Open positions don’t save the company money, even though there’s no paycheck issued to an empty workstation. In some cases, especially with tech positions, the act of posting jobs means you’re losing money. And the longer the chair stays empty, the worse the situation becomes.
You can learn a lot about the value of every employee on board by calculating the cost of that spot if it’s vacant. And that can also help garner you more support for filling vacancies as efficiently and quickly as possible. Problem is, the calculation isn’t exactly straightforward. There are variables, some of which change by industry and by company. Here’s how you can sort it out.
Determine the Direct Costs of a Job Vacancy
Direct costs of a vacancy are the simplest to calculate. Dice gives this tidy formula: “Position’s annual salary / 220 working days X average days to hire.” You can further support your case for the value of the vacant position (and perhaps the case for a bigger recruiting budget) by weaving in industry-related data.
For example, there are probably industry leaders who have done calculations of their own. Dice recommends using their data as supporting information. The numbers won’t be perfect, of course, but they can help.
After all of that, you can see the company saved a tidy sum when the position was vacant. But unless the job duties were not covered by anyone and the position was truly at a halt, you’ll need to deduct those expenses from the savings. Expenses might come from temp workers, outsourced work and from current employees who took on extra duties.
Examine the Business Impact
Direct costs are straightforward. The effect of a job vacancy on the profitability of a business is not. The possibilities here are potentially far-reaching and require some research. Chances are when you think you’ve covered every base, you’ll think of something more.
A job vacancy can result in issues as simple as delayed communication with a vendor and Dice says it can be as complicated as a delayed product release or buggy software. These issues can directly or indirectly affect the company’s revenue. The general approach here is to calculate the dollar amount lost, spread that cost responsibility among all employees involved, and divide the responsibility by the number of employees to determine each person’s dollar value role in the outcome.
This approach works for lost profits and lost revenue. The calculations for these impacts are the same: (Annual revenue or profits / the number of employees) / 22 working days X the average number of days to hire.
Direct costs plus the profit and revenue effects of a job vacancy are challenging. But the human impact is more so. Dice says it can influence the stress level, morale, absenteeism and even turnover of existing employees. But they caution about making assumptions. An employee might leave the company because of the additional stress. But unless you know for sure, it’s a level of complexity that you might not want to wade into.
Merely attempting to calculate the cost of a job vacancy should offer clarity on how important it is to fill positions with the right people every time. For every dollar that you can assign to the problem, it grows day by day as the position remains vacant. So while it might seem like a self-negating problem, since the company doesn’t pay an employee who isn’t there, the effects are much broader. And the more responsibility that position covers, the more the effects can spill into other areas.
An empty programmer chair can negatively impact the company’s bottom line. And that’s reason enough to use an efficient hiring process, from programmatic job ad placement that saves time to candidate matching that improves the quality of job applicants.