Every company leader knows that the biggest cost of doing business is most often labor. Employee wages, benefits, payroll, and taxes can comprise up to 70% of a company’s cost structure, and that number is rising as the economy improves.
Another cost frequently associated with labor is the cost involved in hiring and turnover. Talent is increasingly difficult to acquire and as a result, companies are paying closer attention to Cost of Vacancy – the actual cost of an open position in an organization. Some managers might see a silver lining when they have a vacancy in that they are saving money on salary and benefits. Smart leaders know, however, that there are significant costs associated with vacancies and the longer positions stay open, the greater the financial impact.
Our exploration into Cost of Vacancy includes many hidden costs that companies sometimes do not take into consideration. Let’s look at both the direct and soft costs associated with job vacancies:
There are four main categories of Direct Costs:
- Opportunity Cost Of an Open Vacancy – if the open position is a revenue producing role (such as sales) you can directly calculate the revenue or profit you are losing by not having the position filled
- Cost To Cover a Vacancy – you might need to use a temporary employee or consultant to cover the role while trying to fill the job. Not only do temporaries/consultants cost more, they typically do not produce at the same capacity or quality as a regular hire
- Cost To Fill a Vacancy – these costs includes hiring manager/HR time, advertising, resume screening, cost of interviewing, behavioral/skill assessments, background checking, moving/relocation costs, and perhaps agency or 3rd party recruiter costs
- Onboarding Costs – this includes trainer or manager time plus the cost of any tools, materials, and travel
These direct costs are not the only financial impact vacancies can have on your business. Also consider the following potential business factors that have an indirect financial impact:
- Decrease in quality due to lack of resources, burn out/stress from remaining staff, less competent people filling in to cover the work
- Sliding customer service levels
- Lost customers due to suffering service levels, quality, or production levels
- Lost market share
- Project or initiative failures due to lack of resources
Finally, there are also significant soft costs that are harder to measure but still important when considering Cost of Vacancy:
- Negative impact on remaining employees who might be asked to cover vacancies, requiring them to work harder and experience more stress and burn out
- Team performance and morale can dip due to increased workload
- Managers often need to fill in, requiring them to spend less time managing their teams
- Underutilization of space/equipment
RPO Can Minimize Your Cost of Vacancy
Partnering with the right RPO provider brings many benefits, one of which is decreased costs related to vacancies. RPO providers not only deliver significant recruiting expertise to fill your jobs quickly; they also have tools and technology to streamline and improve your hiring practices. An RPO partner (like Advanced RPO) will deliver:
- Decreased time-to-fill
- Increased hire quality; employees who will ramp up quickly and make positive contributions faster
- Hiring the right talent also means lower turnover, reducing your vacancies to start with
- More efficient processes require less time from hiring managers, reducing cost-per-hire and improving manager productivity
RPO has been proven to reduce overall recruitment costs by 15-40% on average for companies of all sizes, resulting in significant, positive ROI. Make talent acquisition your strategic advantage.
Recruitment Process Outsourcing (RPO) solutions from Advanced RPO can help you evaluate and improve your hiring processes to get the talent you need to succeed. Contact us today to learn more about our high-touch solutions.