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Cost of Vacancy: Unfilled positions as a decisive cost factor

04/05/2021 2021/05

Cost of Vacancy: Unfilled positions as a decisive cost factor

Vacancies can be an expensive business. This article explains exactly where the costs arise when a position remains unfilled and how they are calculated.

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RECRUITING 4.0

How much does an unfilled vacancy cost?

"My customer just contacted me, and I still haven't received the written offer. What's going on here?"

"You know the internal sales department has been hopelessly overworked since Ms. Miller left. They just can't keep up with the work!"

"What, the position still hasn't been filled? How long is that going to take? If we don't get faster, the customer will go to the competition and we'll lose the job! What that will cost again!"

Unfilled positions can cost a lot of money. In our example, the dynamic salesperson can even quantify how much money the company misses out on if an order is not closed. 

In other cases, the cost of an unfilled position is less obvious: 

The company doesn't even apply for an order because of too thin a staffing level, the development or manufacture of a product is delayed and leads to lost revenue, or existing employees work expensive overtime to make up for the missing manpower.

These vacancy costs can be roughly calculated with the help of a formula. The starting point is the gross annual salary of the vacant position; in our example, the clerk in the internal sales department earns €38,000 per year. The next step is to assess the importance of the unfilled position for the company's processes: 3 = essential, 2 = medium importance, 1 = subordinate position. Since we have already seen that order processing is severely delayed in our example, this position is given a factor of 2. 

First, we now calculate what the cost per lost workday would be. In Hamburg, the year 2021 has 256 working days, so €38,000 annual salary / 256 working days = approx. €148 per day.

This is multiplied by the factor 2 for average importance of the position = 296 €.

Now comes the really painful point: the number of days a position remains unfilled in the company. In 2019 (more recent figures are not yet available), this vacancy time averaged a whopping 130 days across all positions and all industries, or over four months. 130 days x €296 results in calculated vacancy costs for the unfilled internal sales position of €38,480.

The more important the vacant position is for the company, the higher the cost of vacancy. As another example, a Java front-end developer in Berlin: annual salary of €75,000, these positions in IT are unfilled for an average of 182 days.

Let’s calculate:

  • 75,000 € / 255 working days in Berlin 2021 = 294 € per day
  • How important is the position for the company? Factor 3 (very important)
  • 294 € x3 = 882 € cost for the company per day 
  • 882 € x number of vacant days = 882 € x 182 days = 160,524 € vacancy costs for the company due to the vacant position for 182 days!

Further calculation aids can be found here!

Our examples show the importance of strategic recruiting and that unfilled positions do not mean lower costs.

A vacancy causes immense costs
The actual costs of a vacancy can be calculated with the Cost of Vacancy.
The actual costs of a vacancy can be calculated with the Cost of Vacancy.

ARTS - Your HR Expert

Do you have concrete figures for your company on how long it takes to fill a vacancy? These costs are a good argument to speed up your recruiting process, for example by hiring a recruitment agency, or by externally managing your vacancy as part of a recruiting package. By reducing vacancy times and associated costs, such investments can quickly pay for themselves. Especially if your HR department already has its hands full, we at ARTS will be happy to help you reduce your vacancy costs due to unfilled positions and make your company more responsive.

If you are repeatedly struggling with unfilled positions in your department or company, it is also worth getting to the bottom of the causes for the fluctuation among your employees - our colleague Nadia Döhler will be happy to look into the background together with you.

About the Author
Valeska Szalla
Recruitment Consultant
Since 2017 I have been writing my success story at ARTS, where I can always add a new chapter through the various projects I have been involved in.

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