A bad hire is expensive in any department, but a bad technical hire carries costs that go far beyond the direct financial impact. When an underperforming engineer joins your team, the damage compounds across project timelines, team morale, code quality, and opportunity cost — often for months before the problem is fully recognized and addressed.
The U.S. Department of Labor estimates that a bad hire costs roughly 30% of the employee’s annual salary. For technical roles, where salaries range from $100,000 to $200,000+, that puts the floor at $30,000-$60,000. But that figure only scratches the surface. When you account for indirect and opportunity costs, the real number is often 3-5x higher.
Understanding these costs is not about being pessimistic. It is about building the case for investing in a rigorous, engineer-led hiring process that prevents bad hires before they happen.
Direct Costs: The Numbers You Can Measure
Direct costs are the easiest to calculate, but they are often underestimated because organizations fail to account for every line item.
Recruiting and Onboarding
The cost of sourcing, interviewing, and hiring a technical employee typically runs between $15,000 and $30,000 when you account for:
- Recruiter fees or internal recruiting team time — External agency fees typically run 20-25% of first-year salary. Internal recruiting costs (recruiter salary, tools, job board fees) are lower per hire but still substantial.
- Hiring manager and interview panel time — A typical technical hiring process involves 8-15 hours of cumulative interview time from engineers and managers. At blended engineering rates of $75-$150/hour, that is $600-$2,250 in direct labor cost per candidate interviewed.
- Onboarding and training — New engineer onboarding typically takes 30-90 days of reduced productivity, during which the new hire consumes significant time from peers and managers.
When a bad hire leaves or is terminated, you pay these costs twice — once for the failed hire and again for the replacement.
Severance and Legal Costs
If the termination involves a severance package (common for roles at the senior level and above), expect to pay 2-8 weeks of salary. In cases where the termination is contested or involves potential legal exposure, legal review and HR management can add $5,000-$20,000 or more.
Compensation During Underperformance
The most overlooked direct cost is the salary paid to an underperforming employee during the period between when the problem becomes apparent and when it is resolved. Most organizations take 3-6 months to identify, document, manage, and ultimately terminate a bad hire. For a developer earning $140,000/year, that is $35,000-$70,000 in salary paid for substandard output.
Total Direct Cost Estimate
For a mid-level technical role with a $140,000 salary:
| Cost Category | Low Estimate | High Estimate |
|---|---|---|
| Recruiting (original hire) | $15,000 | $30,000 |
| Onboarding and training | $8,000 | $15,000 |
| Salary during underperformance (3-6 months) | $35,000 | $70,000 |
| Severance | $5,400 | $21,500 |
| Recruiting (replacement) | $15,000 | $30,000 |
| Total Direct Costs | $78,400 | $166,500 |
Use our bad hire calculator to estimate these costs for your specific situation.
Indirect Costs: The Damage You Can’t See on a Spreadsheet
Indirect costs are harder to quantify, but they are often more destructive than the direct financial impact. These are the costs that erode your team’s effectiveness from the inside.
Team Morale and Productivity
When a team member consistently underperforms, the burden shifts to their colleagues. Senior engineers spend time reviewing poor-quality code, fixing bugs introduced by the underperformer, and re-explaining concepts. This creates resentment and frustration that compounds over time.
Research from Harvard Business School found that toxic workers cost organizations an average of $12,500 per year in increased turnover alone — and that figure does not include the productivity drag on surrounding team members. In engineering teams, where collaboration and code quality are deeply interconnected, one weak link can reduce overall team output by 20-40%.
Code Quality and Technical Debt
A bad technical hire writes bad code. That code gets merged, deployed, and built upon. The resulting technical debt — poorly architected systems, inadequate test coverage, security vulnerabilities, and brittle implementations — persists long after the employee is gone.
Cleaning up technical debt introduced by an underperforming engineer can consume weeks or months of a senior engineer’s time. In some cases, entire components need to be rewritten. The cost of this remediation work is rarely attributed to the original bad hire, but it should be.
Knowledge Loss and Context Gaps
When a bad hire is terminated, any institutional knowledge they’ve acquired leaves with them — and the knowledge transfer is often incomplete because the relationship typically ends on poor terms. Worse, if the departing employee was responsible for specific systems or features, there may be gaps in documentation and understanding that the replacement must fill through reverse engineering.
Management Overhead
Managing an underperforming employee consumes a disproportionate amount of leadership time. Performance improvement plans (PIPs), documentation, frequent check-ins, difficult conversations, and coordination with HR all pull managers away from productive work. Engineering managers report that managing a single underperformer can consume 10-20% of their weekly time for months.
Opportunity Costs: What You Didn’t Build
Opportunity cost is the most significant and most frequently ignored category. While you are dealing with a bad hire, your organization is not doing other things that would generate value.
Delayed Projects and Missed Deadlines
A bad hire on a critical project doesn’t just underperform — they slow down the entire project. Features ship late. Releases get pushed back. If those delays affect revenue-generating products, the financial impact can dwarf the direct costs of the hire.
Consider a scenario where a bad hire delays a product launch by 8 weeks. If the product generates $50,000/month in revenue, that delay costs $100,000 in lost revenue — a figure that never shows up in the “cost of the bad hire” calculation but is directly attributable to it.
Lost Candidates
While you are spending months trying to make a bad hire work, you are not hiring the person you should have hired in the first place. The candidates you passed over or who dropped out during your original search have moved on to other opportunities. Your replacement search starts from scratch, in a market that may have gotten even more competitive.
Damaged Employer Brand
Candidates talk. A bad hiring experience — whether it’s the frustration of working alongside an underperformer or the instability of frequent turnover — gets shared in engineering communities, on Glassdoor, and through personal networks. This reputational damage makes future recruiting harder and more expensive.
Real-World Impact: How Bad Hires Compound
To understand the full impact, consider this common scenario:
A growing SaaS company hires a senior DevOps engineer to lead their cloud migration to Azure. The candidate interviewed well but lacked the depth of experience their resume suggested — a common outcome when non-technical recruiters screen technical candidates.
Within 60 days, the problems become apparent: the migration architecture has significant design flaws, security best practices were ignored, and the CI/CD pipeline is fragile and poorly documented. The company spends 3 months trying to coach the engineer before ultimately terminating the relationship.
The total impact:
- Direct costs: ~$120,000 (recruiting, salary, severance, re-hiring)
- Remediation: A senior cloud engineer spent 6 weeks rebuilding the migration architecture — ~$30,000 in labor
- Project delay: The migration shipped 4 months late, extending legacy hosting costs by ~$40,000 and delaying planned headcount savings
- Morale impact: Two team members cited the experience as a factor in their subsequent departures, triggering additional replacement costs of ~$60,000 each
- Total estimated impact: $300,000+
All from a single bad hire.
How to Avoid Bad Technical Hires
Prevention is dramatically cheaper than remediation. Here are the strategies that consistently reduce bad-hire rates.
Invest in Technical Vetting
The single most effective prevention strategy is ensuring that candidates are evaluated by someone with genuine technical expertise in the relevant domain. Keyword matching and HR screens are insufficient for assessing whether a candidate can actually do the work. Engineer-led vetting — where someone who has done the job evaluates the candidate — catches the mismatches that non-technical screens miss.
Define Clear Success Criteria Before You Hire
Before you open a requisition, define what success looks like at 30, 60, and 90 days. What specific outcomes should the new hire deliver? This clarity makes it easier to evaluate candidates during the interview process and to identify underperformance quickly if it occurs.
Use Structured Interviews
Unstructured interviews are poor predictors of job performance. Structured interviews — where every candidate answers the same questions and is evaluated on the same criteria — produce significantly better hiring outcomes. For technical roles, this means combining behavioral questions with practical technical assessments that mirror real job responsibilities.
Consider Contract-to-Hire
For roles where the risk of a bad hire is particularly high (new team, critical project, hard-to-evaluate specialization), a contract-to-hire arrangement allows both parties to evaluate fit before making a permanent commitment. This approach adds cost in the short term but dramatically reduces the risk of a 6-figure bad hire.
Work with Technical Recruiting Specialists
Generalist recruiters lack the domain expertise to evaluate technical candidates effectively. Working with a recruiting partner that employs engineers as recruiters means candidates are pre-vetted by people who understand the technology and can distinguish genuine expertise from resume padding.
Measuring and Tracking Hiring Quality
You cannot improve what you do not measure. Track these metrics to identify and address hiring quality issues:
- 90-day retention rate — What percentage of new hires are still with the organization and meeting expectations after 90 days?
- Time-to-productivity — How long does it take new hires to start contributing independently?
- Hiring manager satisfaction — Do hiring managers rate new hires as meeting, exceeding, or falling below expectations?
- Source quality — Which sourcing channels produce the highest-quality hires?
- Interview-to-offer ratio — How many candidates must you interview to generate an accepted offer?
Reviewing these metrics quarterly allows you to identify patterns — specific sourcing channels, interview processes, or role types that have higher bad-hire rates — and make targeted improvements.
FAQ
How much does a bad technical hire actually cost? The total cost of a bad technical hire typically ranges from $100,000 to $300,000+ when you account for direct costs (recruiting, salary, severance, replacement recruiting), indirect costs (team productivity loss, code quality remediation, management overhead), and opportunity costs (project delays, lost revenue, damaged employer brand). The Department of Labor’s commonly cited estimate of 30% of annual salary captures only the direct costs and significantly understates the true impact.
How long does it typically take to identify a bad technical hire? Most organizations take 3-6 months to identify and act on a bad technical hire. The signs often appear within the first 30-60 days — missed deadlines, poor code quality, difficulty working independently — but managers frequently attribute early struggles to the normal learning curve. Defining clear 30/60/90-day success criteria before the hire starts helps identify problems earlier.
What is the best way to prevent bad technical hires? The most effective prevention strategy is engineer-led vetting, where candidates are technically evaluated by someone with genuine domain expertise before entering your interview pipeline. This catches the mismatches that resume screening and non-technical interviews miss. Combining engineer-led vetting with structured interviews, clear success criteria, and quality-focused metrics creates a hiring process that consistently produces strong outcomes.
Should we use a probationary period for technical hires? Probationary periods can help, but they are not a substitute for a rigorous evaluation process. By the time a probationary period reveals a bad hire, you have already invested 2-3 months of salary, onboarding, and team integration. A better approach is to invest more in pre-hire evaluation — including contract-to-hire arrangements for high-risk roles — so that you have higher confidence in the hire before day one.
How do bad technical hires affect team retention? Bad technical hires have a measurable impact on team retention. Research shows that employees who work closely with a toxic or underperforming colleague are 54% more likely to leave the organization. In engineering teams, where collaboration on codebases is constant, the effect is particularly pronounced. The departure of even one experienced team member as a result of a bad hire can trigger a cascade of additional turnover.