Your vacant positions are costing you money

Vacant positions in your company can carry many problems that are not always clear at first sight. Therefore, we created this Vacancy Costs Calculator to clarify these costs. Using the average salary for each position, importance factor and average vacancy days, we can estimate how much money you are losing on a yearly-basis.

Vacancy Costs Calculator

What are vacancy costs?

Vacancy costs are the estimated losses in revenue that a company's faces due to vacancies and describes the business impact of the shortage of skilled workers. Today, many organizations tend to have a strong focus on cost minimization, overlooking the potential long-term and negative impact of how they handle vacancies. Consequently, there is a discrepancy between understanding a vacancy as saving costs or as an investment.

Unresolved personnel issues are widely spread among German medium-sized businesses. As a result, companies suffer from lost sales, unmanageable workloads and an overall reduction in productivity and profitability. At first glance, savings in salaries, overheads and benefits seem to increase the company's turnover. However, a profound confrontation with the issue quickly reveals that the opposite is the case.

Problems with vacant positions become increasingly significant, depending on the relevance of a position for a company. If, for example, a company is struggling with deficiencies or problems in sales, such a vacancy is more severe than in a stable situation. This is why it is extremely vital to analyse the economic consequences of the lack of an efficient employee in key positions within your company.

What causes the problem?

Most top managers are aware of the challenges behind vacancy costs and consider them critical to the success of their business. However, the right measures are not always the ones taken. This is usually due to the following causes:

  • Lack of investment in HR Strategy
  • Strong focus of companies on cost minimization 
  • Salaries reported in the balance sheet as an expense (not as an investment)
  • Missing key figures and calculation models on the true loss in value 
  • Inadequate emphasis on the relevance of this topic

What are the resulting consequences of open vacancies?

Open vacancies present various direct and indirect problems for the company. Significant consequences include:

  • Direct loss of revenue: projects or orders are unable to be fulfilled or are not executed in the desired form
  • Reputation loss: Customers book fewer orders due to unsatisfactory or unfulfilled projects
  • Declining morale and performance of the existing workforce: Redistribution of current orders leads to overwork, reduced productivity and frustration

What are the potential solutions to the problem?

Unfilled vacancies may be a challenge, but they are certainly not unsolvable. But clear and targeted solutions are required:

  • Introduction of concise and targeted recruitment KPIs in the HR department
  • Implementation of external recruitment solutions
  • Creation of a working environment that minimizes employee fluctuation

Be aware that factors like the adoption of tasks by less qualified employees, the slowing down of any competitive advantage of the company or an increased dissatisfaction of existing employees due to increasing workloads will negatively affect the profitability of your company. In the worst case scenario, this may also lead to a loss of corporate culture.

For determining vacancy costs we use the average salary per position in Germany, the factor of the business relevance* of the employee for your company and the average number of vacancy days for filling this position. Of course, in this context, we provide you with the average vacancy times per position. In addition, you can also insert a salary according to your salary expectations.

*Explanation of the business relevance factor: The criterion of business relevance depends on the degree of seniority and the direct impact on turnover generated by the core business. The coefficient is divided into three levels according to the respective weighting.

Factor 1: This factor corresponds to the lowest level of business relevance and refers to an employee with low seniority and no direct relevance to the core business.

Factor 2: This factor corresponds to the medium level of business relevance and refers to an employee who EITHER proves to have a high degree of seniority OR has a direct influence on the turnover in the core business. 

Factor 3: This factor corresponds to the highest level of business relevance and refers to an employee who has BOTH a high degree of seniority AND a direct influence on the turnover in the core business. 

Remark: Of course, the factor of business relevance cannot always be clearly determined. Consider the example of an eCommerce-shop: You need both customers and a functional shop. In case you have additions to the approach described here, please send your suggestions to [email protected].

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