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Weighing Costs — When to Fire an Employee

Professional handing over a piece of paper to another with his hands on his head

Incompetent and toxic employees cost businesses more than money. Incompetent employees are those who are unable to meet expectations. Toxic employees, by comparison, are continually negative or pessimistic. They shoot down ideas, don’t contribute to a positive work environment, reduce productivity, and drag down employee morale. What’s worse is that their mindset is contagious and can spread to their colleagues. As the adage goes: It only takes one bad apple to ruin the bunch.

But what is the cost of a bad hire and how does it compare to the cost of firing an employee? Furthermore, how do you know when to fire an employee rather than trying to rehabilitate or “fix” them?

The Cost of Keeping a Bad Employee

According to a CareerBuilder survey, nearly 75% of participating employers have hired the wrong person for a position, losing an average of nearly $15,000 on every poor hire they made in 2016 alone. According to the U.S. Department of Labor (DOL), the estimates get worse, indicating that the price of one bad hire is a minimum of 30% of the employee’s first-year earnings. When you’re talking about someone who earns $50,000, $75,000, or even $150,000 a year, these costs add up quickly.

According to a Harvard Business School study, the turnover cost of replacing workers who are induced to leave when there is a toxic employee present on a team is $12,489. This estimate, which does not include potential other costs relating to litigation, regulatory penalties, and employee morale, stands in stark contrast to the cost of hiring an excellent job candidate.

The study reports:

“Avoiding a toxic worker (or converting them to an average worker) provides more benefit than finding and retaining a superstar. Assuming that it is no more costly to avoid a toxic worker (or replace them with an average worker) than it is to find, hire, and retain a superstar, it is also more profitable to do the former over the latter.”

Knowing The Right Time to Fire an Employee

Weighing the costs of if or when to fire an employee? Determine whether they bring value to your team, if their personal and professional values align with yours, and, ultimately, if they are making your organization better or worse.

When you have identified a bad or negative employee, there are some things you can do before moving straight to the termination stage:

  1. Gauge Their Level of Toxicity — Are the behaviors or actions of the employee merely annoying, or are they approaching the level of becoming a potential lawsuit or formal investigation? If they are occasionally negative but are not a threat to anyone or anything, move on to the next step. If, at any point, you determine that the individual or their behaviors are a threat to anyone else, contact the appropriate authorities.
  2. Be Proactive in Addressing Issues— Determine and implement proactive measures to address the actions or behaviors such as counseling, an official reprimand, and employee training.
  3. Re-Evaluate and Determine Your Course of Action — When you have gauged the level of danger/damage and go through the steps of addressing the issue, re-evaluate to determine whether the situation has changed. Has it improved? Or, has the situation intensified?

If you go through these steps and realize that nothing has changed or the employee brings no real value to your organization, it may be time to call a spade a spade and move on to greener pastures (or less toxic talent, in this case). This will be a clear indicator of when to fire an employee. After all, hiring a new employee is less costly than the cost of keeping a bad employee.

Tips on What to Avoid When Firing Employees

In our increasingly litigious society, it’s essential when firing employees to make sure that you do it right. Following the appropriate steps when terminating employees is imperative to potentially avoiding the costs that can ensue from a lawsuit. has come up with a great list of tips for what you’ll want to avoid when firing employees:

  1. “Don’t Fire an Employee Unless You are Meeting Face-to-Face” — When you fire someone, do it face-to-face and not via email, telephone, or other methods. They deserve to be shown that courtesy, which will go a long way with your other employees.
  2. “Don’t Act Without Warning” — No one wants to be blindsided. Unless an employee does something dangerous or appalling, give them employee performance feedback and coaching to address performance issues. Just be sure to document your efforts.
  3. “Don’t Start a Conversation Without a Witness” — Have another employee with you (preferably an HR representative) who can serve as a witness or step in if you are struggling with the firing process.
  4. “Don’t Make the Conversation Longer Than It Needs to Be” — Keep it short and simple. If you’ve coached the employee’s performance over time, remind them of that.
  5. “Don’t Let Them Think the Decision is Not Final” — While you can approach the employee with an attitude of kindness and respect, make it clear that the termination is final and that they cannot do something to affect your decision.
  6. “Don’t Let Them Leave with Company Property” — Ask the employee to hand over all company property there during the termination meeting. This could include a door badge, employee access card, keys, laptop, smartphone, and more.
  7. “Don’t Allow the Former Employee to Access His Work Area or Coworkers” — Marching a sobbing employee to their work area in front of coworkers is not only undignified, but it also can negatively affect other employees. Make arrangements for them to come back after hours or on the weekend to collect their belongings (or offer to mail them). This also prevents the terminated employee from accessing or taking company property along with their possessions.
  8. “Don’t Allow the Employees to Access Information Systems” — With the help of your IT team, terminate the employee’s access to all company systems, networks, email accounts, and resources during or slightly before the meeting.
  9. “Don’t End the Meeting on a Low Note” — End the meeting on a positive note or word of encouragement. This could include talking about the job search process and where they can find resources. Suggest a career that may be a good match for their skills.
  10. “Don’t Fire an Employee Without a Checklist in Hand” — When firing employees, it’s essential that you remain on task and organized to ensure you address all relevant topics.

While knowing when to fire an employee can be tough, it is something you will need to be in tune with to make your organization as productive and healthy as possible. The cost of keeping a bad employee will only grow the longer you wait and may result in losing other workers.

A Recruiting Firm Can Find & Place the Top Talent You Need

After an employee has been terminated and the dust settles a bit, you’ll want to move on to the task of recruiting and interviewing their replacement. This is where a professional recruiting firm or headhunter can be of assistance.

4 Corner Resources (4CR) is an award-winning staffing agency headquartered in Orlando, Florida. While we may be located in the sunshine state, we work with Fortune 500 companies and others across the United States. We help companies find the ideal employee virtually every time and avoid the cost of a bad hire.

Contact our team today to learn more about how we can help you bring aboard the top talent you need so you hire right the first time.

Pete Newsome

About Pete Newsome

Pete Newsome is the President of 4 Corner Resources, the staffing and recruiting firm he founded in 2005. 4 Corner is a member of the American Staffing Association and TechServe Alliance, and the top-rated staffing company in Central Florida. Recent awards and recognition include being named to Forbes’ Best Recruiting Firms in America, The Seminole 100, and The Golden 100. Pete also founded zengig, to offer comprehensive career advice, tools, and resources for students and professionals. He hosts two podcasts, Hire Calling and Finding Career Zen, and is blazing new trails in recruitment marketing with the latest artificial intelligence (AI) technology. Connect with Pete on LinkedIn