SHRM estimates a bad hire costs 30% of annual salary. For a £130,000 senior backend engineer in London, that's £39,000.
That formula was written in 2016, before engineers cost six figures everywhere, before sprint time became the scarcest resource on earth, and before interview cycles stretched to 45 days. We re-ran the math for 2026 engineering hiring. The real number is closer to £243,000 — nearly 2x the engineer's annual salary.
Here's how we got there, the six cost components most teams ignore, and a quick way to estimate your own number.
Why the old "30% of salary" rule is wrong in 2026
The SHRM number was built for an era when:
Today, none of those assumptions hold. The cost of a bad hire scales superlinearly with salary, sprint dependence, and team size.
The 6 cost components we actually measure
1. Direct costs — salary, benefits, equipment
The most obvious. For a £130K senior engineer who leaves at month 6:
This is what every CFO calculates. It's about 33% of the total cost.
2. Hiring costs — agency, time, tooling
To hire that engineer in the first place:
If you have to replace them, you pay this twice.
3. Interview cost — sprint time you'll never get back
This is the cost most teams don't see. For 8 candidates × 4 hours of senior engineer time per candidate (1hr interview, 30min prep, 30min debrief, plus take-home reviews) = 32 hours of senior eng. time.
At a £75/hour fully loaded cost: £2,400.
But the real cost is what those engineers DIDN'T ship in those 32 hours. If your team's sprint velocity drops by 10% during heavy hiring (typical), and a 2-week sprint is worth ~£40K in salary across a 6-person team, that's £4,000 of velocity loss per sprint × 3 sprints = £12,000.
(For a deeper breakdown, see our post on the real cost of technical interviews.)
4. Onboarding cost — mentor time, ramp-up, knowledge transfer
For 6 months of bad employment:
5. Opportunity cost — features not shipped, deadlines missed
If the bad hire was assigned to ship a feature, and that feature didn't ship (or shipped late), you have:
This is the most variable cost. For a Series B fintech with £2M MRR, a missed quarterly feature can easily be £80,000 in deferred revenue. Conservative estimate for a bad senior hire: £60,000.
6. Team morale cost — stress, residual trust damage
Hardest to quantify, easiest to underestimate. When a bad hire leaves:
Studies (Gallup, Officevibe 2024) put the indirect productivity cost at 8–12% across affected team members for the next quarter. For a 5-person team affected: £18,000.
Worked example: a £130K senior engineer in London who leaves at month 6
| Cost component | Amount |
|---|---|
| Direct (salary, benefits, equipment) | £80,500 |
| Hiring (agency fee, interview time) | £36,500 |
| Interview opportunity cost (sprint velocity) | £14,400 |
| Onboarding (mentor time, ramp) | £33,250 |
| Missed features / delayed revenue | £60,000 |
| Team morale and productivity drag | £18,000 |
| Total | £242,650 |
Almost 2x the engineer's annual salary. And this is the conservative scenario — they left clean, no legal issues, no IP disputes.
The quick estimator
Don't have time to calculate all six? Use this rough formula:
> Bad hire cost ≈ (annual salary × 0.5) + (annual salary × 1.0) + (team size × £4,000)
For our £130K engineer in a 5-person team:
Within 12% of the detailed calculation. Use this for back-of-napkin sanity checks; use the full breakdown when justifying budget for hiring tooling.
Calculate your own number
Plug in your scenario — salary, tenure of the bad hire, team size, sourcing method — and see the real total.
Bad hire cost calculator
Edit the values below to see your number
True cost of this bad hire
£220,850
That's 1.7× the engineer's annual salary — not 30% like the old SHRM rule.
The default values (£130K salary, 6-month tenure, 5-person team, agency-hired) reproduce the £243K example above. Edit them to match your situation.
How to reduce the probability of a bad hire — without slowing down
Most teams respond to bad hires by adding more interview rounds. This is the wrong fix. More rounds increase candidate drop-off (good candidates have other offers) and burn more sprint time per hire — without significantly improving signal quality.
The right fix is better signal at the top of the funnel:
Recruo combines all three. Our Phase 1 placement data shows 80% client interview pass rate (4× industry average) and 95% 90-day retention.
The bottom line
Bad engineering hires don't cost 30% of salary. They cost 1.5–2× annual salary when you count all six components. For a £130K engineer, that's £200K–250K per bad hire.
If your team has had even one bad senior hire in the last 12 months, the math on better screening is overwhelming.
Get a sample shortlist for one of your open roles — see what pre-validated candidate quality actually looks like. £0, 5 business days, 90-day replacement guarantee.