Job Vacancies Are Costing You More Than You Think
If employers calculated the full costs of leaving jobs vacant, they would immediately rethink the practice. During the pandemic and recession, companies survived by squeezing costs, mostly on labor. That cost-cutting mindset persists as organizations spend less on recruitment and its associated costs today than they did before the recession, and needlessly drag the hiring process out for months as well.
The monetary costs of leaving jobs unfilled are pretty easy to establish, basically: the loss of productivity for that role plus the total spend for recruiting and training a new employee. But that’s only the beginning of the calculation. Based on data from the Society for Human Resource Management (SHRM), the average cost per hire was thought to be $4,700 in the past. But new research shows many employers estimate the total cost to hire a new employee can be three to four times the position's salary, so into the tens and hundreds of thousands of dollars. According to SHRM Foundation Chair, Edie Goldberg, just 30% to 40% of that amount relates to hard costs; the remaining 60% reflects soft costs, the ones you may not be considering part of the equation.
Because the list of indirect “soft” costs is extensive, and because they can negatively impact virtually every aspect of your business, it’s crucial that you understand them and include them in your cost of vacancy calculations. A full and accurate picture sets a baseline for successful recruitment in today’s challenging talent wars. And it helps sustain your financial health and competitive market position.
What's Left When Someone Leaves?
The effects of just one job vacancy can ripple through a team, department, and sometimes throughout an entire organization. Teammates and colleagues get confused about who is responsible for what. Communication flows are interrupted, and people don’t get the information or support they need to finish a project or finish it on time. Best practices are lost along with corporate knowledge and expert guidance. Errors result. Customer relations suffer. Productivity and morale take a dive while people struggle with overwhelm and burnout from assuming additional tasks. They feel less engaged and turnover increases. Opportunities are lost.
Multiply this scenario by your number of vacancies. Even though it’s difficult to determine the actual cost for these consequences, it is not hard to imagine what those might be. And it’s big. The picture sounds bleak but the solution is under your control.
Calculate the Total Costs of Vacancy
A tool that helps calculate your real job vacancy costs is essential for developing a successful recruitment strategy. It also helps you understand where you need to strengthen support for your people when there are vacancies and improve the overall employee experience, minimizing turnover (and its costs).
Although there are numerous factors that go into figuring each of these COV pieces, the basic formula is this:
Cost of Vacancy = Revenue Lost – Payroll and Benefits Savings
The TalenTrust team has developed an easy-to-use, all-encompassing COV calculator and we are introducing it today. It’s designed to give you the full picture you need to make critical decisions about your people and your business.
While you may have believed that it’s cost effective to leave jobs unfilled to save money on salaries and benefits, the reality is that’s not the case. The negative effects of leaving jobs unfilled can trickle down into your organization, hidden but in plain sight. By taking all factors into account to calculate the real cost of vacancies, you’ll have the data you need to make sound decisions related to recruitment, retention, and growth.