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Calculating the Cost of an Empty Chair

The typical time to fill a role in the UK is 48 days in the UK and Ireland and 43 days in the US. Naturally, this varies depending on the seniority, skills, local competition and the wider job market. And the wait often won’t end when an offer is accepted. On the other side of this timeline is the candidate's notice period with their current employer. This can be especially critical for roles with lengthy notice periods, bonus terms or contracted gardening leave.

Throughout this time, the business will lose revenue, either directly for an income-generating employee or indirectly for roles in a support function. The impact of the empty seat is also felt across the team. Other employees may need to step up and cover, impacting everything from sick leave to productivity to overall attrition rates.

How do we put a value on the empty chair? 

To give the cost of an empty chair a monetary value, we can use the company's annual revenue, the number of employees and a seniority rating (0.75 for junior employees, 1.5 mid-level, 3 for senior/c-suite) to calculate the gross impact as follows:

(Annual revenue / Number of employees) x Seniority rating = Gross Annual Impact

From here, we can deduct the salary cost and any benefits that the employee would be entitled to:

Gross Annual Impact - Salary & Benefits = Net Annual Impact

Finally, we can divide this figure by the average working days for a daily rate.

Net Annual Impact / Working Days per Year = Net Daily Impact

Worked Example

Amy leaves her role as a software developer. She was paid a salary of £70,000 for a company with a £40 million turnover and 200 employees.

(£40m / 200 employees) x 1.5 seniority = Gross Annual Impact £300k

£300k - £75k total remuneration costs = Net Annual Impact £225k

£225k Net Annual Impact / 260 annual working days = £865.38 Net Daily Impact

If Amy’s role is vacant for four weeks or 20 working days, that becomes a cost of over £17,000 to the business.

Cost of productivity for a new starter

It’s also important to consider the speed to competency of a new employee. During the initial onboarding period, we can expect productivity to be lower than the previous post-holder who knew the job well. Even highly skilled hires require time to adapt to new processes and learn how a company works. A study by the Work Institute found that as many as 43% of new hires leave their role within 90 days, escalating recruitment costs significantly. Investing in this period will be worthwhile, helping increase productivity and improve retention rates.

The solution

People are your biggest investment, and it’s important not to rush the process or rely on the right talent finding you. Investing in a talent pipeline allows you to identify potential future employees and shorten your hiring time for critical roles. Best of all, it’s possible to do so without placement fees.

Talk to our team today to find out how we can support your current and future recruitment while keeping your budget on track. 

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