What does an unfilled position cost you?
On average, it takes between four and seven months in Germany to fill an engineering position, for example. For specialists, the period can also be longer. Demand is highest in the technical field and especially in production. This is made clear by the Ernst & Young SME barometer https://go.ey.com/2jsdaH3.
In our previous blog post, I already mentioned the “cost of vacancy” (COV). Today I would like to provide the promised calculation.
The longer a recruiting process takes, the higher the recruiting costs, simply because of the running times of the ad placements, the spreading of the same, the coordination of consultants and employees, the use of temporary staff, overtime of the staff, etc. The costs of recruiting are higher than the costs of advertising. On the other hand, there are the costs “saved” by not filling the vacancy.
But an unfilled position costs something, doesn’t it?
If we assume that each employee contributes to turnover in a certain way, then the cost of an unfilled position can be calculated quite easily. We now only have to assess the factor with which the employee contributes to turnover, be it through the generation of turnover or the processing that leads to invoicing. As a rule, a factor of 1 to 3 is assumed here.
Now let’s take, for example, an engineer with an annual salary of €80,000. And let’s put a figure of 1.5 on his performance in relation to the company’s turnover. The calculation then looks like this:
Annual salary : Ø working days/year * factor * Ø recruiting time = COV
(80.000 € : 2471 )* Factor² = 324 €/day * 1,5 = 486 €/day
1Working days in Bavaria 2017 ² assumed average factor of 1.5
With an average duration of occupation of 5 months, this corresponds to the sum of
486 € * 105 days = 51,030 € costs for not filling a position! Almost 64 % of the annual salary!
And as if that wasn’t enough. On top of that, there can also be potential sickness costs from overworking the workforce. Furthermore, there may be an exodus of employees and the loss of good reputation if a job advertisement appears in the media for too long.