HR Mavericks

Eddy’s HR Mavericks Encyclopedia


You know the stress of having positions open for long—the added stress to the employees covering those tasks and to you while you recruit and hire—but are you aware of how much those vacancies cost financially? Read on to learn the impact of job vacancies, how much they cost your organization, and how you can reduce vacancies altogether.

What Is a Vacancy?

A vacancy is exactly what the hotel signs indicate when they say Vacancy or No Vacancy: either you have job openings or you do not. It’s important to note that vacancies don’t only refer to openings created when employees leave their roles; there can be new positions you’ve created that are vacant as well. Any position that should have an employee that does not qualifies as a vacancy.

The Impact of a Job Vacancy on a Business

We all know that without employees in the right positions, the business cannot go on effectively, but let’s dive into some more subtle and substantial impacts a job vacancy can have on your organization.

Lost Revenue

Vacancies mean loss of production, reduced service, and potential loss of growth opportunities for your organization. These may be the times you explain to your clients or customers, “We are in the process of hiring and training new employees, so bear with us as they learn.” This lost productivity trickles down to the bottom line if the vacancy isn’t filled.

Burnout/Decreased Morale

In order to have the impacts of the vacancy go unnoticed by clients or customers, extra work often has to be picked up by the other employees. Even if it’s just one open position, the expectation will be that the customer comes first and the employees should work accordingly. This can lead to overtime to fill the gaps, and then overtime again to train the new employees you hire. Worst case, your current employees are faced with allowing some things to go unfinished and suffering the consequences because there just aren’t enough hours in the week. Overworked employees who step up during a job vacancy can quickly feel devalued and burn out.

Financial Cost

Open positions come with a substantial financial impact for your organization. Vacancy, no matter how you spin it, impacts the expenses of your business, including:
  • Overtime to cover the responsibilities of the open position
  • Loss of revenue due to insufficient personnel
  • Time spent recruiting, marketing, and hiring
  • Possible use of temporary staffing services or contractors
  • Time spent training the new hire
Let's look at how to calculate these costs more exactly.

How to Calculate Vacancy Costs

You’ve learned how a job vacancy can impact your business drastically, but let’s take some time to look at how to calculate these vacancy costs so you can be educated when evaluating how to move forward in filling them for your organization. Vacancy cost takes into account all the items we’ve just reviewed and puts numbers to them in order to make more informed decisions.

Step 1: Determine Gross Annual Salary

This will vary from vacancy to vacancy, but it is important to understand how much your organization is losing due to vacant positions. Your numbers will be drastically different if you have an entry level position open vs a senior level executive position open, and your equation should reflect that. For this number, look strictly at the gross annual salary of the open position; do not include any benefits or additional compensation. For hourly employees, it is most effective to take their annual gross for this calculation. To find that number, take their hourly pay and multiply it by the hours worked per year; for full-time employees, this number is traditionally 2,080. So, for example: a full-time employee who is paid $15 an hour would have a gross annual salary of $30 x 2,080 = $62,400. Use this number for your equation.

Step 2: Determine Potential Working Days per Year

This can vary from organization to organization. For example, if your company provides two weeks off during the Christmas season, or if you’re a teacher and you have summers off, these numbers can change. But in general, for most employers, the working days per year is around 260 for every employee. Feel free to use this number in your calculation to make it more streamlined and consistent, or count up the days your organization operates and use that for your equation.

Step 3: Find Average Vacancy Time

This will, of course, depend on the position, but as of this writing, on average it takes about 42 days to fill a position. You may evaluate your current vacancy and your previous time-to-fill numbers and understand that the one you’re currently hiring may only take 15 days because your pipeline from previous job vacancies is strong; 42 days is just an average. You’ll want to evaluate the amount of time it has taken you in the past to fill previous positions for your organization in the current job climate in order to come up with a number that fits your company. Feel free to use the average of 42 if you don’t have any metrics of your own yet to consider.

Step 4: Run the Numbers

Now that you’ve gathered all your data, it’s time to run the numbers and see exactly what your vacancy is costing you. The equation will read as follows: (Gross annual salary / Working days) x Average vacancy time = cost of vacancy Let’s run the numbers using the information we have gathered above. Consider an open position with a gross annual salary of $62,400. Working days per year are 260. Using the standard vacancy time of 42 days, your formula would read: ($62,400 / 260) x 42 = $10,080. It is costing your organization $10,080 to have this position open for 42 days. That's a good incentive to fill those vacancies.

Effective Methods to Reduce Vacancies

Now that you’ve seen how costly vacancies can be for your organization, let’s look at a few methods to cut down on those costs and perhaps avoid vacancies altogether.

Invest in Your Current Team

When employees feel valued, cared for, and invested in, they are more likely to stay at your organization. If you take the time to develop your employees and help them achieve their career goals, show them that you believe in their worth and empower them to be the best employee they can, and give them all the tools to do so, job vacancies are sure to be low. Take the time and resources to invest in your current team. It will surely cost less than $10,080 for 42 days if you do.

Stay Competitive

When it comes right down to it, the bottom line is that you need to stay competitive. That means everything from benefits, pay, leave plans, 401(k) matching contributions, holiday parties, and employee perks to stay competitive. If your competitor offers incentive travel for the top sales earner and you’re still offering a free lunch, step up your game. Give them the option to choose something that provides more perks for them and their family. Keep up on market trends and avoid job vacancies by doing so.

Be Prepared

You can take all the necessary steps to ensure your employees are happy—morale is strong, you show them you value them, you pay them well, the list goes on and on—but vacancies will still happen. Be prepared. Watch for the signs of employees getting ready to leave and get your recruiting pipeline ready to fill the gaps when necessary. Look for employees losing interest in their work, loss of productivity, and even time off for job interviews. Do your best to not be blindsided by a job vacancy and set your organization up for success when they do come.
Shalie Reich

Shalie Reich

Shalie has over 4 years of experience working in a variety of HR positions and organizations including: working as an HR department "of one", working with a start-up based in Europe, to working in a fully established robust USA based HR department. Shalie has experience in multiple states and countries with all aspects of the HR spectrum. She has a passion to share her knowledge and experience to benefit the HR profession!
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Frequently asked questions
Other Related Terms
Boolean Search
Candidate Experience
Candidate Persona
Company Goals
Company Reputation
Customer Relationship Management (CRM)
Elevator Pitch
Employee-Generated Content
Employer Brand
Employer Value Proposition
Essential Job Function
Evergreen Requisition
HR Forecasting
Hiring Criteria
Hiring Preparation Process
Hiring Process
Intake Meeting
Job Analysis
Job Boards
Job Description
Job Design
Job Evaluation
Job Post
Job Requisition (Req)
KSAs (Knowledge, Skills and Abilities)
Minimum Qualifications
Mock Interview
Non-Essential Job Functions
Physical Job Requirements
Salary Budget
Succession Planning
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