with these approximate lost cost tests, assume the truth is worse. Net net, better to hire well and filter even more well.