How to Calculate the Cost of a Vacancy

The cost of a vacancy is the money a business loses each day a role stays empty. A simple estimate is the daily value the role produces, multiplied by the number of days it is vacant. For roles that make money directly, use the revenue they would have brought in. For other roles, use a defensible estimate of the value of the work that is not being done.

What is the basic formula?

Cost of vacancy equals the average daily value of the role multiplied by the number of vacant days. To get a daily figure from an annual number, divide by the working days in a year, which is commonly taken as about 260. The hard part is choosing a sensible value for the role, so show your assumptions.

How do I value a revenue-generating role?

For a salesperson, estimate the revenue a typical person in that seat produces per year and divide by working days. If a rep usually closes an example figure of 600,000 of business a year, a day of vacancy is roughly 2,300 of unrealised sales. Be honest about how much of that revenue another person could pick up while the seat is empty.

How do I value a role that does not sell?

Start with the fully loaded cost of the role, meaning salary plus benefits and overheads, because the business was willing to pay that to get the work done. Many teams then apply a multiplier to reflect that a role should produce more value than it costs. Choose a multiplier you can defend and label it as an assumption.

What offsets the cost?

A vacancy also saves the salary you are not paying. Subtract the pay and benefits saved, and any cost of temporary cover or overtime, from the lost value to reach a net figure. Include both sides so your estimate is credible when you show it to finance.

What costs are easy to miss?

Overtime for the rest of the team, slower projects, missed deadlines and the strain on people who absorb extra work all count, though they are harder to measure. Note them as qualitative risks if you cannot price them.

How do I run the numbers quickly?

Put your assumptions in the Rezumz Cost of a Vacancy Calculator. Enter the salary, the value multiplier and the expected days to fill, and it shows the cost per day, the total, and what cutting ten days from time-to-fill is worth. Every assumption is editable, and it runs in your browser with no account.