When it comes to hiring, there’s a lot at stake. According to research, the cost of a bad hire can amount to 30% of that employee’s first-year earnings – a significant loss for any company.
Every new hire brings fresh energy and talent, but they also bring potential risks if they’re not the right fit for the job or your company culture. This is where staff background checks come into play.
How Staff Background Checks Boost ROI
Staff background checks may have an upfront cost, but the benefits they bring can be much greater. Here’s how they contribute to a positive return on investment (ROI):
Improved Quality of Hires
Staff background checks help you learn about a candidate’s experience, skills, and background. By checking their credentials, you’re more likely to hire skilled and trustworthy employees who fit your company’s standards. This results in a higher quality of hire, with employees who are more likely to thrive in their roles and contribute to the team.
Enhanced Workplace Safety
With background checks, you can identify red flags., like criminal history or other safety concerns. This is especially important for jobs handling sensitive information or in high-risk areas.
By hiring individuals with a proven track record of reliability, you create a safer workplace for everyone.
Lower Turnover Rates
Employees who fit the job are more likely to stay, saving on rehiring costs. Background checks help you pick people who match the role and company culture. This leads to better job satisfaction and higher retention.
Reduced Legal and Compliance Risks
Hiring someone who lacks proper qualifications or certifications can expose your company to legal and regulatory issues. Staff background checks verify credentials and ensure your hires meet the legal requirements of their roles, protecting your organisation from potential liabilities.
Better Company Culture and Morale
High-quality hires contribute positively to the workplace culture, aligning with company values and strengthening team cohesion. By ensuring candidates are a good fit, you create a healthier work environment where employees are motivated and engaged.
The Cost Breakdown for Hiring in South Africa
Assuming a mid-level employee with an annual salary of R300,000:
Recruitment Costs
Recruitment Company Fee: At 15% of an annual salary of R300,000, the recruitment cost would be R45,000.
Additional HR and Hiring Manager Time: Even with a recruitment company, HR and managers often spend time screening, interviewing, and onboarding. We’ll estimate this at R3,000 to R5,000.
Subtotal for Recruitment Costs: R48,000 to R50,000
Onboarding and Training Costs
Onboarding Materials and Programmes: Training materials, orientation, and initial setup might add up to around R5,000 to R10,000. This includes printed materials, online training modules, or software required for onboarding. It also includes the cost associated with onboarding sessions or training. There are also potential costs for equipment and workspace setup.
Productivity Loss During Ramp-Up:
During the initial weeks or months, a new employee might operate at around 50-75% of their full potential as they learn the role. For example, if an employee’s full monthly productivity is worth R25,000 (based on their monthly salary and expected output), operating at 75% would mean a productivity loss of R6,250 per month. Over two to three months, this adds up to R12,500 to R18,750.
Often, existing team members or managers dedicate time to training and guiding the new employee, which can reduce team output. This indirect productivity cost could range from R1,000 to R2,000, depending on the time spent by other team members.
These factors could result in productivity losses estimated at R10,000 to R20,000.
Subtotal for Onboarding and Training: R15,000 to R30,000
Total Hiring Cost Estimate
Combining these figures, the total cost to hire a mid-level employee at an annual salary of R300,000 could realistically be R63,000 to R80,000.
Calculating the ROI of Staff Background Check
Let’s put some numbers to this. If your company hires 50 people annually and each background check costs around R250, the initial investment would be R12,500. With platforms like Dots360, you only pay per check, with no subscription fees, ensuring a flexible and affordable solution.
Now, let’s consider the average cost of turnover for a single bad hire. In South Africa, this cost—covering re-advertising, retraining, and productivity losses—typically ranges from R63,000 to R80,000. f background checks help prevent just one or two bad hires each year, the company can cover the initial cost, making them a smart and valuable investment.
Not only does this safeguard your bottom line, but it also saves time and keeps your teams moving forward with the right talent. By investing in staff background checks, you’re investing in long-term productivity, reduced turnover, and a stronger workplace culture.
You may also be interested in: The Employment Background Checks Every SA Employer Needs to Know About
