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Unfilled job positions can be costly for businesses, but many are unaware of this. By calculating the Cost of Vacancy, the importance of having an effective recruitment strategy and its impact on the company's performance can be clarified. When senior management comprehends the potential loss of tens of thousands of euros each month due to vacant positions, they will likely prioritize including recruiters in the strategic decision-making process.
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Fill in the fields below to see the estimated financial cost of your open position.
Indicates how much the employee earns gross in euros per year.
In Germany that is an average of 250 days.
Average time in days (IT & Engineering: 134 days according to Statista)
Cost of Vacancy
136.680 €
Estimated total cost of the unfilled position
Formula
Annual Salary / ⌀ Working Days per Year × Factor × ⌀ Time to Fill
The Cost of Vacancy is a key figure for a company's recruitment and is typically used to plan the recruitment budget. It reflects the costs incurred by a vacant position in a company. The ratio of this cost is based on the assumption that each employee contributes numerically to the company's revenue, which means that an unfilled position represents a loss for the company.
The costs of unfilled jobs are complex and may not be immediately evident. They are hidden costs that arise from various factors.
On average, a manager should earn their company three to five times their annual salary. For instance, let's consider an R&D manager who makes 120,000 euros annually. If this position is eliminated and left unfilled, the company could lose between 1,400 to 2,300 euros in daily revenue. If this role remains unoccupied for half a year, the expenses increase to roughly 300,000 euros — an impressive amount, yet only a small percentage of the total impact an unfilled position can have on a company's profits.
Loss of Revenue
Personnel Costs
Management Costs
Customer Dissatisfaction
Impairment of Competitiveness
All these factors culminate, initiating a downward spiral that may result in not only dissatisfied employees but also in lost revenue.
The cost of a vacant position can be calculated and depends on several factors:
Annual Salary / ⌀ Working Days per Year × Factor × ⌀ Time to Fill
Suppose a company has an open position for a software developer. The annual salary for this position is €62,000. The company assumes that there is an average of 250 working days per year. The multiplication factor is set to 2. The average time to fill the position is 120 days.
62,000€ / 250 × 2 × 120 = 59,520€
These figures result in a cost of vacancy of 59,520 euros. After just 4 months, the cost of a vacant software developer is therefore only slightly less than his annual salary. After one year, the cost of the unfilled position would already amount to 181,040 euros — almost three times the annual salary of this position. Accordingly, positions with a high influence factor in particular should remain unfilled for as short a time as possible.
Costs of vacancies may indeed adversely affect a company's financial status. However, additional performance factors also play an important role.
If an employee leaves their job, colleagues often have to take on their tasks until a replacement is found. This can result in a substantial increase in workload. Without any prospect of improvement, employee motivation declines, and dissatisfaction arises which, in the worst-case scenario, can lead to termination.
If employees have to take on additional tasks, this slows down regular processes. Ambiguity in the allocation of work and the same amount of work with fewer personnel results in decreased productivity for a team.
Overworked employees hardly have time for innovative and creative ideas. This slows down growth and affects the company's competitiveness in the long term.
In times of skill shortages and the 'war for talent', where companies struggle to fill their vacancies with suitable candidates, it is essential to proceed strategically to establish oneself as an attractive employer. This is especially important when vacancies arise unexpectedly, as speed is crucial for the reasons mentioned above and recruiting becomes a critical process for success. There are several ways to fill an unfilled position.
These include models that enable companies to respond flexibly to their staffing needs. In particular, freelancers provide a perfect solution for efficiently bridging short-term bottlenecks.
One way to reduce the duration required to fill a job position is to actively search for candidates yourself. In active sourcing, companies specifically search for suitable candidates and contact them. Although this can be time-consuming, it shortens the time it takes to fill a position.
Another type of sourcing that involves actively outsourcing certain tasks to external, specialized freelancers or contractors.
Establishing a talent pool to keep in touch with previous, skilled applicants increases the chances of being able to hire suitable candidates more quickly in the future. Another option is to utilize existing personnel databases from a personnel service provider or consider employee leasing.
Through efficient resource planning and strategic task allocation as part of workforce management, existing employees can temporarily take on additional responsibilities to bridge the bottleneck. This gives the company time to find a suitable solution without productivity and quality of work suffering. This allows greater flexibility to respond quickly to staff shortages and helps bridging vacancies.
The costs of an unfilled position are not explicitly listed on your company's financial statements, but they do exist and can have a significant negative impact. Alongside a decrease in efficiency and productivity, employee discontent also plays a major role. Consequently, it is recommended to be aware of these expenses and fill positions as quickly as possible in order to minimize possible negative effects.
