Project Description

It’s a question that not many business owners contemplate mainly because, if there is a vacancy in to be filled, their time is dedicated to recruiting. However, it’s an important question that you should know the answer to before the situation arises.

In the first place, there’s the financial cost. You might assume that with an unfilled vacancy you’re saving the cost of a salary. However, after reading this, you will have a better understanding that the overall costs far outweigh what you will ‘save’ in an unpaid salary.

I: Non-financial costs

Before we go into how much an unfilled position sets you back financially, let’s go over some of the non-financial costs. A simple way to analyse these hidden costs is to take a look at each of the types of position in your company.

Lower level: An unfilled vacancy means that other staff have to carry out the work of the missing person. Whilst it can be borne in the short-term, this puts added strain on them and is likely to have a knock-on effect in terms of the quality of their output. If the staff has certain bonuses to reach, they could miss out on these targets, causing team members to become disgruntled. The worst-case scenario is burn out, triggering the desire to leave, thus increasing your financial loss.

Intermediate level: Intermediate staff in your organisation are usually those with expertise skills. To maintain your service levels for clients, you may need to hire temporary staff who come in at a higher pro-rate expense, thereby costing more than a regular full-time staff member.

Higher level: If you need to fill a team leader position or management role, you will be missing the person who is responsible for running of projects, and everything from communication to deadlines will be affected. It will become difficult to meet the demands of the market, risking your business reputation.

For you: While your attention is focused on recruitment, you aren’t spending time on the actual running of your business. Core business areas can become neglected, with negative consequences.

One thing that is becoming increasingly more important is the culture in a working environment. It’s more and more necessary that people fit in with the values and work ethics of a company. If you have a high staff turnover exacerbated by unfilled positions, it’s very difficult to promote and maintain a positive office culture. It’s truly a vicious circle because if an employee doesn’t fit in with the culture, they are more likely to leave, and so once again, your costs go up.

II: Financial costs

For the sake of this worked example, let’s assume an average annual income of $50,000. We will take the case of a company that has an unfilled vacancy that has gone unresolved for two months.

Now, according to Statista’s 2018 survey, the average revenue per employee is $166,000. Assuming that the average number of working days is around 240 per year, the average number of working days per month will be 20 days. So:

Cost of a single vacancy over two months = $166,000 x (20/240) x 2 = $27,667

If you go back to the average annual salary ($50K), you’ll see that the cost of such a vacant position is significantly more than the equivalent cost of a salary. And if the vacancy were to remain unfilled for even longer, the picture looks worse.

Clearly, you need to input your own statistics to get a clear idea of what a vacant position costs your firm but don’t be surprised if it is similar to our example.

In conclusion

It’s important to understand both the financial and non-financial costs of an unfilled vacancy at your firm. Once you can clearly see the potential consequences, it will motivate you to ensure your recruitment process is firmly in place.


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