There is no one-size-fits-all, comprehensive way to calculate a business’s cost of an unfilled position. This is because it varies according to what the open position entails. That said, if the position generates revenue, a simple formula can calculate the quota that’s not being met while the role remains unfilled.
For example, an unfilled software engineer position will save ABC Software Company €40,000 but cost them €74,000. Ultimately, ABC Software Company will lose €34,000 due to the unfilled, vacant role.
40,000 – 44,000 = -€34,000
It’s far more complicated for non-revenue-generating positions simply because there are many more variables to consider. Whether revenue data is available or not, the list below covers many likely considerations/variables.
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Identify the Key Factors: Determine the key factors contributing to the cost of an unfilled job in your organization. These may include lost productivity, increased workload for existing employees, missed business opportunities, or delayed projects.
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Determine the Time Frame: Decide the time frame for which you want to calculate the cost. It could be per month, quarter, or year, depending on the impact of the unfilled job on your business.
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Estimate the Lost Productivity: Assess the impact of the vacancy on productivity. Calculate the average output or revenue generated by the position and estimate the percentage of lost productivity due to the vacancy. For example, if the position generates $10,000 in revenue per month and you estimate a 20% decrease in productivity, the lost productivity cost would be $2,000 per month.
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Assess the Additional Workload: Determine the additional workload placed on existing employees to compensate for the vacant position. Estimate the time spent by each employee on tasks that the vacant position would have handled. Calculate the cost of their time based on their salaries or hourly rates.
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Consider Overtime Costs: If existing employees are working overtime to cover the responsibilities of the vacant position, calculate the additional wage costs associated with the overtime hours.
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Account for Recruitment Costs: Factor in the costs associated with the recruitment process. This may include expenses for job postings, advertising, recruitment agency fees, background checks, and pre-employment assessments.
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Include Training and Onboarding Costs: If the unfilled job requires training or onboarding of a new employee, estimate the costs associated with the training program, materials, and any external trainers or resources required.
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Evaluate Missed Business Opportunities: Identify any missed business opportunities or delayed projects caused by the unfilled position. Estimate the potential revenue or savings that could have been generated if the position was filled in a timely manner.
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Consider Employee Morale and Turnover: Account for the impact on employee morale due to the increased workload and stress caused by the vacant position. Consider the potential costs associated with decreased productivity, increased absenteeism, or higher turnover rates.
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Calculate the Total Cost: Add up all the costs identified in the previous steps to calculate the total cost of the unfilled job. Depending on the time frame chosen, you may multiply the monthly cost by the number of months the position remains vacant to get an estimated annual cost.
Remember that this calculation is an estimation, and the actual cost will vary based on your organisation’s circumstances.
