Nearly one in three Australian SMEs say it is now harder to find the right person for their business. New SEEK research puts a dollar figure on what happens when they get it wrong
Most small business owners know instinctively that a bad hire is expensive. What the new SEEK research does is put a precise figure on exactly how expensive, and the number is significant enough to change how seriously you take the hiring process the next time a role comes up.
Surveying more than 950 small and medium-sized businesses across Australia and New Zealand, SEEK found that hiring the wrong person, defined as someone hired who did not match the expectations of the role, costs an individual business around $16,000 per incident. Across the SME sector as a whole, which accounts for 97% of all Australian businesses and employs more than half the private sector workforce, the cumulative cost adds up to an estimated $7.3 billion per year.
The $7.3 billion problem
The scale of that figure reflects two things happening simultaneously. The first is that small businesses hire frequently, and the second is that they are increasingly finding it harder to hire well. Nearly a third of SMEs surveyed, 32%, say it is now harder to find the right person for their business. That difficulty is being compounded by the current hiring environment, where job applications are sitting near record highs, meaning business owners are spending more time sifting through a larger pool of candidates while also trying to run their day-to-day operations.
Kylie Pascoe, SEEK’s Customer Insights and Research Lead, describes the compounding pressure on small business owners specifically. “Finding the right people is vital to the success of any business and this impact is often felt more acutely in businesses with smaller teams,” she says. “We also know that small business recruitment is often juggled alongside day-to-day business operations, which makes it even more important for these businesses to feel confident in their hiring decisions.”
Where the $16,000 goes
The breakdown of the $16,000 cost per wrong hire is where the research becomes most useful for business owners trying to understand the risk they are carrying. The largest single contributor is staff turnover, accounting for 55% of the total cost. That includes the additional recruitment costs of finding a replacement, the time spent rehiring, and the time and resource invested in onboarding someone new. When a hire does not work out, you do not just lose the person. You restart the entire process at your own expense.
Additional training and performance management costs make up a further 34% of the total. This reflects the time invested beyond standard onboarding, managing underperformance, providing additional coaching, and dealing with the operational drag of having someone in a role who is not fully functioning at the expected level. The remaining 11% comes from direct financial losses linked to the wrong hire’s actions, whether that is errors, lost clients, or other direct impacts on the business.
Together those three categories paint a picture of a cost that spreads across multiple areas of the business simultaneously. The upfront recruitment cost is the visible part. The management time, the lost productivity while the role is being refilled, and the operational disruption are the parts that do not show up on an invoice but are equally real.
Why small businesses are most exposed
Large businesses carry the cost of a bad hire differently from small ones. A team of 200 can absorb the drag of one underperforming hire in a way that a team of five cannot. In a small business, one wrong hire can affect team morale, client relationships, revenue, and the owner’s own time and mental load all at once. The $16,000 average cost is a meaningful sum for any business, but as a percentage of operating budget it hits smaller operators hardest.
The current environment makes the risk higher than it has been in recent years. Record application volumes mean more time is needed to review candidates. Hiring is often being done under pressure, filling urgent gaps rather than following a deliberate process. And the cost of getting it wrong, as the SEEK research makes clear, is not just the immediate disruption but the cascading cost of turnover, retraining, and refilling the role.
What to do differently
The research does not offer a magic fix, but it does point to where the risk is concentrated. The majority of the cost of a wrong hire comes from turnover and retraining, both of which are downstream consequences of a hiring decision that could have been made more carefully upstream. Investing more time and rigour in the hiring process itself, clearer role definitions, better screening, more structured interviews, and reference checks that go beyond the formality, reduces the probability of the costly outcome rather than managing it after the fact.
Pascoe’s observation that the right fit looks different for every role and organisation is worth sitting with. Hiring decisions made under time pressure, against a vague role brief, or based primarily on first impressions are more likely to result in the kind of mismatch the research is measuring. The businesses that take hiring seriously as a process rather than a task tend to make fewer mistakes and pay less of that $16,000 price tag.
For a sector already managing rising input costs, tighter margins, elevated interest rates, and Payday Super arriving on 1 July, the $16,000 cost of a wrong hire is not an abstract risk. It is a real and avoidable expense that compounds every time it happens.
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